Tilly's, Inc.

Greetings and welcome to the Tillies Incorporated First Quarter 2022 Earnings Results Conference Call. At this time, all participants are in a listen-only mode. A brief 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. It is now my pleasure to introduce your host, Gar Jackson, Investor Relations. Thank you, Gar. You may begin.

Good afternoon and welcome to the Tilly's fiscal 2022 first quarter earnings call. Ed Thomas, president and CEO, and Michael Henry, CFO, will discuss the company's results and then host the 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 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, June 2nd, 2022, 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 2022 first quarter earnings release, which is furnished to the SEC today on Form 8K, as well as our other filings that the SEC referenced in that disclaimer. Today's call will be limited to one hour and 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. Our fiscal 2022 first quarter operating results were in line with our outlook range for the quarter. Last year was an amazing year, fueled by the unprecedented pent-up consumer demand, exiting 2020 pandemic restrictions, and the impact of federal stimulus payments. As we lap those record-setting numbers amid a highly inflationary environment this year, we expect our fiscal 2022 operating results will be significantly below last year for each quarter. However, relative to our pre-pandemic performance in fiscal 2019, we delivered comparable net sales growth with consistent product margins, improved gross margin as a result of lower occupancy costs, and higher operating income in the first quarter despite significant cost increases that have occurred since then in wages, freight, fuel, and insurance. Despite the challenges in the current environment, we continue planning for growth and further improvement in our business over time. We continue to believe we have ample opportunity to grow our business both in terms of store count and via e-commerce and are investing to position ourselves for that growth. Near the end of the first quarter, we completed an upgrade of our website platform to a more mobile responsive version of our existing platform with improved customer experience features such as overall site speed, express checkout for returning customers, the ability to save items in your shopping cart, and options to receive push notifications. We are also in the process of upgrading our mobile app to allow for biometric sign-in loyalty card scanning, native search, and faster checkout. We are also evaluating potential distribution investments to improve efficiencies and help support our planned future store growth. Regarding new stores, we currently have nine leases signed for opening in fiscal 2022 with two stores planned to open in June, four in August, two in October, and one in early November. We now expect total new store openings for fiscal 2022 to be in the range of 9 to 12 total stores. As we've said in the past, we only intend to open new stores that reflect what we believe to be appropriate lease economics relative to the environment we expect. Store traffic is down relative to 2019, so lease economics for potential new stores need to reflect that reality. We closed one store in early May as a result of a landlord's plan to significantly increase rent. There may be a small number of additional store closures as we work through our lease renewals, although none are currently planned. We continue to believe that we have ample opportunities to grow our store count over the next several years, despite current challenges with rising construction costs and inflation generally. Turning to the second quarter fiscal 2022, our customers continue to suffer from high inflation and energy costs. Total comparable net sales through May 30th declined 17.0% versus the comparable period of last year as we continue to lap last year's pent-up demand and stimulus impacts. Through May 30th relative to the comparable period of fiscal 2019, total net sales increased by 13.9% with a comparable net sales increase of 8.6% with comp growth from both stores and online. We believe it is going to be a challenging year relative to last year's incredible record-setting results. However, we also believe that an absence of a significant slowdown in consumer spending or unforeseen pandemic impacts, we have an opportunity to produce operating results that are consistent with or better than our pre-pandemic performance in the back half of fiscal 2019, despite the significant cost increases that have taken place since then. I will now turn the call over to Mike to discuss our first quarter operating results and second quarter outlook in more detail. Mike?