Tilly's (TLYS) Q1 2025 Earnings Call Transcript
Key Takeaways
Image source: The Motley Fool. DATEWednesday, June 4, 2025 at 4:30 p. ETCALL PARTICIPANTSChief Financial Officer — Michael HenryExecutive Chairman — Hezy ShakedNeed a quote from one of our analysts. [...
Article Overview
Quick insights and key information
13 min read
Estimated completion
investment
Article classification
June 4, 2025
07:26 PM
The Motley Fool
Original publisher
Image source: The Motley Fool
DATEWednesday, June 4, 2025 at 4:30 p
ETCALL PARTICIPANTSChief Financial Officer — Michael HenryExecutive Chairman — Hezy ShakedNeed a quote from one of our analysts. [ tected]RISKSGross margin (GAAP) declined to 19. 8% of net sales from 21% in Q1 FY2024, reflecting deleverage in buying, distribution, and occupancy costs, even as aggregate expenses decreased
The net loss (GAAP) widened to $22. 2 million, or $0. 74 per, compared to $19. 6 million, or $0. 65 per, in Q1 FY2024
Total store count decreased by eight year over year as of Q1 FY2025, and management expects further closures, including up to fifteen additional stores subject to lease negotiations
TAKEAWAYSTotal Net Sales: $107. 6 million, representing a 7. 1% year-over-year decline
Physical Store Net Sales: Down 7. 4%; E-commerce net sales fell 5
Comparable Net Sales: Decreased 7%, an imvement from an 11. 2% decline in Q4 FY2024; in fiscal May, comparable net sales decreased 2
Store Count: 238 total stores at quarter-end, a net decrease of eight from the prior year
SG&A Expenses: $44 million, down $1. 1 million; Included $1. 2 million in non-cash asset impairment and write-off charges
Pretax Loss: $22. 3 million, or 20. 7% of net sales
Net Loss: $22. 2 million, or $0. 74 per (GAAP)
Inventory Levels: Total inventory down 3. 8% year over year, and unit inventory down 10
Liquidity: $92. 6 million, including $37. 2 million in cash and marketable securities and $55. 4 million in undrawn credit capacity; no debt outstanding
Guidance for Q2 FY2025: Anticipates net sales of $150 million to $158 million, Comparable net sales change from down 5% to flat, SG&A of $48 million to $49 million, and Net result between a $2. 7 million net loss and $2 million net income (GAAP)
Store Closures: Plans to operate 232 stores at the end of Q2 FY2025 after seven closures and one opening; additional closures possible pending lease renewal outcomes
TikTok Shop Launch: Management stated that after its March 2025 launch, order volume surpassed daily Amazon orders by mid-April 2025 and has continued to grow
Marketing Initiatives: Recent events celebrity influencers, Travis Barker and Mike Tyson, aiming to strengthen customer affinity and imve trends
Tariff Impact: Management noted "[tariffs] have generally become less burdensome in recent weeks," and expects "not seeing a material impact at this time" on margins
Back-to-School Season: Management highlighted the last two to three weeks of Q2 FY2025 as the period with the highest sales volume, describing back-to-school as historically its strongest season even in negative comp years
SUMMARYTilly's (TLYS 8. 12%) management emphasized that sequential imvement in comparable sales and enhanced duct margins are attributable to active marketing strategies, merchandise adjustments, and customer engagement initiatives
The jected liquidity increase next quarter is expected to reflect effective cash management and a strong, debt-free capital position, with total liquidity jected at apximately $106 million to $111 million for Q2 FY2025
Leaders signaled that closure of underperforming stores and lease negotiations may further reshape the store base, contingent on renewal outcomes
Physical and e-commerce sales as a portion of total revenue shifted slightly, with store-based sales at 79. 8% and e-commerce at 20. 2% in Q1 FY2025
Transaction volume and traffic both decreased by low single digits in Q1 FY2025, while average sale per transaction imved in May of Q2 FY2025
Michael Henry said, "It would take a consistent comparable net sales decrease of apximately 10% over the course of the remainder of FY2025 to require any level of borrowing this year. "Hezy Shaked said, "It's the merchandise and the marketing that brings the people to the stores," underscoring management's belief in the effectiveness of current strategies across customer segments
INDUSTRY GLOSSARYComparable Net Sales: Sales comparison metric evaluating the performance of stores and e-commerce platforms open throughout the current and prior periods
SG&A: Selling, General, and Administrative expenses represent overhead and operational costs unrelated to duction
Asset-backed Credit Facility: Lending arrangement secured by company assets, typically accounts receivable and inventory, viding liquidity with available unused capacity
Full Conference Call TranscriptMichael Henry: Thanks, Gar, and to all joining us today
Our fiscal 2025 first quarter net sales were within our outlook range vided during our March earnings call
Our first quarter comparable net sales decreased 7%, which was a sequential imvement from our 11. 2% comparable net sales decrease in the fourth quarter of fiscal 2024
