Tilly's, Inc.

Greetings and welcome to Tilley's Inc. Fourth Quarter 2020 Earnings Results Conference Call. At this time, all participants are in a listen-only mode. The question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Gar Jackson.

Good afternoon and welcome to the Tilley's Fiscal 2020 Fourth Quarter Earnings Call. Ed Thomas, President and CEO, and Michael Henry, CFO, will discuss the company's results and then host a Q&A session. For a copy of Tilly's earnings press release, please visit the investor relations section of the company's website at tillys.com. From the same section, shortly after the conclusion of the call, you'll also be able to find a recorded replay of this call for the next 30 days. Certain forward-looking statements will be made during this call that reflect Tilly's judgment and analysis, only as of today, March 11, 2021, and actual results may differ materially from current expectations based on various factors affecting Tilly's business, including impacts of and the company's action in response to the ongoing COVID-19 pandemic. Accordingly, you should not place undue reliance on these forward-looking statements. For a more thorough discussion of the risks and uncertainties associated with any forward-looking statements, please see the disclaimer regarding forward-looking statements that is included in our fiscal 2020 fourth quarter earnings release which is furnished to the SEC today on Form 8K, as well as our other filings of the SEC referenced in that disclaimer. Today's call will be limited to one hour and will conclude with a Q&A session after our prepared remarks. I now turn the call over to Ed.

Thanks, Gar. Good afternoon, everyone, and thank you for joining us today. Fiscal 2020 was an incredibly challenging year. I'm very proud of our team's fourth quarter accomplishments in finishing the year, including a positive overall comp, significantly improved top line and bottom line performance from our econ business, and improved earnings per share compared to last year's fourth quarter, along with a strong debt-free balance sheet. This was our strongest fourth quarter earnings per share performance since fiscal 2012's fourth quarter. We believe these results are quite remarkable considering the significant restrictions on store operating hours and customer traffic during the quarter, high overall unemployment in the broader economy, and other operational challenges posed by the pandemic. In terms of merchandising results for the fourth quarter compared to last year, womens and footwear were our strongest departments with double-digit percentage increases in comparable net sales. Men's was just shy of flat and girls decreased in the low single digits. Accessories and boys decreased by double digits. We believe that an improved overall assortment and the introduction of several new brands drove the strong performance of women's in footwear. Weakness in third-party brands and denim were the primary causes of net sales decline in boys. Weaker hydration and backpack businesses were the primary causes of net sales decline in accessories. Hard goods, including skateboards, bikes, roller skates, and certain snow products, were launched in 20 stores during the fourth quarter after being soft launched online during the third quarter. Hard goods represented less than 2% of total net sales during the fourth quarter, but we have been encouraged by the customer response to these new offerings so far. In terms of merchandising priorities for fiscal 2021, we intend to expand offerings of our proprietary rescue brand, which was our number one overall brand in terms of net sales in fiscal 2020. This expansion will include new product categories as well as a broader sizing and fit offerings within Denim. We also intend to continue to introduce new third-party brands, which we believe will drive additional customer interest in our overall merchandise assortment. We also intend to expand hard goods into 80 of our stores with greater breadth in our product offerings during the spring. expecting that the draw of individual outdoor activities will continue to be meaningful throughout 2021. Turning to real estate, we currently have seven new stores planned to open during fiscal 2021 that were originally signed to open during fiscal 2020. These new stores are dispersed among our existing markets and are a mix of both mall and off-mall stores. The first store just opened in Las Vegas on March 1st. Two are planned to open by the end of April, and the remaining four are scheduled to open in early May. We intend to continue to open a mix of both mall and off-mall stores over time, but we will be very selective and only pursue those opportunities wherein we believe the economics are appropriate to the environment. Inclusive of conservative internal sales estimates, and good co-tenancy expectations. With respect to our existing store portfolio, we have addressed approximately 95% of our store leases relative to the rents we withheld during the pandemic shutdown period last year. In many cases, we have negotiated ongoing adjusted rents while we remain in this pandemic environment. We currently have one known store closure that will take place at the end of March. Turning to the first quarter of fiscal 2021, total comparable net sales have decreased 4.6% through March 8th versus a comparable period last year. Comparable net sales were positive in both physical stores and e-com during last year's period before the pandemic began adversely impacting our operations. As a reminder, all of our stores were abruptly closed midway through last year's first quarter and remain closed into the second quarter due to the impact of the COVID-19 pandemic across the country. This year, stores have been operating with significant government-mandated restrictions on customer traffic and reduced operating hours compared to last year's pre-pandemic period. Assuming our stores and e-com can remain in operation this year, we would expect our total net sales and earnings per share to be substantially better than last year for the first and second quarters of fiscal 2021. However, at this time, specifics are impossible to predict with any certainty until we see how our business performs as we begin to anniversary last year's store shutdown period. To further complicate any efforts to predict our business, we have also been experiencing meaningful product delivery delays from Southern California ports, impacting almost 20% of our planned retail inventory receipts during the first several weeks of the quarter. Delivery delays have ranged up to a full month at this time and across a variety of product categories. We do not currently have good visibility as to when the situation will be fully resolved. As a result of these delays, we may at times temporarily carry higher inventories than last year. We are carefully monitoring events and adjusting to the best of our ability as we get more information. In closing, we believe we have successfully managed our way through one of the toughest years in recent retail history. We remain excited about the future of Tilly's business and dedicated to continuing to push through the challenges posed by the pandemic. Although so much remains uncertain for now, we are hopeful that we can continue to position the business for success in the evolving environment as we proceed through fiscal 2021. We intend to remain conservative in our approach to managing our business over the near term in order to protect our longer-term prospects in light of the continued volatility and uncertainty in the retail environment. I will now turn the call over to Mike to provide details on the fourth quarter operating performance and balance sheet. Mike?