Store Operations and Expansion - As of October 29, 2022, Tilly's operated 247 stores across 33 states, an increase from 243 stores the previous year[105] - The company expects to open up to 15 new stores in fiscal 2023, primarily in California, Texas, and the Northeast, with total capital expenditures not exceeding $25 million[110] Financial Performance - Total net sales for the thirteen weeks ended October 29, 2022, were $177.8 million, a decrease of $28.2 million or 13.7% compared to $206.1 million last year[123] - Gross profit was $54.6 million, or 30.7% of net sales, down from $76.7 million, or 37.2% of net sales last year, primarily due to increased markdown rates[124] - Selling, general and administrative (SG&A) expenses were $48.3 million, or 27.1% of net sales, compared to $47.7 million, or 23.2% of net sales last year[125] - Operating income decreased to $6.3 million, or 3.6% of net sales, from $29.0 million, or 14.1% of net sales last year[126] - Net income was $5.1 million, or $0.17 per diluted share, compared to $20.8 million, or $0.66 per diluted share last year[128] - Comparable store net sales change was (14.9)% for the thirteen weeks ended October 29, 2022, compared to a 31.3% increase last year[123] - For the thirty-nine weeks ended October 29, 2022, total net sales were $491.9 million, a decrease of $79.3 million or 13.9% compared to $571.2 million last year[129] - SG&A expenses for the thirty-nine weeks were $137.8 million, or 28.0% of net sales, compared to $136.0 million, or 23.8% of net sales last year[131] - Operating income for the thirty-nine weeks was $12.6 million, or 2.6% of net sales, down from $70.3 million, or 12.3% of net sales last year[132] Economic and Market Conditions - Fiscal 2022 fourth quarter operating results are anticipated to remain below fiscal 2021 levels due to ongoing economic impacts from the COVID-19 pandemic[106] - Inflationary cost pressures have resulted in significant price increases for merchandise, negatively impacting consumer behavior and financial results during fiscal 2022[107] - Supply chain disruptions have led to shipping delays and increased costs, affecting the ability to meet customer expectations and overall operational results[108] - Labor challenges and wage inflation have increased competition for labor, driving up wages beyond government-mandated increases[109] - The company experienced a decline in net sales due to the winding down of pandemic restrictions and inflationary pressures in fiscal 2022[140] Cash Flow and Financing - Working capital decreased to $90.0 million as of October 29, 2022, from $91.8 million at January 29, 2022, a decline of $1.8 million[137] - Net cash used in operating activities was $11.1 million for the thirty-nine weeks ended October 29, 2022, compared to net cash provided of $46.9 million in the same period last year, a decrease of $57.9 million[140] - Net cash provided by investing activities was $55.5 million this year, compared to net cash used of $42.1 million last year, reflecting a significant turnaround[142] - Net cash used in financing activities was $10.8 million this year, an improvement from $21.6 million used last year[144] - The company entered into a new senior secured credit agreement with a revolving credit facility of up to $25.0 million, maturing on January 20, 2024[146] - As of October 29, 2022, the company was in compliance with all covenants under the new credit agreement and had no outstanding borrowings[152] - Cash flow from investing activities included maturities of marketable securities totaling $117.2 million, partially offset by purchases of $49.8 million[142] Shareholder Actions - The company repurchased shares totaling $10.9 million during the first three quarters of fiscal 2022[145] Financial Covenants - The company’s financial covenants require a total funded debt to EBITDA ratio no greater than 4.00 to 1.00 and a fixed charge coverage ratio of not less than 1.25 to 1.00[149]

Tilly's, Inc. (NYSE:TLYS) Q3 2022 Results Conference Call December 1, 2022 4:30 PM ET Company Participants Gar Jackson - IR Ed Thomas - President and CEO Michael Henry - CFO Conference Call Participants Rick Magnusen - B. Riley Mitch Kummetz - Seaport Research Operator Greetings. Welcome to the Tilly's, Inc. Third Quarter 2022 Earnings Results Conference Call. [Operator Instructions] Please note this conference is being recorded. I will now turn the conference over to your host, Gar Jackson. You may begin. ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 __________________________________________________ FORM 10-Q __________________________________________________ ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended July 30, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number: 001-35535 _________________________________________________ ...

