Tilly's, Inc. (NYSE:TLYS) Q2 2020 Earnings Conference Call - Final Transcript
Sep 03, 2020 • 04:30 pm ET
[Operator Instructions] Our first question is from David Buckley with Bank of America. Please proceed with your question.
Hi guys, thanks. Mike, appreciate all the details. Just thinking about your gross margin in the third quarter for a minute. How are you thinking about each bucket in terms of merch margin buying, distribution and occupancy? And then, just looking out into the second half of the year, just your overall outlook for the holiday season, how are you planning for stores with traffic likely to remain weak, and the expected e-com mix shift?
Yes, so I would expect our product margins to remain fairly close to last year, generally speaking, absent some additional store closures or things of that nature. When you look at the year-to-date first half our product margins are only down a little bit compared to last year, and so I would expect that probably to remain somewhat consistent without knowing specifically where that might fall out depending on how the rest of back-to-school plays out. I think you should expect to see some deleverage from distribution and occupancy cost, just as we did in the second quarter.
Given the increase in e-com shipping costs which is likely to continue as we expect e-com to continue to be strong double-digit positive during the third quarter and you're going to see some occupancy deleverage, because sales are likely to be down relative to last year, even though we have reduced those expenses in raw dollars as we noted during the second quarter. So, I think directionally those will probably remain consistent with each other. As it relates to the holiday season, we're planning stores continue to be negative for the rest of the year at this stage based on what we know as of today. We noted that for the third quarter we've planned our store inventory receipts significantly below last year, the same remains the case in the fourth quarter. We do think there probably will be something of a larger shift towards e-com than even we typically see during the fourth quarter. Where exactly those things fall out is anybody's best guess.
All right. Thanks, Mike.
And our next question is from Jeff Van Sinderen with B. Riley. Please proceed with your question.
Jeff Van Sinderen
First, let me say good work in Q2. Great to see the metrics better than everyone expected. Obviously a tough compare and we see the August metrics, but can you maybe expand on your thinking around back-to-school, just given the sequential improvement that you've seen so far week to week? What are you seeing in markets where the kids are actually physically going back to school? I think you've sort of touched on that in your commentary, just wondering if there's any more to add to that.
Yeah, we've only had a fewer markets Jeff, where that have actually gone back-to-school, but where we've seen that up, we've seen an uptick in our business as Mike mentioned earlier. It's hard to predict whether that