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Tilly's, Inc. (NYSE:TLYS)

Q1 2013 Earnings Call

May 29, 2013 04:30 PM ET

Executives

Anne Rakunas - ICR

Daniel Griesemer - President and CEO

Bill Langsdorf - SVP and CFO

Analysts

Lorraine Hutchinson - Bank of America-Merrill Lynch

Betty Chen - Wedbush Securities

Dave King - ROTH Capital

Jeff Van Sinderen - B. Riley & Co.

Steph Wissink - Piper Jaffray

Richard Jaffe - Stifel Nicolaus

Sharon Zackfia - William Blair & Co

Tiffany Hagge - Goldman Sachs

Operator

Good day and welcome to the Tilly's Incorporated First Quarter Fiscal 2013 Results Conference Call. Today's conference is being recoded.

At this time, I would like to turn the conference over to Anne Rakunas of ICR. You may begin.

Anne Rakunas

Thank you. Good afternoon, everyone. Thank you for joining us today to discuss Tilly's First Quarter fiscal 2013 Earnings Results. On today's call are Daniel Griesemer, President and CEO, and Bill Langsdorf, Senior Vice President and CFO.

A copy of today's press release is available in the Investor Relation section of Tilly's website at tillys.com. Shortly after we end this call, a recording of the call will be available as a replay for 30 days in the Investor Relations section of the company's website.

I'd like to remind you that certain statements that we will make in this presentation are forward-looking statements. These forward-looking statements reflect Tilly's judgment and analysis only as of today and actual results may differ materially from current expectations based on a number of 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 the forward-looking statements to be made in this conference call and webcast, we refer you to the disclaimer regarding forward-looking statements that is included in our first quarter 2013 earnings release which is furnished to the SEC today on Form 8-K, as well as our filings with the SEC referenced in that disclaimer.

We also note that this call contains non-GAAP financial information. We're providing that information as a supplement to information prepared in accordance with the accounting principles generally accepted in the United States, GAAP, and you can find a reconciliation of these metrics to our reported GAAP results and the reconciliation table provided in today's earnings release.

Also for today's call we have a limit of one hour, so when we get to the Q&A portion, please limit yourself to one question at a time to give others the opportunity to also have their questions answered.

With that, I will turn the call over to Daniel Griesemer, Tilly's President and Chief Executive Officer. Dan?

Daniel Griesemer

Thank you, Anne, and good afternoon, everyone. Thank you for joining us today. On our call I'll be providing you with an overview of our first quarter performance and the key factors that drove our results. Bill will then review our financial results in more detail and provide our outlook for the second quarter and revised outlook for the full year 2013. I'll provide a few closing comments. And then we'll open up the call for your questions.

Before we begin, I want to personally thank Bill for this hard work, dedication and invaluable contributions to Tilly’s during his more than six years here. As we announced in today’s press release, Bill will be retiring later this year. We will surely miss him and appreciate him staying on during the transition as we look for a new CFO and we wish him all the best in his future endeavors.

Turning now to our results for the first quarter, our business performance was better than expected as we achieved positive comparable store sales and net income of $0.08 per diluted share reflecting the strength of our business model and the diligent execution of our team in support of our growth initiatives.

During the first quarter, we opened seven new stores as planned, bringing our total store count to 175. We introduced the Tilly’s brand into four new markets in two new states that we entered for the first time and expanded our presence in three existing markets.

The desirability of the Tilly’s concept to landlords is being reflected in the high caliber locations being opened and those being presented to our site selection team. We continue to identify excellent locations that meet or exceed our stringent criteria and we remained on track to open at least 25 new stores in fiscal 2013.

During the quarter, we grow comparable store sales by 1.1% which was above our expectations. The depth and relevance of our merchandize offering grow an improving trend in March and April, highlighting the destination nature of our business particularly during key selling periods such as the critical spring break and pre-Easter periods. This coincided with the return of more seasonable weather in many parts of the country.

In the combined March and April timeframe, all categories our business, except boys’ apparel produced positive comp sales. Our e-commerce business continues to perform well and grew by 16% on a year-over-year basis to 11.5% of total net sales and was driven by an even greater array of brands and a broader assortment from those brands.

