Tilly's, Inc. (TLYS) Q2 2020 Earnings Report, Transcript and Summary

Greetings. Welcome to Tilly’s Incorporated Second Quarter 2020 Earnings Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded. I will now turn the conference over to your host, Gar Jackson. You may begin.

Good afternoon and welcome to the Tilly’s fiscal 2020 second quarter earnings call. Ed Thomas, President and CEO; and Michael Henry, CFO, will discuss the company’s results and then host the Q&A session. For a copy of Tilly’s earnings press release, please visit the Investor Relations section of the company’s website at tillys.com. From the same section, shortly after the conclusion of the call, you will also be able to find a recorded replay of this call for the next 30 days. Certain forward-looking statements will be made during this call that reflect Tilly’s judgment and analysis only as of today, September 3, 2020 and actual results may differ materially from current expectations based on various factors affecting Tilly’s business, including impacts of and the company’s actions in response to the current COVID-19 pandemic. Accordingly, you should not place undue reliance on these forward-looking statements. For a more thorough discussion of the risks and uncertainties associated with any forward-looking statements, please see the disclaimer regarding forward-looking statements that is included in our fiscal 2020 second quarter earnings release, which is furnished to the SEC today on Form 8-K as well as our other filings with the SEC referenced in that disclaimer. Today’s call will be limited to 1 hour and will include a Q&A session after our prepared remarks. I now will turn the call over to Ed.

Thanks Gar. Good afternoon, everyone and thank you for joining us today. I want to kick off today's call by thanking our entire Tilly's team for their hard work combating this unprecedented and unpredictable COVID-19 environment. I'm very proud of everyone's efforts fighting the unexpected challenges that we have faced together as we approach the six-month mark of the pandemic's severe impact on our business. Turning to the second quarter, it began with all 239 of our stores closed for the first two weeks of the quarter, beginning on May 15 and continuing through July, early July. We reopened all but four of our stores in a phased approach with new health protocols, customer traffic restrictions and reduced operating hours in place. Then on July 13 our home state of California ordered the closure of indoor malls. For the remainder of the quarter 33 of our 98 California stores, which are some of our more productive stores, were closed. Despite these complications, our second quarter results were better than we had anticipated. Total net sales for the second quarter decreased by 16% compared to last year. Net sales from physical stores including all periods of store closures and net sales from new stores not yet open a full year decreased 39.6% compared to last year's second quarter. Comparable net sales from reopened stores declined 18% collectively during the second quarter following their respective reopening dates compared to last year, while customer traffic in reopened stores decreased more than 30% collectively. E-commerce net sales grew by 128% compared to last year's second quarter. The period of store closures that crossed the first and second quarters allowed us to focus solely on e-com inventory management and operations and coupled with our digital first merchandising mindset helped us deliver significant e-com topline growth, improved product margins and operational efficiency and profitability from e-com. We also expanded our ship from store capabilities, introduced curbside pickup in selected stores during the quarter, and I've just recently identified five or six stores across the country to be utilized as hub stores for additional e-commerce fulfillment, while in-store activity remained significantly reduced. In terms of merchandising, all departments comp negative as a result of the various periods of pandemic related store closures this year compared to a normal