Tilly's, Inc. (NYSE:TLYS) Q1 2022 Earnings Conference Call September 1, 2022 4:30 PM ET Company Participants Gar Jackson - IR Edmond Thomas - President and CEO Michael Henry - CFO Conference Call Participants Jeff Van Sinderen - B. Riley Securities Mitch Kummetz - Seaport Research Matt Koranda - ROTH Capital Operator Greetings, and welcome to the Tilly's, Inc. Second Quarter 2022 Earnings Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will fo ...

[Form 10-Q Filing Information](index=1&type=section&id=Form%2010-Q%20Filing%20Information) This section provides details on Tilly's, Inc.'s Quarterly Report on Form 10-Q filing and its common stock information - Tilly's, Inc. filed its Quarterly Report on Form 10-Q for the period ended April 30, 2022[2](index=2&type=chunk) | Class of Stock | Symbol | Exchange | | :--------------- | :----- | :------- | | Class A Common Stock, $0.001 par value | TLYS | New York Stock Exchange | | Common Stock Class | Shares Outstanding (as of June 3, 2022) | | :----------------- | :------------------------------------ | | Class A common stock $0.001 par value | 22,736,122 | | Class B common stock $0.001 par value | 7,306,108 | [Forward-Looking Statements](index=4&type=section&id=Forward-Looking%20Statements) This section outlines risks and uncertainties associated with forward-looking statements, covering economic and operational factors - The report contains forward-looking statements subject to risks and uncertainties, including impacts from the COVID-19 pandemic, inflation, supply chain disruptions, and changes in consumer spending[10](index=10&type=chunk)[11](index=11&type=chunk) - Key risks include the ability to adapt to downward trends in store traffic, successfully open new stores, attract e-commerce customers, manage inventory, and respond to fashion preferences[11](index=11&type=chunk) - The company cautions that actual results may differ materially from expectations due to various factors and undertakes no obligation to update these statements[13](index=13&type=chunk)[15](index=15&type=chunk) [PART I. FINANCIAL INFORMATION](index=6&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This part presents Tilly's, Inc.'s unaudited consolidated financial statements and management's analysis [Item 1. Financial Statements (Unaudited)](index=6&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) Presents Tilly's, Inc.'s unaudited consolidated financial statements, encompassing balance sheets, income statements, cash flows, and related accounting notes [Consolidated Balance Sheets](index=6&type=section&id=Consolidated%20Balance%20Sheets) Presents Tilly's, Inc.'s consolidated financial position, detailing assets, liabilities, and stockholders' equity at specific reporting dates | Metric (in thousands) | April 30, 2022 | January 29, 2022 | May 1, 2021 | | :-------------------- | :------------- | :--------------- | :---------- | | Total Current Assets | $208,041 | $227,978 | $237,281 | | Total Assets | $485,657 | $504,823 | $526,524 | | Total Current Liabilities | $122,185 | $136,167 | $146,768 | | Total Liabilities | $317,722 | $330,110 | $351,923 | | Total Stockholders' Equity | $167,935 | $174,713 | $174,601 | - Total current assets decreased from **$227.98 million** at January 29, 2022, to **$208.04 million** at April 30, 2022, primarily due to decreases in marketable securities and cash and cash equivalents[19](index=19&type=chunk) - Total stockholders' equity decreased from **$174.71 million** at January 29, 2022, to **$167.94 million** at April 30, 2022[19](index=19&type=chunk) [Consolidated Statements of Operations](index=7&type=section&id=Consolidated%20Statements%20of%20Operations) Reports Tilly's, Inc.'s financial performance, including net sales, gross profit, operating income, and net income for the specified periods | Metric (in thousands) | Thirteen Weeks Ended April 30, 2022 | Thirteen Weeks Ended May 1, 2021 | | :-------------------- | :---------------------------------- | :------------------------------- | | Net sales | $145,775 | $163,157 | | Gross profit | $43,815 | $54,839 | | Operating income | $1,108 | $14,874 | | Net income | $813 | $10,959 | | Basic EPS | $0.03 | $0.37 | | Diluted EPS | $0.03 | $0.36 | - Net sales decreased by **10.7%** from **$163.16 million** in Q1 2021 to **$145.78 million** in Q1 2022[21](index=21&type=chunk) - Net income significantly declined from **$10.96 million** in Q1 2021 to **$0.81 million** in Q1 2022, resulting in a diluted EPS decrease from **$0.36** to **$0.03**[21](index=21&type=chunk) [Consolidated Statements of Comprehensive Income](index=8&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Presents Tilly's, Inc.'s