Although we are not satisfied with the lower profitability than last year, we achieved profitability above our expectations in a generally challenging quarter. In a highly promotional environment brought about by a slow start to the spring season, we maintained our historic pricing discipline and strategies while at the same time taking appropriate steps to ensure that our inventory was properly positioned for the upcoming summer and back-to-school periods.

Our gross margin was at the high end of our expectations and we entered the quarter with inventory 6% less on a square foot basis compared to the same date last year. Equally important, we achieved a slightly lower adjusted SG&A rate than last year, further demonstrating the efficiency of our organization and the ability to tightly manage our cost even as we open new stores and continue to invest in the long term growth of our business.

And now I'd like to turn the call over to Bill Langsdorf. Bill?

Bill Langsdorf

Thank you, Dan. Good afternoon, everyone. I'll begin by reviewing the details of our first quarter results and then provide our outlook for the second quarter and full year 2013.

For the first quarter, net sales have increased 13% to a $109.1 million driven by 30 net new stores opened during the first quarter, since the first quarter of 2012. Comparable store sales increased by 1.1% with a single-digit increase in men's and junior’s apparel comps, slightly negative comps in footwear and accessories and a single-digit decrease in comps for kids apparel. Our e-commerce sales, which are included in our comparable store sales, grew 16%. As a reminder our first and second quarters historically generated lower revenue compared to the third and fourth quarters of the year which include the back-to-school and winter holiday shopping seasons.

Our first quarter comps reflect an increase in the average transaction value, largely offset by a decline in the number of transactions. Gross profit increased 5.9% to $32.2 million or 29.5% of net sales compared to 31.5% of net sales last year reflecting product margins below last year as well as about 90 basis points of deleverage in buying, distribution, and occupancy cost. As Dan mentioned, our gross margin rate was at the high end of our expectations despite the highly promotional environment in the quarter.

Selling, general and administrative expenses totaled to $28.3 million or 25.9% of net sales which compared to $24.4 million or 25.3% of net sales in the 2012 first quarter. The higher SG&A rate in the 2013 first quarter reflects the $890,000 of non-cash stock-based compensation charge in the 2013 first quarter that was not incurred in 2012. On an adjusted basis assuming a pro-forma non-cash stock-based compensation charge in the first quarter of 2012 similar to the ongoing charges of the other three quarters of 2012, our SG&A rate in Q1 2013 were slightly lower than the rate in Q1 of 2012 reflecting stringent cost control even as we opened seven stores during the quarter.

Our operating margin was 3.6% compared to an adjusted operating margin of 5.5% in the first quarter of 2012 reflecting the lower product margin and deleveraging in buying, distribution and occupancy cost in this one of our lower sales volume quarters. Income tax expense was $1.6 million and reflects an effective tax rate of 40.3% for the quarter. This compares to an expense of $68,000 in the first quarter of 2012 with an income tax rate of 1.1% in when we filed as an S corporation.

Net income was $2.3 million or $0.08 per diluted share, based on a weighted average diluted share count of 28 million shares. This compares to first quarter 2012 net income of $5.9 million or $0.29 per diluted share and first quarter (2000) adjusted net income of $3.2 million or $0.15 per diluted share based on 20.5 million weighted average diluted shares. The adjusted net income for 2012 assumed an annual effective tax rate of 40% and add-back charge for ongoing non-cash compensation expense for stock options similar to the charge in the other three quarters of fiscal year 2012.

Turning to the balance sheet, our financial position remained strong and we ended the quarter with cash and marketable securities of $48.6 million, and no borrowings, and no debt outstanding under our revolving credit facility. Cash used for capital expenditures during the quarter totaled $11.4 million compared to $7.5 million in the first quarter of 2012, and were primarily related to new stores opened during the quarter and new stores under construction during the quarter that are scheduled to open in the second quarter of 2013, as well as our new e-commerce distribution center. Inventory totaled $49.7 million at the end of the quarter and as Dan mentioned, compared to the same week, 52 weeks ago, inventory declined 6% on a per square foot basis.

