TLYS Q1 Earnings Call: Store Closures and Marketing Efforts Amid Ongoing Sales Decline

Yahoo

2 days ago

Young adult apparel retailer Tilly's (NYSE:TLYS) missed Wall Street's revenue expectations in Q1 CY2025, with sales falling 7.1% year on year to $107.6 million. Its GAAP loss of $0.74 per share decreased from -$0.65 in the same quarter last year.
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Revenue: $107.6 million (7.1% year-on-year decline)
Revenue Guidance for Q2 CY2025 is $154 million at the midpoint, above analyst estimates of $147.2 million
Operating Margin: -21.1%, down from -16.5% in the same quarter last year
Locations: 238 at quarter end, down from 246 in the same quarter last year
Same-Store Sales fell 7.1% year on year (-8.6% in the same quarter last year)
Market Capitalization: $39.2 million
Tilly's management attributed first quarter results to continued softness in store traffic and overall sales, despite some sequential improvement compared to prior periods. Executive Vice President and CFO Michael Henry noted that while comparable net sales were down 7%, this was better than the 11.2% decline in the previous quarter, suggesting potential stabilization. Management pointed to improvements in merchandise assortment and increased marketing efforts, such as the launch of Tilly's TikTok shop and high-profile in-store events, as contributing to this relative outperformance. CEO Hezy Shaked commented that the company has seen consistent traffic gains in recent weeks, particularly in the junior segment, but cautioned that more work is needed to sustain these trends.
Looking forward, Tilly's is focused on capitalizing on the upcoming back-to-school season and maintaining progress in merchandise and customer engagement. Management believes that product selection is increasingly resonating with younger consumers and expects further benefit from recent marketing initiatives. CFO Michael Henry highlighted that May sales trends have improved to a 2.2% decline, and the company anticipates that the peak sales period in late July could drive stronger results. While tariff exposure remains a risk, current assessments suggest minimal impact on product margins for the remainder of the year. CEO Hezy Shaked expressed cautious optimism for the next six months, emphasizing ongoing efforts to improve both inventory positioning and in-store experience.
Management identified improved merchandise assortment, digital engagement, and event-driven marketing as key factors behind the quarter's sequential sales improvement, while also acknowledging ongoing pressures from store closures and external uncertainties.
Merchandise Assortment Progress: Management reported that recent changes to product mix, particularly in the junior category, have led to better sales performance and customer response. CEO Hezy Shaked noted that merchandise is 'looking better' and 'selling better,' attributing recent traffic improvements to these adjustments.
Digital Engagement Expansion: The introduction of the Tilly's TikTok shop in March has provided a new e-commerce channel, which the company claims began outperforming Amazon orders by mid-April. Management sees this as an important step to reach younger shoppers who are increasingly active on social media platforms.
Event-Driven Marketing Initiatives: Tilly's hosted several in-person events, including celebrity appearances and collaborations with influencers, to strengthen its brand association with youth culture. These activities, particularly during festival season, are intended to drive store traffic and reinforce the company's position at the intersection of fashion and music.
Store Optimization and Closures: The company closed eight stores year-over-year and plans further closures depending on lease negotiations. CFO Michael Henry highlighted that ongoing store rationalization is expected to reduce occupancy costs, but acknowledged that future cost leverage will depend on sales trends.
Tariff and Cost Management: While tariffs on imported goods remain a concern, management indicated that the current impact on product costs is minor, with efforts underway to mitigate risks through supplier collaboration. Michael Henry stated that product margins are expected to remain stable barring significant changes in tariff policy.
Tilly's outlook is shaped by efforts to stabilize sales trends, execute marketing strategies, and navigate macroeconomic headwinds in the coming quarters.
Back-to-School Season Importance: Management emphasized that the final weeks of the second quarter, coinciding with the back-to-school shopping period, historically generate the highest sales volume. The company is relying on this seasonal lift to potentially offset ongoing traffic and transaction declines.
Store Footprint Adjustments: Tilly's plans to close multiple additional stores in the next two quarters, with up to 15 more closures possible depending on lease renewals. Management believes that a leaner store base could help control costs, though it presents risks to overall reach and sales volume.
Tariff and Inventory Risk: The company continues to monitor tariff developments, which could affect product costs over time. Current inventory levels are lower than last year, positioning Tilly's to be more agile, but ongoing macroeconomic uncertainty and changing consumer preferences present continued risks to profitability.
In the quarters ahead, the StockStory team will be watching (1) whether Tilly's can sustain recent sequential improvements in comparable sales through the back-to-school period, (2) the impact of continued store closures on both cost structure and overall sales, and (3) how digital and event-driven marketing initiatives translate into higher customer engagement and transaction growth. Changes in tariff policy and consumer spending patterns will also be important factors to monitor.
Tilly's currently trades at a trailing 12-month price-to-sales ratio of 0.1×. In the wake of earnings, is it a buy or sell? Find out in our full research report (it's free).
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