comprehensive income, reflecting net income and other comprehensive income components for the specified periods | Metric (in thousands) | Thirteen Weeks Ended April 30, 2022 | Thirteen Weeks Ended May 1, 2021 | | :-------------------- | :---------------------------------- | :------------------------------- | | Net income | $813 | $10,959 | | Other comprehensive income, net of tax | $3 | $3 | | Comprehensive income | $816 | $10,962 | - Comprehensive income decreased significantly from **$10.96 million** in Q1 2021 to **$0.82 million** in Q1 2022, mirroring the net income trend[24](index=24&type=chunk) [Consolidated Statement of Stockholders' Equity](index=9&type=section&id=Consolidated%20Statement%20of%20Stockholders'%20Equity) Details changes in Tilly's, Inc.'s stockholders' equity, including net income, share repurchases, and share-based compensation - Stockholders' equity decreased from **$174.71 million** at January 29, 2022, to **$167.94 million** at April 30, 2022[27](index=27&type=chunk) - The decrease was primarily driven by **$8.18 million** in share repurchases, partially offset by net income of **$0.81 million** and share-based compensation of **$0.56 million**[27](index=27&type=chunk) [Consolidated Statements of Cash Flows](index=10&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Summarizes Tilly's, Inc.'s cash inflows and outflows from operating, investing, and financing activities for the specified periods | Cash Flow Activity (in thousands) | Thirteen Weeks Ended April 30, 2022 | Thirteen Weeks Ended May 1, 2021 | | :-------------------------------- | :---------------------------------- | :------------------------------- | | Net cash (used in) provided by operating activities | $(17,553) | $19,277 | | Net cash provided by (used in) investing activities | $43,463 | $(17,097) | | Net cash (used in) provided by financing activities | $(8,157) | $2,651 | | Net increase in cash and cash equivalents | $17,753 | $4,831 | | Cash and cash equivalents, end of period | $59,954 | $81,015 | - Operating activities shifted from providing **$19.28 million** in cash in Q1 2021 to using **$17.55 million** in Q1 2022[30](index=30&type=chunk) - Investing activities provided **$43.46 million** in Q1 2022, a significant change from using **$17.10 million** in Q1 2021, primarily due to marketable securities maturities[30](index=30&type=chunk) [Notes to the Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) Provides detailed explanations and disclosures supporting the consolidated financial statements [Note 1: Description of the Company and Basis of Presentation](index=11&type=section&id=Note%201%3A%20Description%20of%20the%20Company%20and%20Basis%20of%20Presentation) Describes Tillys as a specialty retailer operating 241 stores and an e-commerce site, with financial statements prepared under GAAP, noting ongoing COVID-19 impacts - Tillys operates **241 stores** across 33 states and an e-commerce platform, offering a wide assortment of global, emerging, and proprietary brands[32](index=32&type=chunk) - The COVID-19 pandemic continues to adversely impact the business, affecting consumer behavior, store traffic, operational capabilities, supply chains, and inventory management[38](index=38&type=chunk) [Note 2: Summary of Significant Accounting Policies](index=12&type=section&id=Note%202%3A%20Summary%20of%20Significant%20Accounting%20Policies) Details Tillys' significant accounting policies, including revenue recognition, lease accounting, stock repurchases, income taxes, and evaluation of new accounting standards | Net Sales Source (in thousands) | Thirteen Weeks Ended April 30, 2022 | Thirteen Weeks Ended May 1, 2021 | | :------------------------------ | :---------------------------------- | :------------------------------- | | Retail stores | $117,482 | $127,675 | | E-commerce | $28,293 | $35,482 | | Total net sales | $145,775 | $163,157 | | Net Sales by Brand Type | Thirteen Weeks Ended April 30, 2022 | Thirteen Weeks Ended May 1, 2021 | | :---------------------- | :---------------------------------- | :------------------------------- | | Third-party | 68 % | 71 % | | Proprietary | 32 % | 29 % | | Total net sales | 100 % | 100 % | - Revenue from gift cards was **$4.0 million** for the thirteen weeks ended April 30, 2022, up from **$3.8 million** in the prior year[42](index=42&type=chunk) - The company modified its loyalty program expiration policy, reducing the estimated liability by **$0.5 million** during the thirteen weeks ended April 30, 2022[44](index=44&type=chunk) - Income tax expense for the thirteen weeks ended April 30, 2022, was **$0.3 million** (**26.9%** of pre-tax income), compared to **$3.8 