Tilly's (TLYS -2.80%) is a brick-and-mortar retailer that sells clothing and accessories across its 241 stores in the U.S. It's scheduled to report fourth quarter and fiscal 2021 earnings on March 10.
The company was devastated at the pandemic's onset when it temporarily shut its doors to shoppers. As stores reopened for business, Tilly's has been bouncing back with more promise than ever. And for the upcoming report, investors should expect the momentum to continue.
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A return to in-person learning helped Tilly's
In its previous quarter ended Oct. 30, Tilly's reported sales of $206 million. The top line was up 46.9% year over year. Tilly's target market is pre-teens and young adults, so it got a huge boost in the past year as schools brought students back for in-person learning. That created one of its most epic back-to-school seasons ever.
President and CEO Ed Thomas said in the fiscal third-quarter earnings release:
Fiscal 2021 continues to be a record-setting year for us so far, which we believe has been driven by our strong product assortment, an improved consumer spending environment, and the hard work and dedication of our entire team. Each of the first three quarters have produced record net sales and earnings per share. The fourth quarter is off to a strong start, and despite all of the challenges in the current environment, we remain optimistic about our business prospects for the remainder of fiscal 2021 and into fiscal 2022 at this time.
Of course, you can't have record sales without securing enough supply. That usually routine feat has become a challenge during the pandemic. Businesses worldwide are reporting supply shortages as out-of-stock notices become commonplace for many retailers. Tilly's management can be commended for securing sufficient inventory -- that's one reason investors can look for robust sales and profits in the fiscal fourth quarter. As of Oct. 30, Tilly's reported merchandise inventories of $86.7 million, up from $65.9 million in the prior-year period.
And partly because several competitors were not as adept in securing their own supply, Tilly's has been enjoying a favorable pricing environment for its products, recording in its third-quarter report the highest gross profit margin in the company's history as a public company. In the nine months ended Oct. 30, Tilly's had a gross margin of 36.1%. In the previous decade, the highest it achieved was 32.2% in 2012.
What this could mean for Tilly's investors
Management has guided for fiscal fourth-quarter revenue in the range of $210 million to $215 million and earnings per share (EPS) of $0.42 to $0.50. If the company delivers on its outlook (at the midpoint), that would represent year-over-year growth of 19.4% and 58.6%, respectively.
Wall Street estimates are lower than even the bottom of both ranges, and Tilly's stock is down 24% year to date. If Tilly's delivers a strong report, it will extend a yearlong streak that should boost the share price.