Now I'd like to turn to our outlook for the second quarter and the full year 2013. For the second quarter 2013 we expect comparable store sales growth in the range of flat to a positive low single digit increase compared to our 5.1% comparable store sales increase in the second quarter of 2012. As we mentioned on our fourth quarter call the 2013 fiscal calendar shift will cause the first week peak week of the company’s back-to-school season to fall on the last week of the second quarter this year compared to being the first week of the third quarter last year.

As a result we expect an estimated $8 million to $9 million in sales will shift into the company’s second quarter from the third quarter when compared to the 2012 fiscal calendar. We do not anticipate the calendar shift have any meaningful impact to other key selling periods in fiscal 2013 other than the shift between the second and third quarters. SG&A in the second quarter is expected to include an ongoing non-cash stock-based compensation expense of between $700,000 and $800,000 before tax, as a reminder SG&A in the second quarter of 2012 included a onetime non-cash compensation charge of $7.6 million to recognize life-to-date stock-based compensation.

Net income in the second quarter is expected to be in the range of $3.2 million to $3.8 million or $0.11 to $0.14 per diluted share which assumes a 40% tax rate and a diluted share count of 28.2 million shares compared to 27.3 million diluted shares in the second quarter of last year. This compares to net loss in the second quarter of 2012 of $1.2 million or $0.04 per share and adjusted net income in the second quarter of 2012 of $2.6 million or $0.09 per diluted share which exclude the onetime non-cash compensation charge to SG&A that I just mentioned as well as a onetime net tax revision benefit at the time of IPO and includes a 40% effective tax rate to make that quarter comfortable.

Now moving onto the full year, factoring in better than expected results achieved in first quarter, we continue to expect comfortable store sales growth in the low single digit range for fiscal 2013 on a 52 week versus 52-week basis. As discussed on our fourth quarter call, this reflects gradually improving trend as the year progresses and as we cycle easier comparison in the second half of the year. Using an anticipated annual effective tax rate of 40%, net income for fiscal year 2013 is expected to be in the range of 21.5 million to 23.3 million or $0.76 to $0.82 per diluted share, and assume a weighted average diluted share count of 28.3 million shares compared to 26.1 million weighted average diluted shares for the full year of 2012.

This projection for fiscal 2013 compares to net income for fiscal 2012 of $23.9 million or $0.92 per diluted share and adjusted net income for fiscal 2012 of 22.9 million or $0.88 per diluted share. Adjusted 2012 net income includes adjustment to have four quarters of ongoing stock-based compensation expense totaling $2.7 million and a 40% effected tax rate for the entire year. Adjusted 2012 net income excludes the one-time charge of $7.6 million to recognize life-to-date stock-based compensation and the one-time tax benefit of $3 million both of those were recorded in the second quarter of 2012 as I mentioned above.

We continue to expect capital expenditures for fiscal year 2013 to be in the range of $40 million to $45 million with the majority approximately 23 million related to the opening of our new stores as well as the remodels and refreshes of our existing stores. As previously stated, this estimate also includes approximately $14 million for the completion of our new e-Commerce distribution center. The balance of our expected capital spending in 2013 is related to expenditures on IT and other infrastructure improvements.

As always we remain focused on tightly controlling our expenses to capitalize on margin expansion opportunities. Now, I would like to turn the call back to Dan for some closing remarks.

Daniel Griesemer

Thanks, Bill. We feel very good about our business as we head into summer season. Our inventory is clear and well positioned with the dominative assortment of brands, fashion, and styles that are resonating with our target customer. While not losing side of the fact that the economic environment remains challenging, our focus remains on executing to our strategic initiatives in order to drive quality, sustainable sales, and earning. We have complete confidence in the fundamentals of our business which is strong and generating cash resources to continue to expand the Tilly’s brand.

And now I’d like to open the call for your questions, Operator.

Question-and-Answer Session

Operator

(Operator Instructions). And our first question will come from Lorraine Hutchinson of Bank of America-Merrill Lynch. Please go ahead.