course of business last year. Women's, men's and footwear were our best performers. Girls, accessories and boys were weakest. Under Tricia's leadership we launched several new brands during the quarter, including BDG by Urban Outfitters, women's Nike, Free People Movement, Lukas Sport [ph], Fjallraven, and several new skate brands. We are excited about the prospects for these new brands and we continue to evolve the Tilly’s merchandise assortment. Turning to real estate, we continue to negotiate with our landlords to reach mutually acceptable solutions for rents we have withheld during periods of store closures and we continue to negotiate for reductions in future rent obligations in light of the reduced operating hours and customer traffic restrictions associated with the ongoing pandemic. For the most part we have had thoughtful engagements from our landlords. To date, we have been successful in reaching agreements in principle to address approximately 70% of our total stores. Due to the sensitivity and evolving nature of these discussions, we will not share any particular details for those negotiations other than to say we appreciate the spirit of partnership expressed towards our company by most of our landlords. In terms of new stores and other capital expenditures, we currently expect to open two new stores during fiscal 2020, with one opening in early October and one opening in mid-November. We sincerely thank those landlords who are understanding about the uncertainties of the current environment and allowed us to defer new store capital expenditures until 2021 for the seven other new stores we had originally planned to open during 2020. We currently expect total capital expenditures for fiscal 2020, including the two new stores and continuing customer facing and other technology investments to be in the range of approximately $8 million to $10 million. Turning to the third quarter, the back-to-school season is typically our second most important period behind the holiday season for generating sales. We started the third quarter going up against our two largest sales weeks of last year's third quarter, which got us off to a very tough start in terms of comp sales. We also entered into this year's third quarter with the 33 California stores closed that I referenced earlier. In many of the markets in which we operate, school districts have announced delayed start dates compared to last year and/or have converted to an online only or hybrid format and these plans continue to evolve. These factors have had a meaningfully negative impact on our comparable net sales results when compared to last year, which included a normal healthy back-to-school season. Our August total net sales, including the impact of store closures in net sales from stores not yet open a full year, decreased 35.6% in total with net sales from stores down 46.3% and e-commerce up 40.6%. The trend of our comp performance, while still negative, has been improving from week to week with each passing week following the week one of August. We are encouraged to have seen a recent uptick in business in certain markets wherein some schools have reopened. We cannot be certain if this improving trend from week to week that we saw in August will continue for the remainder of the quarter, nor can we predict whether current expectations for schools going back will change, whether stores will remain open for the entirety of the quarter or how consumer behaviors may change as the pandemic continues to evolve. However, we are trying to be proactive and in anticipation of this significantly reduced back-to-school period this year, we have planned our third quarter inventory receipts for stores well below last year's levels. In closing, I want to thank our team again for working so hard to carefully manage our business during this pandemic period. We are not out of the woods yet so to speak, but we are focused on growing and protecting our business for the longer term despite the ongoing pandemic. Mike will now provide more details on our second quarter operating performance and balance sheet. Mike?

