Shares of Tilly’s plunged 11.8% on Dec. 4 even as the company’s results for the third quarter of fiscal 2020 (ended Oct. 31) exceeded analysts’ expectations. Investors were concerned about the significant impact of COVID-19 on the apparel and footwear retailer’s operations.
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Tilly’s (TLYS) net sales fell 9.4% to $140.3 million but came in ahead of analysts’ estimate of $131 million. The company cited the delayed back-to-school timing this year, restrictions on store operating hours and the temporary closure of 33 California stores for some part of the third quarter as the reasons for the lower sales.
E-commerce sales grew 57.3% but were not enough to offset the 20.8% slump in the sales from physical stores. The 3Q EPS declined about 67% year-to-year to $0.07. Analysts were expecting the company to break even.
The company did not provide any guidance for the fourth quarter but revealed that the comparable 4Q net sales through December 1 fell 0.6%, with physical store sales down 14.2%. (See TLYS stock analysis on TipRanks)
The company stated, “Due to the impacts of the COVID-19 pandemic, including higher unemployment and anticipated reductions in consumer spending compared to last year, the Company expects its fiscal 2020 fourth quarter net sales will be lower overall compared to the Company’s reported net sales of $172.5 million for the fourth quarter of fiscal 2019.”
Following the earnings release, Pivotal Research analyst Mitch Kummetz increased his price target for Tilly’s to $10 from $9 and reiterated a Hold rating. Kummetz stated, “This 2020 strangeness has continued into 4Q, as Black Friday was a shadow of its former self. That said, we’re encouraged that 4Q is trending better than 3Q, but there’s a lot of high-volume days between now and Christmas, and it’s hard to know how this period will pan out.”
Meanwhile, the Street has a cautiously optimistic outlook on Tilly’s. The Moderate Buy analyst consensus is based on 1 Buy and 1 Hold. With shares down 23.6% year-to-date, the average price target of $10.50 indicates upside potential of 26.5% in the months ahead.
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