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Graham Defensive Screen
Tillys took the markets current "right sizing" wrath full blunt, right in the kisser. Tilly went public May of 2012 and shareholders have been stuck in a declining pattern since, dumping 30% after earning Thursday morning reaching the current bottom of mid-$8 after the morning dust settled. Lately a "dump" has been taking 2-4 days to settle, but Tilly did manage a bottom bounce early in the day, usually a good sign for a "play" and evaluate move. Retail has been a tough environment for the "specialty" retailers lately. Many are facing stiffer competition and lower customer spends. Still Tilly continues to post profits, is debt free, and is growing it's footprint. 200 stores, 32 states, popular brands with a mix of private label. Attracts teens which is "bad" in this economy, but popular brands can garnish higher loyalty and margins.With competitors, especially Aeropostale in trouble, Tilly needs to be careful going forward. It may not be able to match, nor may it want to, price promotions and other incentives that are wearing down their margins, but rather may want to up their game in other areas to try to twist the knife in deeper and further weaken competitors who could lose their loyal customers as their customer perception weakens.Retail is not a strong play for me. I've caught several near bottom, rode them up for awhile and then had them collapse under me. Some of the bigger chains offer dividends that while they don't always hold, can help signal strength if supported by good cash flow. Tillys use to pay a dividend before they went public. It's unclear if they plan to restart one "if they gain" more stability. Tillys does have what the big players doesn't....serious growth potential, VERY LOW FLOAT, very low volume, very good institutional holdings, all which can lend to more stable pricing once a bottom is found. Low volume took down the share price, but low volume can bring it back up if Tillys can demonstrate potential.I think they can, and I'll give them a CAPS call at this point. Unfortunately, most clothing retailers "show the money" on the holiday quarters. Tillys could have a tough few quarters going forward, but their apparel is the type that needs refreshed year round, especially in the summer months and not necessarily under the Christmas tree.
Insider trading shows a lot of selling, executives do not have any ownership in the company. Declined in operating income. Cash flow sheet shows huge dividend payments but I don't see a dividend being paid on the stock. The dividend payments are like 2x as high as the operating cash flow
Long. Tilly’s apperal stores. Great growth happening. Trading at a fraction of the P/S and P/E ratios of some of its peers. Very undervalued here at 16x trailing and 14x forward earnings.
Opportunity to increase store base 3x domestically. + Margin expansion (and I believe company's LT OM target have upside to double digit EBIT margins. Can see 20% + Sales growth for next 5 years. Sitting $0.50 above IPO and beat first 2 Q's post IPO. Think great entry price here at $16 level.
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