Lorraine Hutchinson - Bank of America-Merrill Lynch

I just wanted to follow up on the gross margin commentaries and product margins were down this quarter, are you comfortable enough with the pace of business quarter-to-date that you would expect product margins to increase into 2Q, what’s the outlook for the rest of the year and then what’s your leverage point on both the fix piece of cost of goods and also SG&A?

Bill Langsdorf

The product margins in the first quarter were certainly impacted by the selective markdown we took on the spring merchandize that’s got up to such a slow start in February with very weak comps in that month. What we’re seeing in the second quarter when we're building our expectations, we're building our second quarter comp expectations on kind of including the what we see May doing so far, and so we're certainly off to a better start than what we saw in Q1, and at this point our expectations are for a more normalized product margin Q2 that's more similar to last year and in fact for the other quarters of the year it should continue to be more similar to last year on a rate basis. When you're talking about buying distribution and occupancy costs, quarter 2 will have the benefit if you will of that shift of sales from Q3 into Q2 and Q3 of course will have the detriment of that shift in sales so you'd likely see little better than you'd expect buying distribution and occupancy cost as a percentage of sales in Q2 even though with a very modest comp number that we're showing and a little bit worse than you'd expect in Q3 because of those sales shifting, even though the comp per center course doesn't reflect that. So overall for the year, I think we talked before about meaningful leverage in the 3% to 4% comp range, but of course last year we had leverage even little over 2% comp, I think for buying distribution and specially occupancy costs you need to see a little bit more leverage than that, you know one kind of comp that we had in the first quarter and certainly in the lower volume quarters, first and second quarter generally are going to need a little bit higher comps than that to start leveraging any of those costs. So overall for the year it's going to be 2% to 3% comp to start even getting any leverage on those costs, you may get in G&A before that.

Operator

And moving on now, we go to Betty Chen of Wedbush Securities.

Betty Chen - Wedbush Securities

I was wondering if you can talk a little bit about fashion newness if, without sharing too much for competitive reasons if the team feels like they continue to be able to identify with the new fashion, new brands, and able to incorporate them well into the stores and then I also was curious in terms of regional performances, if you can help us quantify if you can any sort of difference between hot versus colder climate regions and whether you're still seeing some other differences in early May so far.

Dan Griesemer

Betty, I'll take the first part of that question and Bill you can take the second, in regards to fashion newness brands, kind of things that are happening I've talked about this before, the action sports industry is vibrant, it's ever changing, there's newness evolving all the time and our business model, our dynamic business model is built to ebb and flow, adapt and to take advantage of those changes and of newness and trends and to do it quickly, we've a very rapid response and the team remains encouraged by the newness that exists out in the market place for our business and for our customers as well as the newness coming from brands, established and new brands, so it's, we’re very encouraged obviously, online carries an even broader assortment of that newness and a more dominant assortment of brands and the stores being the size that they are because of the diversity and breadth to the customer and the categories we carry constantly reflect this newness flowing into the store almost on a daily basis we have deliveries to our stores five days a week and in there is the newness as we get it, it gets right out into the customer's hand and creates that engaging experience that the Tilly's brand is known for.

Bill Langsdorf

And Betty to answer your second question, regional differences; certainly we saw regional differences in Q1 that was highly correlated with weather patterns in both East and the West. In Q2 the weather seems to have normalized more in these first three weeks of Q2, so the differences between the markets due to weather is far less variable on a daily, weekly basis than what we saw in Q1. Certainly there's differences and the penetration in certain parts of the business as you'd expect if it's a cold weather versus a warm weather market just because of the timing of when the product starts to sell for summer versus, in some warmer weather markets versus summer for colder weather markets. That's just seasonally normal differences, so overall the difference between hot and cold or between east and west is much more normal in the first three weeks of May than what we saw in Q1.

Betty Chen - Wedbush Securities

And I had a quick follow up if I could Dan, are there any sort of product color you can share with us of what did well during the first quarter and then last quarter, I'm sorry a year ago Q2, we believe was another very healthy comp, I'm thinking back whether perhaps opportunities that the team can pursue this year that we can start to look for in stores?

