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Tilly’s Earnings Call: Mixed Sentiment Amid Challenges

Tilly’s Earnings Call: Mixed Sentiment Amid Challenges

Tilly’s ((TLYS)) has held its Q4 earnings call. Read on for the main highlights of the call.

The recent earnings call for Tilly’s revealed a mixed sentiment, highlighting both positive strides and ongoing challenges. The company has made notable improvements in inventory management, product margins, and has a strategic focus on reducing expenses. However, these positive aspects are overshadowed by significant declines in net sales, particularly in e-commerce, and increased losses. Despite these hurdles, there is cautious optimism for the future, driven by potential sales improvements with warmer weather and strategic merchandising changes.

Inventory Management Improvement

Tilly’s has successfully reduced its inventory levels by 6.1% year-over-year as of March 1, 2025. This reduction comes after a challenging fourth quarter, where specific actions were implemented to address inventory issues, showcasing the company’s commitment to efficient inventory management.

Increased Physical Store Sales Proportion

The earnings call highlighted a positive shift in sales dynamics, with net sales from physical stores increasing by 13.7%. Physical stores now account for 73.5% of total net sales, up from 72.6% last year, indicating a stronger performance in brick-and-mortar locations.

Improved Product Margins

Tilly’s reported a 190 basis point improvement in product margins compared to the previous year. This improvement is primarily attributed to higher initial markups, reflecting the company’s strategic pricing decisions.

Significant Expense Reductions Planned

The company is targeting significant expense reductions through careful scrutiny of store lease decisions, strict payroll management, and negotiated reductions in contractual commitments. These measures are part of Tilly’s strategic focus on cost control.

Positive Trends with Warmer Weather

During a brief period of warmer weather, Tilly’s stores experienced positive comparable sales, suggesting that the spring assortment is resonating well with customers. This trend offers a glimmer of hope for improved sales performance in the coming months.

Decline in Total Net Sales

Tilly’s reported a 14.9% decline in total net sales, amounting to $147.3 million compared to the fourth quarter of fiscal 2023. This decline underscores the challenges the company faces in maintaining its sales momentum.

Decrease in E-commerce Net Sales

E-commerce net sales saw a significant decrease of 17.8%, now representing 26.5% of total net sales compared to 27.4% last year. This decline highlights the ongoing challenges in the digital sales channel.

Increased Pretax Loss

The company’s pretax loss increased to $13.4 million, up from $6.9 million last year, driven by lower net sales and increased inventory valuation reserves. This reflects the financial pressures Tilly’s is currently facing.

Net Loss Despite Reduced SG&A

Despite a reduction in SG&A expenses, Tilly’s reported a net loss of $13.7 million or $0.45 per share, an improvement from $20.6 million or $0.69 per share during last year’s fourth quarter. This indicates some progress in managing operational costs.

Store Closures

Tilly’s ended the fiscal year with 240 total stores, a net decrease of eight stores compared to the end of fiscal 2023, after closing 10 stores during the fourth quarter. This reflects the company’s strategy to optimize its store footprint.

Forward-Looking Guidance

Looking ahead, Tilly’s projects first-quarter net sales between $105 million and $111 million, with comparable store sales expected to decrease by 8% to 3%. The company anticipates having $25 million to $30 million in cash and marketable securities by the end of the first quarter of fiscal 2025, with no need to access their credit facility due to anticipated reductions in inventory and expenses.

In conclusion, Tilly’s earnings call presented a mixed picture of the company’s current financial health. While there are positive developments in inventory management and expense reduction, the significant declines in net sales and increased losses pose substantial challenges. The company’s forward-looking guidance suggests cautious optimism, with expectations of improved sales trends and strategic adjustments to navigate the current market landscape.

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