Tilly's, Inc.

Greetings, and welcome to Tilly's Inc. Third Quarter 2021 Earnings Results Conference Call. At this time, all participants are in a listen-only mode. A 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 of Investor Relations.

Good afternoon and welcome to the Tilly's fiscal 2021 third 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. For the same section, shortly after the conclusion of the call, you will 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 Kili's judgment and analysis only as of today, December 2, 2021, and actual results may differ materially from current expectations based on various factors affecting Kili's business. 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 2021 third quarter earnings release which is furnished to the SEC today on Form 8K, as well as our other filings with the SEC referenced in that disclaimer. Today's call will be limited to one hour, and I will include 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 2021 continues to be a record-setting year for us. With record net sales and earnings per share, for each quarter thus far. We have already surpassed our total net sales for all of last year and our year to date third quarter earnings per share have set a record relative to any full fiscal year. Our third quarter net sales grew by 47% over last year with us being fully operational this year in a more normalized back to school season. and our comparable net sales grew by 27% over fiscal 2019's pre-pandemic third quarter. Our strong operating results over the past year improved our third quarter ending cash and investments position by $30 million compared to last year, which led our board of directors to approve a special cash dividend, a second special cash dividend of $1 per share to shareholders of record as of December 7th, 2021, with payment scheduled for December 15th, 2021. Our first special cash dividend of the year, also $1 per share, was paid on July 9th. The back-to-school season and third quarter were our strongest ever, driven by a compelling overall merchandise offering and a much improved consumer spending environment. Relative to the pre-pandemic third quarter of fiscal 2019, comparable sales of women's, men's, girls and accessories increased by double-digit percentages, while footwear and boys increased by high single-digit percentages. Hard goods, which we did not have as a material part of our assortment in 2019, produced $1.6 million in total net sales during the third quarter, We now have portions of this assortment in roughly 200 of our stores. We expanded our sustainability shop on our website during the third quarter with the introduction of over 40 styles of proprietary rescue branded merchandise with sustainable features to supplement our extensive selection of such products from over 40 of our third party brands. We also launched a collection of over 200 vintage and upcycle product choices that have been well received by our customers. In terms of stores, we opened our ninth and final new store for fiscal 2021 in early November, and we will close one store in late December. We are actively negotiating new store opportunities for fiscal 2022. and tentatively plan to open 15 to 20 new stores next year, assuming we can negotiate what we believe to be appropriate lease economics. These stores will primarily be located within existing markets, primarily California, Texas, and the Northeast. We also have approximately 75 existing lease-up decisions to make during fiscal 2022 that are coming up on expiration or have lease kick-out options. We intend to use this opportunity to continue to improve upon our existing occupancy cost structure with these pending lease decisions where possible. During our last earnings call, we mentioned several customer-facing investments that were underway. In November, we upgraded our mobile app to offer greater mobile functionality, including loyalty and in-store experience features that we did not have previously. We expect to continue to invest in improving and enhancing our mobile app experiences throughout 2022. We also expect to complete an upgrade of our website platform to a more mobile responsive version in early 2022. We will also continue to improve our omnichannel capabilities and reinvest in distribution efficiencies to expand capacity for anticipated future growth. We currently estimate that our total capital expenditures for fiscal 2022 to be in the range of 25 to $30 million inclusive of these initiatives, construction of new stores, and continuing IT infrastructure investments. Turning to the fourth quarter of fiscal 2021, we are very encouraged by our strong start to the holiday season, especially considering that last year was our most profitable fourth quarter since 2012. While we continue to contend with delivery delays throughout Southern California ports, the aggregate retail value of delayed products currently represents less than 10% of our total inventory already on hand. Our merchants made every effort to position us well for the holiday season, and we believe we have plenty of inventory to produce a successful holiday season. These delivery delays may cause the supply of particular items to run low, from time to time, but we have been contending with these delays all year long, not just in the holiday season, and they have not stopped us from producing record results each quarter. Despite ongoing concerns about the COVID-19 pandemic, supply chain difficulties, labor challenges, and increasing costs generally, we remain optimistic about our business prospects for the remainder of fiscal 2021 and into fiscal 2022 at this time. I will now turn the call over to Mike to provide additional details on our third quarter operating performance and to introduce our fourth quarter outlook. Mike?