Thanks Ed. Good afternoon. As Ed noted, our fiscal 2020 second quarter operating results were significantly impacted by the ongoing COVID-19 pandemic, including various periods of store closures, reduced customer traffic and sales results following the phased reopening of our stores throughout the quarter, and the subsequent re-closure of California indoor malls late in the quarter. Details of our second quarter operating performance compared to last year's second quarter were as follows. Total net sales for the second quarter were $135.8 million, a decrease of $25.9 million or 16% compared to $161.7 million last year. Net sales from physical stores were $83.9 million, a decrease of $55.1 million or 39.6% compared to $138.9 million last year. Net sales from stores represented 61.7% of total net sales for the quarter compared to 85.9% of total net sales last year. E-commerce net sales were $52.0 million, an increase of $29.2 million or 127.8% compared to $22.8 million last year. E-commerce net sales represented 38.3% of total net sales for the quarter compared to 14.1% last year. We ended the quarter with 238 total stores, including one RSQ-branded pop-up store of which 33 California stores were closed as a result of the COVID-19 pandemic. This compares to 229 total stores including three RSQ-branded pop-up stores, all of which were open to the public last year. Gross profit, including buying, distribution and occupancy expenses was $41.7 million or 30.7% of net sales compared to $51.7 million or 32.0% of net sales last year. Product margins improved by approximately 360 basis points compared to last year, primarily due to strong regular price selling upon the reopening of our stores. Buying, distribution, and occupancy costs, deleveraged by approximately 490 basis points collectively against lower total sales. Occupancy costs, despite being reduced by $0.4 million on a larger store base compared to last year deleveraged by 270 basis points against lower total net sales. Distribution expenses deleveraged by 200 basis points primarily due to an increase in e-com shipping costs of $3 million associated with the significant increase in e-commerce orders. Buying costs deleveraged 20 basis points on lower total sales. Total SG&A expenses were $34.0 million or 25.0% of net sales compared to $39.6 million or 24.5% of net sales last year. Total SG&A was reduced by $5.6 million compared to last year, but deleveraged 50 basis points as a percentage of net sales on lower total sales. Total payroll and related benefits decreased by $7.5 million primarily resulting from the various periods of store closures during the quarter and careful management of staffing levels upon reopening. Most other expenses were also reduced compared to last year. The primary exception to this was increased e-com marketing and fulfillment expenses of $3.9 million due to the significant growth in e-commerce orders. Operating income was $7.7 million or 5.7% of net sales compared to $12.1 million or 7.5% of net sales last year. This decline in operating results was directly attributable to the impact of the COVID-19 pandemic on our retail stores. Other income decreased to $0.3 million from $0.6 million last year, primarily due to having lower total cash and marketable securities, earning lower interest rates on our investments and paying interest on borrowed cash compared to last year. Income tax expense was $2.8 million or 34.3% of our pretax income compared to $3.4 million or 26.8% of pretax income last year. We cannot accurately predict what our effective income tax rate will be going forward as it is dependent upon our operating results for the back half of the fiscal year, which are also unpredictable in the current environment. Net income was $5.3 million or $0.18 per diluted share compared to $9.3 million or $0.31 per diluted share last year. Weighted average shares were 29.7 million for both periods. Turning to our balance sheet, we ended the second quarter with cash and marketable securities totaling $148.9 million including $23.7 million borrowed under our revolving credit facility and approximately $13.9 million of withheld store lease payments. Excluding borrowed cash and withheld store lease payments, total cash and marketable securities were $111.3 million compared to total cash and marketable securities of $124.8 million and no debt or withheld store lease payments last year. We ended the quarter with inventories per square foot down 8.9%. Year-to-date capital expenditures were $4.6 million compared to $4.8 million last year. Turning to the third quarter, given the continuing unpredictability surrounding the COVID-19 pandemic, including but not limited to its impacts on consumer behavior, our ability to continue to operate some or all of our stores at any point in time, or our e-commerce business, and the adverse impacts on the back-to-school season so far this year, we are unable to reliably predict our future sales or earnings at this time and therefore we will not be providing any specific guidance. However, we thought it was important to share certain facts to help everyone better understand our current environment. First, as we noted earlier, we ended the third quarter with 33 of our California stores closed. These stores represent 14% of our total store count of 238, and in the aggregate, accounted for $22 million or 14% of our total net sales during last year's third quarter. On Friday last week, the State of California issued new guidelines which affected the reopening of businesses, including indoor malls. As a result of these new guidelines, the company was able to reopen 15 of these closed California stores on Monday of this week, 6 more on Tuesday, 1 on Wednesday, and 1 more is expected to open on Friday. We do not yet know when the remaining 10 of these California stores will be able to reopen, most notably in Los Angeles County which has 8 of the 10 remaining closed stores. Next, if history is relevant in the current environment, fiscal August has represented approximately 50% of third quarter net sales for each of the past four years. Our fiscal 2020, August net sales were $50.2 million dollars compared to $77.9 million for August last year. However, there are a few reasons to believe that results could be relatively better for the remainder of the quarter. With a delayed back-to-school date this year, we could see some business shift to later in the quarter than in prior years, although still below prior levels overall. Comparable net sales results have been improving trend wise from week to week as we go up against smaller sales weeks from last year. We have also been encouraged to see an uptick in business following the reopening of certain schools within the markets in which we operate. However, we can't be certain that this near term uptick will sustain for the remainder of the quarter. Finally collective comparable net sales from reopened stores since their respective reopening dates and through September 1, 2020 compared to the respective comparable fiscal date of last year have declined 25.5%. Taken together, we believe these factors make it appear more likely than not that our third quarter net sales will be meaningfully below last year's $154.8 million. We cannot predict with any certainty what our net sales may specifically be for the quarter, given all the factors we have discussed. We continue to carefully manage inventory levels as Ed referenced earlier, as well as all expenses in order to protect our cash position, which as of September 2, was $161.9 million, including borrowed cash and withheld store lease payments. Based on all currently available information, we believe our cash position and credit facility availability will be more than sufficient to support our operations for at least the next year. Operator we will now go to Q&A.