The comparable net sales trend of our has continued to imve in fiscal May, starting the second quarter, with a decrease of just 2
Consequently, we believe our merchandise asment is on trend and moving us in the right direction
And we are encouraged to see signs of potential stabilization in our
As we look ahead in fiscal 2025, the potential impact of tariffs on duct costs remains a concern, yet the currently known impacts on our duct costs appear to be relatively minor
We have worked closely with all of our prietary branded partners to attempt to mitigate as much tariff impact as is reasonably possible
While tariffs have generally become less burdensome in recent weeks, we all realize this could change given the evolving nature of the tariff situation
Despite external uncertainties, we are actively pursuing opportunities to build mind with current and spective customers and we've had a busy last couple of months on the marketing front
Which we believe has contributed to some degree the sequential imvement in the comparable net sales trend of our
In early March, we launched our Tilly's TikTok shop, introducing a new source of Tilly's content with a digital storefront for today's generation of consumers
We hosted a launch party in West Hollywood, att by various youth culture influencers and celebrities
Our shop has grown to a level that began outperforming our daily order volume through Amazon in mid-April and continues to grow
During festival season in Palm Springs, we participated in an event featuring fessional surfing talent and DJs that drew reported 10,000 plus attendees in aggregate across the two weekends
In late April, the legendary boxer Mike Tyson made an appearance in our Blue Diamond store in Las Vegas in support of his namesake license duct line we carry
In late May, we hosted Travis Barker in our Irvine Spectrum store to mote his duct collaboration with our longtime brand partner, Hurley
These efforts are aimed at solidifying our authentic position at the intersection of youth culture, fashion, and music with a goal of building greater customer affinity for Tilly's
Which in turn will hopefully aid our efforts toward imving our results
Turning to our operating results for the first quarter of fiscal 2025 compared to last year's first quarter
Total net sales were $107. 6 million, a decrease of 7
Net sales from physical stores decreased by 7. 4% while e-commerce net sales decreased by 5
Net sales from physical stores represented 79. 8% of total net sales, compared to 80. 1% last year
While e-commerce net sales represented 20. 2% of total net sales compared to 19. 9% last year
Total comparable net sales, including both physical stores and e-commerce, decreased by 7%
We the first quarter with 238 total stores, a net decrease of eight stores compared to a year ago
Gross margin, including buying distribution and occupancy expenses, was 19. 8% of net sales compared to 21% of net sales last year
Duct margins imved by 40 basis points compared to last year primarily due to higher initial markups partially offset by increased inventory valuation reserves
Buying distribution and occupancy costs deleveraged by 160 basis points despite being $0. 8 million below last year in the aggregate, due to carrying these costs against lower total net sales
Total SG&A expenses were $44 million which included non-cash store asset impairment and other asset write-off charges of $1. 1 million decrease in total SG&A compared to last year was primarily due to reduced store payroll and related benefits of $0. 9 million and lower non-cash asset write-off charges of $0. 5 million partially offset by increased marketing expenses of $0
SG&A deleveraged 190 basis points as a result of carrying these costs against lower total net sales
Pretax loss was $22. 3 million or 20. 7% of net sales, compared to $19. 6 million or 16. 9% of net sales last year
Income tax benefit was $139,000 or 0. 6% of pretax loss compared to $13,000 or 0. 1% of pretax loss last year
Both years' income tax results include the continuing impact of a full non-cash deferred tax asset valuation allowance
This year's benefit also includes the refund of certain income tax credit carryforwards and state income tax carryback plan
Net loss was $22. 2 million or $0. 74 per compared to $19. 6 million or $0. 65 per last year
On our debt-free balance sheet, we the first quarter with total liquidity of $92. 6 million comprised of cash and marketable securities of $37. 2 million, no borrowings at any time, and undrawn borrowing capacity of $55. 4 million under our asset-backed credit facility which has been ext with Wells Fargo Bank through June 2027
Total balance sheet inventory and unit inventories were 3. 9% lower, respectively, than at the end of last year's first quarter
Looking at the second quarter of fiscal 2025, as noted earlier, total comparable net sales for fiscal May May 31, 2025, decreased by 2. 2% compared to last year continuing our sequential imvement in sales trend that began in the first quarter relative to fiscal 2024's fourth quarter