million** (**25.7%**) in the prior year[55](index=55&type=chunk) [Note 3: Marketable Securities](index=16&type=section&id=Note%203%3A%20Marketable%20Securities) Describes Tillys' marketable securities, comprising commercial paper and fixed income securities, noting a decrease in fair value during the period | Marketable Securities (in thousands) | April 30, 2022 | January 29, 2022 | May 1, 2021 | | :--------------------------------- | :------------- | :--------------- | :---------- | | Commercial paper | $39,921 | $64,233 | $69,969 | | Fixed income securities | $11,076 | $32,794 | $6,664 | | Total marketable securities | $50,997 | $97,027 | $76,633 | - Gains on investments from commercial paper were **$25 thousand** for the thirteen weeks ended April 30, 2022, compared to **$29 thousand** in the prior year[61](index=61&type=chunk) [Note 4: Credit Agreement](index=16&type=section&id=Note%204%3A%20Credit%20Agreement) Details Tillys' new $25.0 million senior secured revolving credit facility, replacing a prior agreement, with no outstanding borrowings as of April 30, 2022 - A new senior secured revolving credit facility of up to **$25.0 million** was entered into on January 20, 2022, maturing on January 20, 2024[62](index=62&type=chunk) - The new facility replaced a prior **$65.0 million** asset-backed credit agreement[69](index=69&type=chunk) - As of April 30, 2022, Tillys was in compliance with all covenants and had no outstanding borrowings under the new Credit Agreement[68](index=68&type=chunk) [Note 5: Commitments and Contingencies](index=19&type=section&id=Note%205%3A%20Commitments%20and%20Contingencies) Outlines Tillys' indemnifications, commitments, and guarantees, along with ongoing legal proceedings, including a class action lawsuit - The company has not recorded any liability for indemnifications, commitments, and guarantees, as their maximum potential future payments are often unlimited and duration indefinite[73](index=73&type=chunk) - In the Juan Carlos Gonzales case, a PAGA action alleging wage and hour violations, a loss is currently not probable or estimable, and BaronHR is required to indemnify Tillys[75](index=75&type=chunk) - The Skylar Ward class action lawsuit was dismissed with prejudice in May 2022 after the parties executed a settlement agreement in March 2022[76](index=76&type=chunk) [Note 6: Fair Value Measurements](index=20&type=section&id=Note%206%3A%20Fair%20Value%20Measurements) Explains Tillys' fair value measurement hierarchy for financial assets and reports non-recurring impairment charges for long-lived store assets - The company categorizes financial assets based on a three-level fair value hierarchy, with money market securities in Level 1 and commercial paper in Level 2[77](index=77&type=chunk)[79](index=79&type=chunk)[82](index=82&type=chunk) - Non-recurring impairment charges of **$13.4 thousand** were recorded for one store's long-lived assets during the thirteen weeks ended April 30, 2022, compared to no impairment charges in the prior year[83](index=83&type=chunk)[84](index=84&type=chunk) [Note 7: Share-Based Compensation](index=21&type=section&id=Note%207%3A%20Share-Based%20Compensation) Details Tillys' share-based compensation plan, including stock options and restricted stock awards, and reports related expenses and unrecognized amounts - As of April 30, 2022, **1,797,665 shares** were available for future issuance under the 2012 Plan[85](index=85&type=chunk) | Stock Option Activity | Outstanding at Jan 29, 2022 | Granted | Exercised | Forfeited | Outstanding at Apr 30, 2022 | | :-------------------- | :-------------------------- | :------ | :-------- | :-------- | :-------------------------- | | Number of Options | 1,570,211 | 502,500 | (4,750) | (2,000) | 2,065,961 | | Weighted Average Exercise Price | $9.02 | $9.45 | $4.13 | $9.45 | $9.14 | | Share-Based Compensation Expense (in thousands) | Thirteen Weeks Ended April 30, 2022 | Thirteen Weeks Ended May 1, 2021 | | :---------------------------------------------- | :---------------------------------- | :------------------------------- | | Cost of goods sold | $89 | $(38) | | Selling, general, and administrative | $474 | $404 | | Total share-based compensation | $563 | $366 | - Total unrecognized share-based compensation expense was **$5.7 million** at April 30, 2022, with a weighted average remaining recognition period of **3.0 years**[94](index=94&type=chunk) [Note 8: Earnings Per Share](index=23&type=section&id=Note%208%3A%20Earnings%20Per%20Share) Explains basic and diluted earnings per share calculations, noting a significant decrease in EPS for the thirteen weeks ended April 30, 2022 | EPS Metric (in