[Operator Instructions] Our first question is from David Buckley with Bank of America. Please proceed with your question.

Hi guys, thanks. Mike, I 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.

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.

Yes, 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 sustains itself, or whether that's going to happen in every market that goes back-to-school, but certainly we've seen some encouraging signs there, some positive signs in terms of improvement in our overall business within those markets. So, it's hard to predict. I mean, there's no material difference, there has not been a material difference in performance from off mall to mall stores. Traffic has generally been down everywhere, and I don't think we're alone with that and where traffic has improved, we've seen a relative improvement to our business too.

Yes and I'm looking at the at the market performance specifically here Jeff. So Florida has been very strong for us in the last two to three weeks. Colorado and Utah has been very strong. Arizona and Nevada have been positive for two to three, four weeks in a row now. And even though the California stores that we mentioned, the indoor mall stores that just reopened, they've had strong positive comps these last couple days. Couple of days doesn't make a long term trend, but it's at least encouraging and that's part of what we're referencing and seeing an uptick is some of these markets, as well as the very near term reopening comps from the stores that had been closed for a month and a half.

Okay so, so it's possible we could gain some momentum here over the next month or so, I guess we just have to wait and see.

Yes, it is possible, that's why we that's why we phrased our thoughts about the third quarter in particular. You know, August as a percentage has been very consistent, but this year is not a normal August obviously. I'd like to think that August was overly depressed because of the push out of back-to-school dates. And then again, seeing this relative improvement from week to week in trend as well as the positive comps we've seen overall the last two days, we've had total comp store sales excluding e-com positive the last two days, so that's a good sign too. Again, we don't know if that's going to sustain. We don't know, if it is just a temporary blip, it's hard to know anything these days, but at least there are some positive signs that maybe we could recover a little ground in the remainder of the quarter as we go up against much smaller revenue weeks than what was in August. Each of the weeks of August is bigger than any other week for the remainder of the quarter. So we've taken the hits of going up against the high volume weeks. And that'll be interesting to see how much ground we can recover and if we can recover through the remainder of this quarter, sorry.

Right, okay that's helpful. And then Ed, maybe you can just kind of give us a sense of your longer term thinking at this point around the concentration of your business in digital versus brick and mortar. I know you talked about negotiating rents with the landlord's. Your e-com business I think was approaching 40% of your business in Q2, which certainly I wouldn't have expected that if you'd asked me last year, but it's great to see. And then just maybe thinking around how you might evolve your real estate strategy as e-commerce grows?

Well, you know, we've said for quite a while that we think before the pandemic, we thought there was ample room for growth in both with physical stores and e-com and we thought we were very underdeveloped in e-com which we were. So the time and effort that we've put in the last few months dedicated to e-com and being able to concentrate more on it, has shown us how much better it can be. But I don't think we've peaked. I know we have not peaked at all as far as the e-com business goes. So I think we've got a lot a lot of runway ahead of - a positive runway ahead of us. In terms of physical stores, I think it's a moving target right now. We have to understand, I think understanding how particular locations, whether it's off mall or mall, what they tend to mix ends up with is a big question mark for all of us in the industry. So we're going to be pretty, like we always are, we're going to be pretty careful and make sure we understand the co-tenancy that if we're going to go in to a particular location who's going to survive and who won't. But we're going to continue to open stores. There's no question about it, and I would say that it's going to be still be a combination or a continuation of our strategy of opening off-mall and mall stores both.

Okay, and hopefully those rents will be substantially lower than they would have been pre COVID. I'll leave it there and take the rest offline. Thanks very much.

Okay, Jeff. Thank you.

Our next question is from Mitch Kummetz with Pivotal Research. Please proceed with your question.

Yes, thanks for taking my questions. I definitely appreciate all the color, particularly around back-to-school, I know you guys, give more information than most, but that being said, I'm still hoping for a little bit more just to make sure I better understand the trajectory. So you gave the kind of August numbers, you also sort of split it out first two weeks, second two weeks. I think first two were down 45. I think I backed into the second two down around 19, but the first two days of I guess, September sounds like they're positive. Is there any way you can give August by week or can you speak to maybe the last week of August or…?