Daniel Griesemer

Yes sure yes so I said in my script there that what we saw when you look particularly at the March-April time period which includes the spring break and pre and post Easter time periods which are very important for us in the quarter. We saw all merchandise categories except the boys’ apparel business positive comping which is a very encouraging sign it’s always encouraging if those remarks when you hear that both men’s and juniors are positive comping and the other large components of the business is accessories and footwear only flattish basically that’s encouraging given kind of the stability and it’s an evidence of the stability of the business so I would have to say it’s kind of across the board which again is evidenced by the kind of the success of the dynamic merchandise model and how we are able to ebb and flow through the season.

In terms of opportunities I am more confident than I have ever been in the future of the business the strength of the opportunity the things that we have going in the pipeline in works, I am not going to share a whole lot. I hope you can respect I am wanting to do that. I’ll be happy to talk about it when the results are delivered from it but it’s very encouraged by the opportunities we see in the business going forward.

Betty Chen - Wedbush Securities

Okay great the stores look terrific, best of luck for Q2.

Operator

Moving on now to Dave King with ROTH Capital.

Dave King - ROTH Capital

I guess in terms of the question Dan I appreciate the update on the store growth plans and encouraged that you are considering to find locations I guess how are your conversations going with landlords these days, I think there’s been a lot of commentary in the market about how what they are seeing has changed a little bit I guess have those conversations changed on recent months and is there any other color you could provide kind of on that subject it would be helpful?

Daniel Griesemer

Yes sure that pointed question given the fact that last week was the ICSC conference in Los Vegas I was there meeting with all of the major developers and I referenced this in the script we continue to be showing a tremendous amount of respect by the landlord community in terms of the quality of the locations the venues where we want to have stores where we believe we have an opportunity. The specific locations in those venues and the economics to make sure that we can proceed over the long-term and be profitable and deliver on our very stringent requirement, so I would say that as the landlords continue to see our expansion and the quality of the environment and experience that we create in either malls or off mall venues we are establishing even further what was a stellar reputation now nationally and I am very bullish on the quality of the pipeline going forward and our ability to partner with the landlord community to get what’s right for the long-term investments for the shareholders so it’s very positive.

Dave King - ROTH Capital

Okay so that’s helpful and then so nothing in terms of rising lease expenses or anything like that that you guys are seeing kind of flow through.

Daniel Griesemer

No.

Dave King - ROTH Capital

Okay and thanks so much and good luck to you Bill in whatever your future plans maybe.

Bill Langsdorf

Thank you, Dave.

Operator

And moving on now to Jeff Van Sinderen with B. Riley.

Jeff Van Sinderen - B. Riley & Co.

Hello everyone and let me add my congratulations on getting a tough environment with a positive comp and by the way Bill we will miss you. So how should we think about inventory down 6% per foot should we expect you to end this quarter with inventory down per foot again or is that shifting just trying to get a sense of are you in a position to comp positive on negative comp inventory? And then I have a follow-up question.

Bill Langsdorf

Yes the short answer is yes we are in good shape from an inventory standpoint being able to deliver the results that we expect in the quarter and I think what everybody should be looking at is to do is keep the relationship of generally the revenue and inventory keeping in step and a few percent here there is not meaningful. This is just really a signal about the effectiveness of the dynamic merchandise model and our ability to solve the problems as we have always committed to in season not carrying forward into future seasons. So you know we begin each quarter with inventory that’s clean and current and ready to do business for the forward season. I think you go into our stores, you see stores that are filled with compelling brands and fashion and styles and inventory that’s ready to create a great experience for our customer so that’s really what you need to keep paying attention to.

Jeff Van Sinderen - B. Riley & Co.

Okay and then Dan maybe you could talk a little bit more about performance of your newer stores in Q1 versus some of your more mature stores maybe touch on mall versus off mall that might be helpful?