thousands, except per share) | Thirteen Weeks Ended April 30, 2022 | Thirteen Weeks Ended May 1, 2021 | | :------------------------------------------ | :---------------------------------- | :------------------------------- | | Net income | $813 | $10,959 | | Weighted average basic shares outstanding | 30,762 | 29,878 | | Dilutive effect of in-the-money stock options and RSAs | 284 | 651 | | Weighted average shares for diluted EPS | 31,046 | 30,529 | | Basic earnings per share | $0.03 | $0.37 | | Diluted earnings per share | $0.03 | $0.36 | - **1.45 million** stock options were excluded from diluted EPS calculation for the thirteen weeks ended April 30, 2022, as their effect would have been anti-dilutive[96](index=96&type=chunk) [Note 9: Share Repurchase Program](index=23&type=section&id=Note%209%3A%20Share%20Repurchase%20Program) Details Tillys' share repurchase program, authorized for up to 2,000,000 shares, and reports repurchases made as of April 30, 2022 - The Board authorized a share repurchase program for up to **2.0 million** shares of Class A common stock through March 14, 2023[97](index=97&type=chunk) - For the quarter ended April 30, 2022, **892,033 shares** were repurchased at a weighted average price of **$9.14** per share, totaling **$8.2 million**[97](index=97&type=chunk) - As of the filing date, **987,427 shares** have been repurchased for **$9.0 million**, with **1,012,573 shares** remaining under authorization[98](index=98&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Provides management's perspective on Tillys' financial condition and operational results, including business overview, market trends, key performance indicators, and liquidity [Overview](index=24&type=section&id=Overview) Describes Tillys as a specialty retailer of apparel, footwear, and accessories, operating 241 stores and an e-commerce platform with diverse brands - Tillys operates **241 stores** in 33 states, averaging approximately **7,300 square feet** per store, and an e-commerce website[101](index=101&type=chunk) - The company offers a selection of iconic global, emerging, and proprietary brands rooted in an active and outdoor lifestyle[101](index=101&type=chunk) [Known or Anticipated Trends](index=24&type=section&id=Known%20or%20Anticipated%20Trends) Outlines anticipated adverse trends, including COVID-19 impacts, inflationary pressures, supply chain disruptions, and labor challenges affecting Tillys' operations - Operating results for fiscal 2022 are expected to remain well below fiscal 2021 levels due to the winding down of pandemic-related stimulus and the current inflationary environment[102](index=102&type=chunk) - Significant price increases for merchandise, gasoline, food, and other consumables are negatively impacting consumer behavior and the company's financial results[103](index=103&type=chunk) - Ongoing supply chain disruptions, particularly in Southern California ports, are causing shipping delays and increased costs, requiring adjustments to merchandise planning and pricing strategies[104](index=104&type=chunk) - Labor challenges and wage inflation are expected to continue throughout fiscal 2022, driven by increased competition for employees[105](index=105&type=chunk) [Fiscal 2022 New Store Openings and Capital Expenditure Plans](index=25&type=section&id=Fiscal%202022%20New%20Store%20Openings%20and%20Capital%20Expenditure%20Plans) Details Tillys' fiscal 2022 plans for 9 to 12 new store openings and projected capital expenditures of $23 million to $25 million for various investments - Tillys plans to open approximately **9 to 12 new stores** in fiscal 2022, mainly in California, Texas, and the Northeast[108](index=108&type=chunk) - Total capital expenditures for fiscal 2022 are estimated to be **$23 million to $25 million**, covering new stores, website/mobile app upgrades, distribution, and IT infrastructure[108](index=108&type=chunk) [How We Assess the Performance of Our Business](index=25&type=section&id=How%20We%20Assess%20the%20Performance%20of%20Our%20Business) Explains how Tillys assesses business performance using key indicators like net sales, comparable store sales, gross profit, SG&A, and operating income, noting business seasonality - Key performance indicators include net sales, comparable store sales, gross profit, SG&A expenses, and operating income[109](index=109&type=chunk) - Comparable store net sales include sales from both e-commerce and physical stores, reflecting an omni-channel business approach, but exclude gift card breakage and e-commerce shipping fees[112](index=112&type=chunk)[113](index=113&type=chunk) - Gross profit is impacted by initial markups, markdowns, shrinkage, and