What Happened:
Shares of young adult apparel retailer Tilly’s (NYSE:TLYS) fell 10.6% in the morning session after the company reported first quarter earnings results. EPS fell below analyst's expectations. While revenue came in narrowly ahead of Wall Street's estimates, topline growth continued to decline in absolute terms. Guidance was also weak as the earnings forecast for the next quarter missed analysts' expectations, disappointing investors. Management struck a not-so-confident tone, adding that it might be "difficult to improve our sales results in the near term." This is partly a result of the macroeconomic challenges experienced during the quarter. Overall, the results could have been better.
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What is the market telling us:
Tilly's's shares are not very volatile than the market average and over the last year have had only 4 moves greater than 5%. Moves this big are very rare for Tilly's and that is indicating to us that this news had a significant impact on the market's perception of the business.
The biggest move we wrote about over the last year was 3 months ago, when the stock dropped 6.9% on the news that the company reported fourth-quarter results with EPS falling significantly short of Wall Street estimates. In addition, its revenue and EPS guidance for next quarter missed analysts' expectations as its same-store sales have already declined 13.4% as of March 12, 2024. The company highlighted some of the drivers of the weak results, including 1.) persistent inflationary pressures. 2.) Record levels of credit card debt. 3.) A shift in consumer preferences. In addition, the company called out a slow start to Q1'2024 due to "a couple of atmospheric river storms that hit our home state of California, particularly hard, in the first 2 weeks of February." This should impact store traffic and sales performance during the quarter.
On the other hand, revenue narrowly outperformed Wall Street's estimates. Overall, the results could have been better.
Tilly's is down 25.9% since the beginning of the year, and at $5.58 per share it is trading 38.2% below its 52-week high of $9.03 from August 2023. Investors who bought $1,000 worth of Tilly's's shares 5 years ago would now be looking at an investment worth $687.19.
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