Daniel Griesemer

Yes. Okay. Well, let me start by saying we’re completely comfortable with new store model with the long term commitments that we’ve made in terms of what we’re expecting of those stores over the long term. We did see an interesting phenomenon in the first quarter that was really on this magnified in the early part of the first quarter and that was that those new stores are mostly in places that were negatively affected by weather and secondarily newer stores that had a less established customer based benefit from our marketing efforts from the peek selling periods.

Recently we see them returning to their normal rates of performance we are very encouraged by the seven openings that we have in first quarter of 2013. So, the new stores remain intact. The new store model remains intact and we’re very optimistic about the pipeline. And in terms of mall no meaningful difference there, it really would be a difference when you say it new markets that were influenced by weather versus anything else and that has more normalized here in most recent weeks.

Operator

And our next question comes from Steph Wissink with Piper Jaffray.

Steph Wissink - Piper Jaffray

If I could just follow up on Lorraine’s earlier question on product margin, and Dan if you could or Bill as well if you could just talk about the biggest opportunities that you think about the merchandise margins specifically is that improvement in marked on rate, gain in the private label business or mix of category that you get a set somewhat on how we should see that trend here over the balance of year maybe even into next year. And I know just a housekeeping question, if you could just give us a quick update on the comp metrics for the first quarter that will be great. Thank you.

Daniel Griesemer

Steph, in terms of how we’d be thinking about the products margins, our branded business remains a vibrant and dominant part of our business. Those margins are fairly fixed, we see some scale and some opportunity scale slightly and as we’ve talked about our long term plans of only slight improvement in INU associated with the overall product margin due largely to the fact that so much of our product is on third party branded. The opportunity if I look back on Q1 would be to see better or improvement in the marked down rate that we chose to do in order to make sure our inventory remained clean and current. We had a challenging February, we talked about it on our last call and that caused us to need to take some mark downs to keep the inventory fresh and current particular on the junior side.

So, that’s where you would kind of look to us to see some improvement. And then as we scale we are seeing that our ability to negotiate sharper prices particularly on our own proprietary product when all of that set and done we’re not really baking and there is no fundamental sourcing strategy here that’s going to move, we’re not going to increase the percentage of our private label or we’re not doing something meaningful to deliver 100 of basis points improvements. This is more about scale as you reference and kind of fine tunings small parts of the opportunity.

Bill Langsdorf

And Steph, you touched on comp metrics in Q1. The overall comp as we talked about was plus 1.1 and as you know historically our e-commerce business is been about 2% of that. So, therefore removing that you know what the brick and mortar comp is approximately. That 1.1 was driven by average ticket, largely averaging of retails and offset by transaction count which is largely traffic, our conversion was still very decent. So, is that what you’re looking for with metrics?

Steph Wissink - Piper Jaffray

Exactly, thank you. I appreciate the color. Best of luck guys.

Operator

And next hearing from Richard Jaffe of Stifel.

Richard Jaffe - Stifel Nicolaus

A couple of thoughts about working to drive traffic obviously that would be wonderful on all metrics if you could get more people on to your store and I’m wondering if you have thoughts regarding your marketing initiatives whether it’s a more print, more TV more social media, a loyalty program in store any those kinds of things you have been percolating or do you feel the sort base is due to spurs for some of those initiative.

Bill Langsdorf

Yes. So, there is a lot going on in that regard, as we've talked about our omni-brand initiatives making sure that the Tilly's brands experiences represented across the broad portfolio of touch points that we have and it's put in place over the last 12 to 18 months. The biggest and most meaningful thing that gives me comfort is the significant growth we've seen in the mailing lists and the name and addresses that we have having grown significantly over the last 12 months and that gives us the ability to appropriately mail into the key time periods with our-what you call as our catalogue, our Lookbook, our lifestyle book that really showcases the entire product collection from branded to private label and so we see that remaining as a very successful tool in driving traffic to the brand whether it'd be towards stores or online and so that remains vibrant as well as a whole host of other things that we are doing around social media around the website, around our brand partnerships, things we've talked about before be it at the local level around stores and grand openings to national campaigns and major events like the events work tour or of if that might be. So we have a lot of things going on and I look forward to updating more in the future as we're able to show some of the performance.

Richard Jaffe - Stifel Nicolaus

Well look forward to hearing by you. Thank you.