shifts in sales mix between proprietary and third-party brands[115](index=115&type=chunk)[116](index=116&type=chunk) - The business is seasonal, with the third and fourth fiscal quarters typically generating stronger sales and operating results[111](index=111&type=chunk) [Results of Operations](index=28&type=section&id=Results%20of%20Operations) Reports a significant decline in Tillys' net sales, gross profit, operating income, and net income for the thirteen weeks ended April 30, 2022, compared to the prior year | Metric | Thirteen Weeks Ended April 30, 2022 | Thirteen Weeks Ended May 1, 2021 | Change ($) | Change (%) | | :------------------------------------------ | :---------------------------------- | :------------------------------- | :--------- | :--------- | | Net sales (in thousands) | $145,775 | $163,157 | $(17,382) | (10.7)% | | Gross profit (in thousands) | $43,815 | $54,839 | $(11,024) | (20.1)% | | Gross profit as % of net sales | 30.1 % | 33.6 % | (3.5)% | | | Selling, general and administrative expenses (in thousands) | $42,707 | $39,965 | $2,742 | 6.9% | | SG&A as % of net sales | 29.3 % | 24.5 % | 4.8% | | | Operating income (in thousands) | $1,108 | $14,874 | $(13,766) | (92.6)% | | Operating income as % of net sales | 0.8 % | 9.1 % | (8.3)% | | | Net income (in thousands) | $813 | $10,959 | $(10,146) | (92.6)% | | Diluted EPS | $0.03 | $0.36 | $(0.33) | (91.7)% | | Operating Data | Thirteen Weeks Ended April 30, 2022 | Thirteen Weeks Ended May 1, 2021 | | :-------------------------------- | :---------------------------------- | :------------------------------- | | Stores operating at end of period | 241 | 238 | | Comparable store net sales change | (13.0)% | 7.5 % | | E-commerce revenues (in thousands) | $28,293 | $35,482 | | E-commerce revenues as % of net sales | 19.4 % | 21.7 % | - The decline in net sales was primarily attributed to the impacts of pent-up customer demand and federal stimulus payments in the prior year, combined with the current highly inflationary environment[122](index=122&type=chunk) - SG&A expenses increased by **$2.0 million** due to wage inflation (average store payroll hour rate increased by **6.5%**) and a **$1.6 million** credit reversal from a prior year sales tax assessment, partially offset by a decrease in corporate bonus expense[124](index=124&type=chunk) [Liquidity and Capital Resources](index=29&type=section&id=Liquidity%20and%20Capital%20Resources) Discusses Tillys' liquidity and capital resources, highlighting cash flow from operations, working capital changes, and cash movements from investing and financing activities - The company expects existing cash, marketable securities, and credit facility availability to cover working capital and capital expenditures for the next 12 months[128](index=128&type=chunk)[130](index=130&type=chunk) - Working capital decreased by **$6.0 million** from **$91.8 million** at January 29, 2022, to **$85.9 million** at April 30, 2022, primarily due to increased merchandise inventories and share repurchases[131](index=131&type=chunk) - Net cash used in operating activities was **$(17.6) million** for the thirteen weeks ended April 30, 2022, a **$(36.8) million** decrease compared to the prior year, driven by lower net sales[134](index=134&type=chunk) - Net cash provided by investing activities was **$43.5 million**, primarily from **$51.0 million** in marketable securities maturities, offset by **$5.0 million** in purchases and **$2.6 million** in capital expenditures[136](index=136&type=chunk) - Net cash used in financing activities was **$(8.2) million**, mainly due to **$8.2 million** in share repurchases[138](index=138&type=chunk) [Critical Accounting Policies and Estimates](index=32&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Addresses the critical accounting policies and estimates, emphasizing the challenges posed by the COVID-19 pandemic on financial statement preparation - Estimates and assumptions about future events are critical for financial statement preparation, with the COVID-19 pandemic making these particularly difficult[152](index=152&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=32&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) States no material changes in market risks were identified as of April 30, 2022, compared to the prior Annual Report on Form 10-K - No material changes in market risks were identified as of April 30, 2022, compared to the previous Annual Report on Form 10-K[153](index=153&type=chunk) [Item 4. Controls and Procedures](index=32&type=section&id=Item%204.