Tilly's Shares Plunge 8% On Weak Outlook, But Q4 Results Top Estimates

(RTTNews) - Shares of Tilly's, Inc. (TLYS) plunged more than 8 percent in extended hours trading on Wednesday after the retailer of casual clothing and footwear provided earnings forecast for the first quarter below Street view. The company said it continues to experience volatile and weak traffic trends and a highly promotional environment in teen retail.

The company reported a profit for the fourth quarter that declined from last year, reflecting lower margins and sales decline. However, both adjusted earnings per share and quarterly sales topped analysts' expectations.

"While fourth quarter results were as expected, we are not satisfied with this level of financial performance. I am, however, pleased with how we navigated the challenging retail environment, which reflects the disciplined execution by our team. We controlled costs, appropriately positioned our inventory levels and adhered to a planned promotional strategy in the quarter that delivered better product margins than the prior year," President and CEO Daniel Griesemer said in a statement.

The Irvine, California-based company reported net income of $5.42 million or $0.19 per share for the fourth quarter, down from $9.84 million or $0.35 per share in the prior-year quarter.

Excluding items, adjusted net income for the quarter was $5.42 million or $0.19 per share, compared to $8.86 million or $0.32 per share in the year-ago quarter.

On average, nine analysts polled by Thomson Reuters expected the company to report earnings of $0.18 per share for the quarter. Analysts' estimates typically exclude special items.

Sales for the quarter edged down 0.6 percent to $139.90 million from $140.77 million in the same quarter last year, and topped nine Wall Street analysts' consensus estimate of $139.75 million by a whisker.

Comparable store sales, which include e-commerce sales, declined 4.9 percent. E-commerce sales grew 2 percent to $19.1 million from last year.

Gross margin for the quarter contracted 200 basis points to 31.3 percent from last year's 33.3 percent.

The company noted that product margins increased 40 basis points, offset primarily by deleverage in buying, distribution and occupancy costs as a result of the negative comparable store sales.

Looking ahead to the first quarter, the company expects earnings in a range of breakeven to $0.04 per share, on a projected comparable store sales decline in the mid single digits.

Street is currently looking for first-quarter earnings of $0.09 per share on quarterly sales of $118.67 million.

"In fiscal 2014, we have developed several key initiatives to adapt to the changing teen retail landscape and to capitalize on the long-term opportunities to grow our business," Griesemer added.

TLYS closed Wednesday's regular trading session at $12.80, up $0.68 or 5.61% on a volume of 0.40 million shares. However, the stock plunged $1.05 or 8.20% in after-hours trading.