Operator

Moving next to Sharon Zackfia with William Blair

Sharon Zackfia - William Blair & Co

Most of my questions have been answered so first I want to say we are going to miss Bill. But secondly Bill since I have put you on the spot now, the guidance still implies obviously some operating margin decline as you're roughly in the realm of a 100 basis points. Can you kind of break out for us, kind of bucket that, gross margin versus SG&A and is that just the function of the sales been up low single digits or are there other investments that are a little bit less obvious from the outside?

Bill Langsdorf

Yes Sharon, first of that certainly is from the first quarter because the other three quarters together are less harmful to the operating margin certainly. What we see going forward is a product margin that is similar to last year for the rest of the year and what we will see is the deleverage in occupancy buying distribution more mild than what we saw in the first quarter but for the next three quarters combined, we'll see some deleverage assuming that very low single digit positive can't.

The SG&A side should be continuing to be similar to last year or slightly favorable; third quarter will be under some pressure just because of the shift to the sales and to the second quarter and the second quarter will get the benefit of that. But overall SG&A should be more similar to LY as well for the rest of the year.

Operator

And at this time, we have one name remaining in our question queue, if you would like to signal for a question (Operator Instructions). And we will now move to Lindsay Drucker Mann with Goldman Sachs.

Tiffany Hagge - Goldman Sachs

It's Tiffany Hagge on for Lindsay. We were just wondering in terms of the e-commerce business if you could set some light on what you saw there during the quarter, in terms of ticket traffic conversion trends a month and just to update us, are you still seeing a substantial portion of your e-commerce sales come from market where you don’t have brick and mortar stores and then Bill what was the cadence of store openings in the quarter, did most of those come early or were they more back half way then? Thanks.

Bill Langsdorf

Yes so e-commerce sales in the quarter; certainly e-commerce has; did everybody else started off a little more softly at the beginning of the quarter and firmed up as the quarter progressed. The brick and mortar openings that you are asking about; the timing was spread fairly evenly throughout the quarter and so there were a couple of stores near the end of the quarter but otherwise we had in March and early April or most of the openings for the quarter.

Dan Griesemer

And I think there was one more question around; wasn't there one more question, Tiffany?

Tiffany Hagge - Goldman Sachs

Yes so we were just wondering if you guys; I don’t know if you had the metrics available but on ticket traffic conversion trends online and how does deferred from what you sell in this order?

Dan Griesemer

Yes it was also the percent you were seeing and we're still seeing the same thing with growth in markets where we don’t have stores and those matrix remain the same in terms of the percentage of business coming from markets where we don’t have stores and we also see and are seeing the same thing that as we put a new store in a market we are seeing the e-commerce revenue grow. So that remains fairly constant.

Bill Langsdorf

And as regarding ticket traffic conversion, the conversion rates continue to be strong, the traffic and e-commerce unlike throughout the brick and mortar chain, the traffic was better than last year and that’s obviously what helps drive with a similar ticket.

Operator

And we do have a follow up question from Betty Chen.

Betty Chen - Wedbush Securities

A housekeeping question if I could to follow up on the earlier question. Bill, could you tell us what the cadence will be for store openings for the balance of the year by quarter if you could?

Bill Langsdorf

We are expecting, now of course with the timing of exact openings it’s always couldn’t be moving but we are expecting second quarter to be somewhat similar to the number of stores that we opened in the first quarter, we open seven in the first quarter and then in the back half of the year there will be more opens in the third than in the fourth. And if they do open in the fourth likely to be before thanksgivings, so it would be early in the fourth quarter.

Operator

And at this time, I would like to turn the call back over to Dan Griesemer for additional and closing remarks.

Daniel Griesemer

Okay thanks again for joining us. We look forward to speaking with many of you at the Stifel Nicolaus Consumer Conference in New York on June 4 and discussing our second quarter results in late August. So, thank you and have a good evening.

Operator

That does conclude today’s program. Thank you all for joining.

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Source: Tilly's CEO Discusses Q1 2013 Results - Earnings Call Transcript
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