Tilly’s Earnings Call: Mixed Sentiments Amid Challenges

Tilly’s ((TLYS)) has held its Q1 earnings call. Read on for the main highlights of the call.

The recent earnings call for Tilly’s painted a mixed picture for the company, with both positive and negative elements coming to the fore. While there were encouraging signs of increased customer engagement and a stabilization in sales decline, the call also highlighted significant concerns, such as a decrease in total net sales, an increased net loss, and ongoing store closures. Despite these challenges, the company expressed cautious optimism about future improvements in sales trends.

E-commerce Growth

Tilly’s has seen promising growth in its e-commerce segment, particularly through its TikTok shop. Since mid-April, the TikTok shop has begun outperforming daily order volumes through Amazon, indicating a strong potential for growth in this channel.

Improvement in Comparable Net Sales

The company reported a 7% decrease in first-quarter comparable net sales, which is an improvement from the 11.2% decrease in the fourth quarter of fiscal 2024. Notably, fiscal May saw a decrease of just 2.2%, suggesting a positive trend in sales performance.

Positive Customer Engagement

Tilly’s has successfully increased customer engagement through in-person events, such as store appearances by celebrities like Mike Tyson and Travis Barker. These events have proven effective in drawing customers and boosting engagement.

Decrease in Total Net Sales

Despite some positive trends, Tilly’s total net sales for the first quarter of fiscal 2025 were $107.6 million, marking a 7.1% decrease from the previous year. This decline highlights ongoing challenges in the company’s sales performance.

Net Loss Increase

The company’s net loss increased to $22.2 million, or $0.74 per share, compared to $19.6 million, or $0.65 per share, last year. This increase in net loss underscores the financial challenges Tilly’s is currently facing.

Gross Margin Decline

Tilly’s gross margin declined to 19.8% of net sales, down from 21% last year. Despite this decline, product margins improved by 40 basis points, offering a silver lining in the company’s financial performance.

Store Closures

The company ended the first quarter with 238 total stores, a net decrease of eight stores compared to a year ago. Tilly’s plans to close additional stores in the coming quarters, reflecting a strategic shift in its retail operations.

Forward-Looking Guidance

Looking ahead, Tilly’s projects net sales of $150 to $158 million for the second quarter, with a potential net loss of $2.7 million to net income of $2 million. The company is focusing on improving product assortment and customer engagement as part of its strategy to enhance financial performance.

In summary, Tilly’s earnings call revealed a company navigating through a challenging retail environment with a mix of optimism and caution. While there are positive signs in e-commerce growth and customer engagement, the decrease in net sales and increased net loss remain significant hurdles. The company’s forward-looking guidance suggests a focus on strategic improvements to drive future growth.