Tillys (TLYS - Snapshot Report) is a specialty retailer in the action sports industry selling clothing, shoes and accessories. The company offers one of the largest assortments of brands and merchandise from the top players in the surf, skate, motocross and lifestyle apparel industries available both in stores and online at tillys.com. The company was founded in Southern California in 1982 and has grown to 225 stores in 33 states.The stock is Zacks Rank #1 (Strong Buy) and todays Bull of the Day after a big earnings beat and violent spike higher in the stock.

Tillys has a market cap of $250 Million with a Forward PE of 33. The stock sports Zacks Style Scores of “B” in both Growth and “A” in both Value and Momentum. In addition, the company also sits in an industry that is ranked 96 out of 265 (Top 36%) in the Zacks Industry Rank.  

The company offers a unique way to enter the retail space, which so far in 2016, has seen heavy selling. The company’s second quarter earnings results have shown their niche is in demand and that they are not exposed to risks the same way as traditional retail is. Because of the negative atmosphere of retail, Tillys has been beaten down in sympathy, and investors are now realizing opportunity.

Q2 Earnings

Q2 was reported on August 24th with the company seeing $0.05 versus the -$0.03 expected. Revenue came above expectations at $136.4 Million verse $133 Million. The company also guided Q3, saying they expect to come within the range of $0.07-0.13 verse the $0.10 expected. Same store sales were up 0.9% and the company saw an improvement on margins, which ticked up to 28.5% verse the 28.1% seen last year. Investors rewarded the stock with a 17% up move in just a day.

CEO Mark D. McLaughlin had some comments on the quarter: “Our second quarter comp sales and operating income exceeded our outlook ranges and we ended the quarter with inventory down 7% on a per square foot basis. We are focused as a management team on continuing these directional improvements. Our back-to-school results have been mixed, but we believe our merchandise assortment is well positioned for the season”

Surprise History

Tillys has had a hard time since its IPO back in 2012. The stock debuted trading around the $18 mark and slowly fell 70%, to a low of $5.49 in July. Despite a series of earnings beats since the IPO, the stock still trended lower. However, the last upside surprise saw a 266% EPS beat, which made investors very interested again. The stock has jumped over 30% since the news and now looks to repeat the move seen in early 2015, when the stock doubled.

Estimates

For fiscal year 2017 and 2018 analyst are all in agreement and revising estimates higher. For 2017, estimates have ticked 42% over the last 7 days, from $0.19 to $0.27. For 2018, estimates have been revised 24% higher, from $0.25 to $0.31. This is the first uptick in estimates that the company has seen since early 2015. Look for the stock to reflect this uptick, just like it did in 2015.

In Summary

Tillys offers investors an opportunity to enter the beaten down retail space in a unique way. The niche that the company has created for themselves is showing to be successful and this has been proven with the recent EPS results. As other retailers are struggling, Tillys has managed to put together their biggest EPS surprise ever.