Tilly's Inc (NYSE:TLYS) Beats Q2 Earnings Estimates with Improved Margins

Tilly's Inc (NYSE:TLYS) reported fiscal second-quarter results that surpassed analyst expectations, with both revenue and earnings outperforming projections. The young adult apparel retailer posted net sales of $151.3 million, exceeding the consensus estimate of $157.1 million, though still representing a 7.1% decline year-over-year. More notably, the company reported earnings per share of $0.10, significantly beating the anticipated loss of $0.04 per share.

Quarterly Performance Highlights

The company demonstrated improved operational efficiency during the quarter, with gross margin expanding to 32.5% compared to 30.7% in the prior year period. This improvement was driven by higher initial markups and reduced markdowns, reflecting better inventory management. Operating expenses decreased by $4.4 million year-over-year, contributing to an operating income of $2.7 million compared to an operating loss of $0.9 million in the same quarter last year.

Comparable net sales decreased 4.5%, showing sequential improvement from previous quarters. Both physical stores and e-commerce channels experienced declines, with physical stores down 7.3% and e-commerce decreasing 6.6%. The company operated 15 fewer stores compared to the same period last year, contributing to the overall sales decline.

Balance Sheet and Liquidity Position

Tilly's maintained a strong liquidity position with $113.7 million in total available liquidity, consisting of $50.7 million in cash and cash equivalents and $63.0 million in available borrowing capacity. Inventory levels decreased significantly by 14.5% compared to the prior year, indicating disciplined inventory management amid challenging sales conditions.

Third Quarter Outlook and Market Reaction

The company provided third-quarter guidance that suggests continued challenges but potential improvement. Tilly's expects net sales between $134 million to $140 million, representing a comparable net sales range of -2% to +2% compared to the prior year. The projected net loss of $10.5 million to $7 million would represent an improvement from last year's third-quarter net loss of $0.43 per share.

The market responded positively to the results, with shares trading higher in after-hours activity. This reaction appears driven by the earnings beat and improved margin performance, suggesting investors are encouraged by the company's progress in controlling costs and managing inventory despite the ongoing sales challenges.

Strategic Developments

During the quarter, Tilly's welcomed Nate Smith as its new Chief Executive Officer. Executive Chairman Hezy Shaked commented that the company is "beginning to see the positive impacts of our efforts to stabilize our business," noting that comparable net sales trends have improved each quarter since the end of fiscal 2024.

For more detailed earnings information and future estimates, readers can review the earnings estimates page.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Readers should conduct their own research and consult with a qualified financial advisor before making investment decisions.