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Will Dismal Holiday Comps Hurt Tilly's (TLYS) Q4 Earnings?

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Tilly’s, Inc. TLYS is scheduled to report fourth-quarter fiscal 2019 numbers on Mar 12, after the closing bell. In the last reported quarter, the company reported a positive earnings surprise of 9.5%. Over the trailing four quarters, the company’s bottom line outperformed the Zacks Consensus Estimate by 43.1%, on average.

The Zacks Consensus Estimate for fiscal fourth-quarter earnings is pegged at 20 cents, indicating a decline of 26% from 27 cents reported in the year-ago quarter. The consensus mark is at the high end of the company-provided guidance of 18-20 cents per share. Notably, the consensus mark has been unchanged over the past 30 days.

The consensus mark for revenues is pegged at $172.6 million, up 1.2% from the year-ago quarter’s reported figure.

Tilly's, Inc. Price and EPS Surprise

Tilly's, Inc. Price and EPS Surprise
Tilly's, Inc. Price and EPS Surprise

Tilly's, Inc. price-eps-surprise | Tilly's, Inc. Quote

Factors to Consider

On Jan 13, Tilly’s reported holiday sales results for the nine-week period ended Jan 5. It noted that the fourth quarter started on a soft note due to a late Thanksgiving. Despite a robust Black Friday weekend and Cyber Monday, a sudden deceleration in sales and traffic in the second and third weeks of December weighed on the results of the holiday period. Notably, comparable store sales (comps) declined 2% for the nine weeks against growth of 5.8% in the prior-year period. 

The company witnessed dismal comps in most of the geographical markets, with the Southeast, Florida and Nevada regions being the most affected.

Further, comps in physical stores, which accounts for roughly 80.5% of total sales, decreased 2.7%. Meanwhile, e-commerce sales, which contribute nearly 19.5% to total sales, inched up 1% for the aforementioned period. Moreover, positive comps for girls and women’s merchandises were more than offset by softness in other merchandising categories such as footwear and accessories.

Total sales for the nine-week period came in at $143.9 million, up 1.1% from $142.4 million reported in the prior-year period.

Owing to weak results, management trimmed its fourth-quarter fiscal 2019 guidance, which mainly comprises of the holiday period. Consequently, it now predicts a 2-3% decline in comps against 2-5% growth expected earlier. 

However, management is making efforts to expand the base and drive the top line. In this regard, the company launched a young contemporary brand — West of Melrose — across all stores, based on positive customer feedback. Further, the company remains on track with store expansion plans. In its last earnings call, management highlighted that it opened seven stores in the fourth quarter, ahead of Thanksgiving. We believe these new stores to have partly cushioned the dismal top lines in the holiday period.  

What the Zacks Model Says

Our proven model does not conclusively predict an earnings beat for Tilly’s this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Tilly’s carries a Zacks Rank #4 (Sell) and an Earnings ESP of 0.00%.

Stocks to Consider

Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat:

The Children’s Place PLCE presently has an Earnings ESP of +1.16% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Gap GPS currently has an Earnings ESP of +0.08% and a Zacks Rank of 3.

Darden Restaurants DRI has an Earnings ESP of +1.03% and a Zacks Rank #3.

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