Based on current and historical trends, we estimate the ing ranges for the second quarter of fiscal 2025
Net sales of apximately $150 to $158 million translating to a comparable net sales range of a decrease of 5% to flat, respectively
SG&A of apximately $48 million to $49 million excluding any potential non-cash asset impairment charges, a near-zero effective income tax rate due to the continuing impact of a full non-cash valuation allowance on our deferred tax asset
Earnings in the range of a net loss of apximately $2. 7 million to net income of $2 million respectively and per results of a net loss of $0. 09 to net income of $0. 07 respectively
We expect to end the second quarter with 232 total stores in operation after closing seven stores and opening one new store during the quarter
This compares to 247 total stores at the end of last year's second quarter
At this time, we expect to close two additional stores in the third quarter, and there are up to potentially fifteen additional store closures, which could occur towards the end of this depending on the outcome of lease renewal negotiations with landlords
We expect to end the second quarter with a debt-free balance sheet and total liquidity of apximately $106 million to $111 million comprised of cash and investments of apximately $43 million to $48 million and available undrawn borrowing capacity of apximately $63 million under our credit facility
Based on current jections, we expect to remain a debt-free company throughout fiscal 2025
We estimate it would take a consistent comparable net sales decrease of apximately 10% over the course of the remainder of the fiscal year to require any level of borrowing this year
In closing, we believe our duct asment is on trend
We are working to drive customer engagement in creative ways and we believe we are controlling what is controllable
We believe you are beginning to see signs of stabilization in our and we're aiming to make further imvements from here over time
Operator, we'll now go to our Q&A session
Operator: If at any time your question has been addressed and you would to withdraw your question, first question comes from Matt Koranda with Roth Capital
Matt Koranda: Hey, guys
Maybe just curious the cadence of the first quarter
If you could unpack it a little bit more, between February, March, April, any discernible trends of coinciding with some of the macro volatility that we saw or weather events
And maybe just if you can vide, a transaction versus ticket breakdown of the 7% and negative 7% comp and the imvement sequentially that you saw, that'd be helpful
Michael Henry: Sure, Matt
So through the first quarter, fiscal February was down 5. 7%, March was down 13. 8%, and then April was plus 1
In terms of transactions, traffic was down low single digits in the first quarter
It remains down low single digits, but slightly better than that in May
The average sale was down low single digits during the first quarter
It's actually up one so far in May
And then total transactions are down 5% to 6%
Thanks for the breakdown, Mike
And then just for the second quarter guidance, I guess, so zero percent to five percent drop
We've seen a negative 2% trend in May
I guess, we're kinda just at the midpoint of that guidance thus far
Anything to call out from last year in terms of calendar shift in June, July, anything we should be mindful of there
And then maybe just for Hezy, if he's on the call, anything on the asment that's working
I know you guys called out of more comfort with the inventory balance and the asment and what's working there
Michael Henry: Go ahead
I was gonna say, your first part of your question on the cadence of Q2, each of the months were down single digits last year
So not expecting any difficulty from comparisons per se
As we go through the quarter
Just as a reminder, the bulk of the sales volume, the quarter is right at the end because we start the beginning of the back-to-school season in the back half of July
So the largest sales weeks of the quarter are actually the last two to three weeks of the quarter
So much of the of the quarter will be done then
May is typically only 25% of the second quarter, and I'm looking historically
But a lot of yet to come kinda there towards the end of July
Going into back-to-school
And I'd point out that each of the last three years, even as we comped negative, the back-to-school season's been our strongest season of performance in each of those years
So that's what gives us some cautious optimism here with starting May a minus two, and heading into what has been our strongest period of the year each of the last few years
That can lend itself to the possibility to get to flat and heaven forbid, positive, hopefully
We'll see as those come upon us
Hezy Shaked: As the seller is the merchant on a chime into
As far as the merchandise, there's no doubt that it's looking better, it's selling better, and of is that our traffic is up, now we can.
Related Articles
More insights from FinancialBooklet