Tilly's, Inc.

Greetings. Welcome to the TILES Inc. Third Quarter 2022 Earnings Results Conference Call. At this time, all participants are on 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. Please note, this conference is being recorded. I'll now turn the conference over to your host, Gar Jackson. You may begin.

Good afternoon, and welcome to the TILES Fiscal 2022 Third 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 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 Tilly's judgment and analysis only as of today, December 1, 2022, and actual results may differ materially from current expectations based on various factors affecting Tilly'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 third quarter earnings release, which was furnished to the SEC today on Form 8-K, 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 will now turn the call over to Ed.

Thanks, Gar. Good afternoon, everyone, and thank you for joining us today. Our third quarter sales performance was stronger than we anticipated throughout the quarter, resulting in both top-line and bottom-line results exceeding our outlook and analyst consensus estimates for the third quarter. As expected, we saw a deceleration in sales trends from month to month as we anniversary last year's early holiday shopping that was driven by supply chain concerns and other pandemic related factors in the latest stages of the quarter. Not surprisingly, as we left those prior year conditions amid this year's highly inflationary environment, all geographic markets comped double-digit negative, and most merchandising departments count double-digit negative with the exceptions of footwear, which was just slightly negative, and accessories, which was led by strengthened backpacks but still decreased by a single-digit percentage overall. Also, not surprisingly, customer store traffic and conversion both declined by high single-digit percentages compared to last year's record results. Despite current economic challenges associated with inflation, we continue to believe that TELUS has meaningful future growth opportunities in many of our existing markets, particularly California, Texas, the Northeast, and greater Chicago area. With very few exceptions, Our new store openings over the past several years have met or exceeded our expectations, and we believe it is important for our long-term earnings potential to continue to grow our store base along with our e-com business. In the third quarter, we opened five new stores. In the fourth quarter, we have opened two new stores so far. With two more, we'll be opening in a few more days. bringing our total new store openings to 11 for the year. We anticipate closing two stores in mid-January, bringing our fiscal year and store count to 249. For fiscal 2023, we have a preliminary expectation to opening up to 15 stores, assuming we can negotiate what we believe to be appropriate lease economics relative to the retail environment. At this time, two of those potential new stores have fully executed leases, and we are engaged in active negotiations on the remainder. In addition to new stores, we continue to invest in company infrastructure during fiscal 2023 to support our future growth plans. We plan to upgrade our warehouse management systems to create greater efficiencies in managing inventory between our stores, e-commerce, and our two distribution centers, as well as to improve distribution labor efficiency. We are also planning to upgrade our merchandise planning and allocation systems with the goals of improving inventory efficiency and reducing the volume of inventory transfers. In total, including 15 new stores, we preliminarily expect our total capital expenditures for fiscal 2023 not to exceed $25 million. Turning to the fourth quarter of fiscal 2022, we are off to a softer start than expected. Total comparable net sales through November 29th, including both physical stores and e-com, decreased by 18.5% versus the record comparable period of last year. For Thanksgiving weekend, Thursday through Cyber Monday, we saw an improved relative trend with total comparable net sales decreasing 13.4% compared to last year and a high single-digit negative comp on Black Friday specifically. Assuming our fourth quarter sales exceed third quarter sales, as has been the case throughout our history except for last year, we believe we have an opportunity to produce an improved comp sales trend for the fourth quarter relative to recent quarters, although still below last year due to the much more difficult economic conditions in play this year. We will continue to manage our business prudently relative to the current environment but remain focused on our longer-term goals of continued growth and improved operational performance. I now turn the call over to Mike to discuss our third quarter operating results and fourth quarter outlook in more detail. Mike?