Yes directionally, you're right Mitch. So the first week of August we were down over 50%. In the second week we were down almost 40, and the third week we were down 24, and the fourth week we were down 14. So it's been moving meaningfully by week. This week, we referenced the last two days being positive overall. The quirk of this week is that Monday we were going up against Labor Day last year. Labor Day was almost as early as it could possibly be last year it was Monday September 2nd which the comparative date was Monday August 31 this year. We'll have the positive side of that compare this year coming up this Monday, which will be this year's Labor Day, which is as late as it can possibly be this year. So we did take a significant negative entering this week, because of that Labor Day compare, we should get the offset of that next week. Trajectory wise, it just looks like things are continuing to improve from week to week and as we referenced, where we have seen schools go back, we're seeing some nice upticks in business and again we mentioned the early results from the California reopened store. So there's reason to hope a little bit.

We've seen enough now Mitch where the schools are going back, we've seen enough of a change in our trends to give us a little bit more confidence in how things will proceed going forward.

Okay. And do you guys have any metrics that you can speak to on, like, I had a company report earlier this week that said, by the end of August 65% of schools were back versus 95% a year ago, and when they said 65% back then that is combination of in person and virtual versus 35 that had been delayed. I don't know if you have any numbers that you could speak to around that and the markets where you guys have stores or even, yes.

Off the top of my head now, but you know it really varies significantly, not only by state, but within the state itself.

Yep.

So, for example, right in our backyard here, LA County is completely different than Orange County. So and it really is a moving target to try to figure out okay, when are they really going to go back and stuff like that. So we don't have enough that we could share with you, other than…

That's fair.

It keeps changing. Yes, the last time, I looked at this a couple of weeks ago and I think I had counted 75 stores that had a meaningful delay in their back-to-school timing, relative to last year but again this keeps changing every single week and sometimes within the week so…

Got it.

I haven't kept up with it honestly.

And then, Mike I was trying to hope to strip out the impact of the closed California stores, and I think you said $22 million in sales in the third quarter of last year, and I think you also made a comment that August typically represents 50% of the quarters. Is it fair to say that those stores we're about $11 million in August last year, or is it less than that, because California typically goes back-to-school later?

I don't have the August break out of those stores in particular, but given the relative penetration of August, it's going to be pretty close to that plus or minus.

Okay. And then just a couple of quick ones. Got it. On the margins, so store payroll was down $7.5 million year-over-year in the quarter. I would assume that it will be down as well in Q3, but down less than that, just given how many store opening days you have this quarter versus last quarter, is that the right way to think about it?

Yes, I think that's a -- I think that's a fair expectation, certainly. I would expect it to be down year-over-year, but yes, not nearly as much as it was in Q2, with the caveat that stores don't reclose.

Sure. And should shipping deleverage be less, less negative in Q3 as ship -- as e-com penetration probably goes down a little bit, again just because you're going to have more stores open or…?

It just depends what the balance of e-com relative to stores is and how those play out? It's hard to say for sure.

Okay, fair enough right. Thanks, guys.

But the good thing is we've really expanded our ability. We've always had the ability to ship from store, but we have a lot more flexibility of where we can ship from in addition to our e-com fulfillment center, and that might -- that should help us long-term.

Okay, thanks again and good luck.

All right.

Thanks, Mitch.

And our next question is from Sharon Zackfia with William Blair. Please proceed with your question.

Hi, good afternoon. I guess I had a question on that, that had less to do with back-to-school and just how you're thinking about driving urgency in the business. And I know historically, you've used a lot of events, really to drive excitement around Tilly’s. And in this environment, I'm just curious how you think about driving that excitement for consumers, whether it's, to come into the stores or to go online?

Hi, I Sharon. Yes, the event, the days of the events and localized events are temporarily suspended until we get to somewhat of a normal period out there with store traffic and people shopping patterns, but we haven't only used events to drive traffic to our stores. And I think you know well that we don't, generally we don't promote much as a company. So it's not going to be price driven. There's a big -- we continue to work with our loyalty base, our loyalty customers and work with them, keep in contact with them, which those customers end up being the best multichannel shoppers for us. And then continuation of introduction of new categories for new brands has always been part of our formula and we're going to continue to do that going forward. So pretty much all we know right now.

Just a follow-up on that. Do you have any stats on how much loyalty is comprising of your sales at this point versus kind of pre-pandemic?

We do, but we do not disclose it. Sorry.

Okay, thank you.

And our next question is from Matt Koranda with ROTH Capital Partners. Please proceed with your question.

