Tilly's, Inc.

Good afternoon and welcome to the TILES fiscal fourth quarter 2022 results conference call. All participants will be in a listen only mode. Should you need any assistance during the call, please signal a conference specialist by pressing a star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please also note that this event is being recorded today. I would now like to turn the conference over to Gar Jackson, Investor Relations. Please go ahead.

Good afternoon, and welcome to the Tilly's Fiscal 2022 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 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, March 9, 2023, 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 fourth quarter earnings release, which is furnished to the SEC today on Form 8K, as well as our other filings with the SEC reference 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 fourth quarter results exceeded the revised sales and earnings outlook ranges we provided in early January in connection with the annual ICR conference. Overall, fiscal 2022 was a very challenging year for us and our customers, particularly in light of one of the worst inflationary environments of the past 40 years. Fiscal 2023 has gotten off to a slow start thus far, as we have anniversary last year's February comparable net sales increase of 15.4%, while also experiencing unseasonably cold and wet weather over the last several weeks, particularly here in California, wherein approximately 40% of our stores reside, and we've seen a meaningful increase decline in our business relative to our fourth quarter run rate. From March onward, we are going up against negative double-digit monthly comp results for the remainder of the year. Consequently, we believe we will see an improving trend in our business very soon. And despite our slow start to the first quarter, we are cautiously optimistic about the spring-summer season overall. based on the product newness that has just started to roll out to stores in recent weeks. In men's, we expect graphic tees will continue to be a leading product for us, and we have a variety of new fabrics and silhouettes in short-sleeve button-up shirts. Within men's bottoms, we expect to see growing interest in non-denim shorts and pants with an improved inventory position compared to last year. In women's, we are optimistic about newness in trend, color, and silhouettes. We are investing more in fashion shop tops in a number of ways, and we expect to have compelling offerings in bottoms with new silhouettes emerging to complement a strong cargo trend. We also have seen growing interest in our swimwear, dresses, and skirts offerings compared to last year. In footwear, we believe we have a strong brand portfolio for both genders. In accessories, we believe we have improved our women's collection in particular with trends that are more feminine and current. Additionally, we will have an expanded home collection compared to last year, and we are optimistic about a new lower-priced designer sunglass business. For boys and girls, we expect to be in a much better inventory position on branded graphic tees than we had last year when we were experiencing supply chain issues. Altogether at this time, we feel good about our spring assortment and believe we will see more favorable, comparable results for the remainder of the quarter and fiscal year based on the significantly easier comparisons we will be going up against from here on in. In terms of store real estate, we currently expect to open approximately 10 new stores during fiscal 2023, with one store set to open near the end of March four expected in the third quarter, and the remainder expected to open between the back-to-school and holiday seasons, subject in each case to finalizing acceptable lease terms. For existing stores, we have nearly 80 lease decisions to make this year and are just over halfway through those decisions. Given the current environment, we continue to approach all lease renewals with reasonable conservatism, to contain lease costs as much as possible. If we are unable to negotiate what we believe to be reasonable lease costs, we will close stores as necessary to protect our overall profitability. At this time, we are aware of two planned store closures in 2023 based on the current status of negotiations, one of which closed in late February. Our anticipated capital expenditure priorities in fiscal 2023 beyond new stores include an upgrade to our mobile app, updating our warehouse management systems to allow for more efficient inventory management across facilities, and continuing IT infrastructure and cybersecurity investments to better position ourselves for future growth. We currently expect total capital expenditures for the year, inclusive of new stores, to be within the $15 million to $20 million range. In terms of other uses of capital, we are taking a wait-and-see approach to fiscal 2023 before we consider any additional significant capital outlays, including cash dividends or potential repurchase of stock, and would not anticipate to incur such outlays until we feel more confident that we have stable economic environment underneath us and are able to generate improved sales performance. In closing, although potential recessionary impacts on our customers remain a significant concern, We are cautiously optimistic about the prospects for improving operating results during fiscal 2023 relative to 2022, given the significantly lower comp sales comparisons we will be going up against for the remainder of the year. I will now turn the call over to Mike to provide additional details on our fiscal 2022 fourth quarter operating performance and introduce our fiscal 2023 first quarter outlook. Mike?