Hi guys, thanks. You shared the comp cadence earlier for August which was super helpful, but I was wondering, can you just clarify that was all in year-over-year comparison including e-com, is that correct?

Yes, that did include e-commerce during, during that cadence for sure.

Okay. And any material split in terms of the way to that performs within the month, I mean, I would assume it was relatively steady but any help just on the cadence there?

The week-by-week cadence?

Yes.

Yes, so we shared that just a few minutes ago when Mitch asked about that. So, week one, we were down a little over 50%. And then it…

Mike Sorry, just to clarify, I was talking about e-com specifically, not just the consolidated, I'm just trying to parse out store versus e-com comparison in the month there?

E-com strengthened as the weeks went on too. So e-com was up double-digits each week, but it continued to strengthen as the month went on. So it was up in the teens in week one, up over 40% in week two, then almost 60% in week three and more than 60% in week four, so it's been accelerating to the positive just as stores. I guess, I've been getting less negative.

Got it. Now that makes sense. Okay, that's very helpful. And then just curious if you could talk about inventory position and how we feel there. Obviously, you guys have done a very nice job managing that down, but are we light anywhere? Are we heavy in particular in areas? And then maybe you could just talk generally about sort of regional differences and sort of merchandise sales. And what are you seeing in areas where you've got physical back-to-school versus kind of virtual, any material differences to point out for us?

Well as far as the inventory goes, our inventory is in great shape. It's probably never been as clean as it is. Tricia and the merchandise team did an outstanding job of managing through from the beginning of managing, making sure that we were very surgical in our approach to cancellations, and being able to capitalize on things that we saw that were good. There is always going to be some spots in the inventory, maybe a product so that is such a such a great seller that you're not going to have enough, but that's not been caused by anything related to the recent environment at all. I would say nothing out of the norm. The inventory is really in good shape. And what's been difficult is to forecast what our sales, store sales are going to be going forward because of all the volatility in the environment stuff and we are somewhat in the more of in a chase mode for certain inventory than we normally would be because of that, but so far, so good.

Okay, very helpful. And then maybe one for Mike, I noticed, cash balance still up in the month of August, I guess, the September an imbalance that you shared. Anything to note there, I would just assume, I guess that you guys are still managing inventory very effectively and flushing cash, but anything else that we should be aware of there or think about as it pertains to kind of working capital?

Well, again, any specific numbers are hard to speak to because it just depends on where sales go and we've acknowledged it's impossible to predict anything right now. That being said, we've run all kinds of different scenarios and trying to project our business and what actions we need to take, what we need to do to protect inventory positioning, protect balance sheet positioning. We expect to continue to have, well more than $100 million of cash and investments on a go forward basis for the remainder of this year. Not expecting to have any meaningful problems from balance sheet perspective. Thankfully, we entered this whole pandemic situation with an extremely strong balance sheet. And we've been very, very diligent and serious about managing inventory and expenses in this pandemic period. So I feel as good as I can about our balance sheet in this environment, and really not anticipating having any issues.

Okay, that makes sense. Maybe I'll sneak one more in here. Sorry, guys. I'm just curious if you got like, can you give us a sense for how you're sort of thinking about market share? I know back-to-school and there's a lot of gyrations in August and the year-over-year comparisons are kind of a little lackey here, but how are you guys thinking about your overall market share going forward? It just seems like maybe you guys have outperformed a couple of specialty retailer peers, but are you losing share to big box? I mean, any general whether you guys are tracking market share and how we should be thinking about that, going forward any I think kind of in Q3, Q4?

I mean, in my thoughts are, with all the store closures in both specialty and department stores in particular, I think it's an opportunity to gain more market share sooner rather than later. So I think our merchandise assortment is unparalleled out there by most retailers. And I think it's an opportunity for us to gain new customers as a result of certain store closures or chain closures.

That makes sense. Thank you, guys. I'll jump back in queue.

Okay, thanks.

And we have reached the end of our question-and-answer session and I will now turn the call back over to Ed Thomas for closing remarks.

Thank you all for joining us on the call today. We look forward to sharing further business updates with you following the conclusion of the third quarter, and Black Friday weekend. Have a good evening everyone.

This concludes today's conference and you may disconnect your lines at this time. Thank you for your participation.