%20Controls%20and%20Procedures) Details management's evaluation of Tillys' disclosure controls and procedures, confirming their effectiveness and noting no material changes in internal control over financial reporting [Evaluation of Disclosure Controls and Procedures](index=32&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that Tillys' disclosure controls and procedures were effective as of April 30, 2022 - The CEO and CFO concluded that Tillys' disclosure controls and procedures were effective at the reasonable assurance level as of April 30, 2022[154](index=154&type=chunk) [Changes in Internal Control Over Financial Reporting](index=32&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) Reports no material changes in internal control over financial reporting during the period covered by this Quarterly Report on Form 10-Q - No material changes in internal control over financial reporting were identified during the period covered by this Quarterly Report on Form 10-Q[155](index=155&type=chunk) [Inherent Limitations on Effectiveness of Controls](index=32&type=section&id=Inherent%20Limitations%20on%20Effectiveness%20of%20Controls) Acknowledges the inherent limitations of control systems, which provide reasonable but not absolute assurance against errors or fraud - Management acknowledges that control systems provide only reasonable assurance and cannot prevent all errors or fraud due to inherent limitations like faulty judgments, human error, circumvention by individuals, or management override[156](index=156&type=chunk)[157](index=157&type=chunk)[158](index=158&type=chunk) [PART II. OTHER INFORMATION](index=33&type=section&id=PART%20II.%20OTHER%20INFORMATION) This part includes information on legal proceedings, risk factors, exhibits, and signatures related to the Form 10-Q filing [Item 1. Legal Proceedings](index=33&type=section&id=Item%201.%20Legal%20Proceedings) Incorporates legal proceedings information by reference from Note 5: Commitments and Contingencies to the consolidated financial statements - Legal proceedings information is incorporated by reference from Note 5: Commitments and Contingencies[160](index=160&type=chunk) [Item 1A. Risk Factors](index=33&type=section&id=Item%201A.%20Risk%20Factors) Refers to the 'Risk Factors' section in the Annual Report on Form 10-K for a detailed discussion of risks affecting the company's business - For a detailed discussion of risks affecting the business, refer to the 'Risk Factors' section in the Annual Report on Form 10-K for fiscal year ended January 29, 2022[161](index=161&type=chunk) [Item 6. Exhibits](index=33&type=section&id=Item%206.%20Exhibits) Lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and interactive data files in iXBRL format - Exhibits include CEO and CFO certifications (31.1, 31.2, 32.1) and interactive data files (101, 104) in iXBRL format[162](index=162&type=chunk) [Signatures](index=34&type=section&id=Signatures) Confirms the report's signing by Edmond Thomas, President, CEO, and Director, and Michael Henry, Executive Vice President, CFO, on June 8, 2022 - The report was signed by Edmond Thomas (President, CEO, and Director) and Michael Henry (EVP, CFO) on June 8, 2022[165](index=165&type=chunk)

PART I [Item 1. Business](index=7&type=section&id=Item%201.%20Business) Tillys is a specialty retailer of casual apparel and accessories for young demographics, operating 241 stores and e-commerce [Company Overview and History](index=7&type=section&id=1.1%20Company%20Overview%20and%20History) - Tillys is a **leading destination specialty retailer** of casual apparel, footwear, accessories, and hardgoods for young men, young women, boys, and girls[24](index=24&type=chunk) Company Operations as of January 29, 2022 | Metric | Value | | :--- | :--- | | Stores Operated | 241 | | States Present | 33 | | Headquarters | Irvine, California | - The company was founded in **1982** by Hezy Shaked and Tilly Levine, with the business conducted through World of Jeans & Tops (WOJT) since **1984**, which became a wholly owned subsidiary of Tilly's, Inc. in **May 2012**[25](index=25&type=chunk) [Our Strengths](index=7&type=section&id=1.2%20Strengths) - Tillys is a **destination retailer** offering a **broad and differentiated assortment** of iconic global, emerging, and proprietary brands, exceeding the selection of many other specialty retailers[27](index=27&type=chunk) - The company employs a **dynamic merchandise model**, allowing for **quick adjustments** to merchandise mix based on trends, store size, and location, with **multiple weekly product shipments**[27](index=27&type=chunk) - Tillys utilizes a **flexible real estate strategy**, successfully operating stores in various retail centers (malls, lifestyle centers, power centers, etc.) across **87 markets in 33 states**[27](index=27&type=chunk) - A **multi-pronged marketing approach**, including an **integrated digital platform**, vendor collaborations, a loyalty program ('Tilly's Rewards'), catalogs, social media, and influencer partnerships, drives customer engagement and traffic[27](index=27&type=chunk)[28](index=28&type=chunk) [Growth Strategy](index=8&type=section&id=1.3%20Growth%20Strategy) - The company plans to open approximately **15 to 20 new stores** during fiscal **2022**, primarily in California, Texas, and the Northeast, maintaining a **disciplined approach to growth**[32](index=32&type=chunk) - E-commerce net sales represented approximately **21% of total net sales in fiscal 2021**, down from **33% in fiscal 2020** due to a resurgence in in-store shopping, but **significant growth opportunities are expected**[29](index=29&type=chunk) - Tillys aims to drive **operating margin expansion** through scaled efficiencies, process improvements, and leveraging previous infrastructure investments, including its dedicated e-commerce fulfillment center and upgraded e-commerce platform[29](index=29&type=chunk) - The company is enhancing **omni-channel capabilities**, including fulfilling online orders from stores, in-store/curbside pickup, and ship-to-store options, with planned upgrades to its mobile application and website platform in fiscal **2022**[32](index=32&type=chunk) [Merchandising, Purchasing, and Planning and Allocation](index=9&type=section&id=1.4%20Merchandising,%20Purchasing,%20and%20Planning%20and%20Allocation) [Merchandising](index=9&type=section&id=1.4.1%20Merchandising) - Tillys offers a mix of third-party and proprietary merchandise across apparel, footwear, accessories, and hardgoods for various demographics[31](index=31&type=chunk) Merchandise Mix by Brand Type (Fiscal Years) | Brand Type | Fiscal 2021 | Fiscal 2020 | Fiscal 2019 | | :--- | :--- | :--- | :--- | | Third-party | 70% | 74% | 75% | | Proprietary | 30% | 26% | 25% | - In fiscal **2021**, the proprietary **RSQ brand** was the **top-selling brand**, accounting for approximately **16% of total net sales**, followed by proprietary **Full Tilt (9%)** and third-party **Vans (7%)**[32](index=32&type=chunk)[33](index=33&type=chunk) [Merchandise Purchasing](index=11&type=section&id=1.4.2%20Merchandise%20Purchasing) - The merchandising team focuses on product relevance, quality, fit, availability, cost, and speed of production, maintaining strong relationships with third-party vendors and identifying emerging brands[37](index=37&type=chunk)[38](index=38&type=chunk) - Proprietary brand merchandise is sourced both domestically and internationally, offering flexibility in lead times and costs[38](index=38&type=chunk) [Planning and Allocation](index=11&type=section&id=1.4.3%20Planning%20and%20Allocation) - Inventory planning and allocation processes involve continuous analysis of inventory levels and sell-through data to adjust assortments based on store size, season, and regional consumer preferences[39](index=39&type=chunk) - The broad vendor base and proprietary product capabilities allow for **quick reactions** to changing consumer preferences and market conditions, with merchandise shipped **multiple times per week**[39](index=39&type=chunk) [Stores](index=11&type=section&id=1.5%20Stores) [Store Operations and Locations](index=11&type=section&id=1.5.1%20Store%20Operations%20and%20Locations) Store Operating Data (Fiscal 2021) | Metric | Value | | :--- | :--- | | Stores Operated (Jan 29, 2022) | 241 | | Average Square Feet per Store | 7,300 | | Average Net Sales per Store | $2.5 million | | Average Net Sales per Square Foot | $342 | Number of Stores by Retail Center Type (Fiscal Years) | Retail Center Type | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Regional Mall | 137 | 136 | 139 | | Off-Mall | 90 | 87 | 86 | | Outlet | 14 | 15 | 15 | | Total | 241 | 238 | 240 | Number of Stores by State (as of Jan 29, 2022) | State | Stores | State | Stores | | :--- | :--- | :--- | :--- | | Arizona | 18 | New Jersey | 7 | | California | 97 | New Mexico | 1 | | Colorado | 5 | New York | 4 | | Delaware | 1 | North Carolina | 2 | | Florida | 19 | Ohio | 3 | | Georgia | 2 | Oklahoma | 2 | | Illinois | 7 | Oregon | 3 | | Indiana | 5 | Pennsylvania | 4 | | Kansas | 1 | Rhode Island | 2 | | Maryland | 1 | South Dakota | 1 | | Massachusetts | 4 | Tennessee | 3 | | Michigan | 3 | Texas | 16 | | Minnesota | 2 | Utah | 5 | | Missouri | 1 | Virginia | 3 | | Nebraska | 1 | Washington | 6 | | New Hampshire | 2 | Wisconsin | 3 | | Nevada | 7 | | | [Store Expansion Opportunities and Site Selection](index=12&type=section&id=1.5.2%20Store%20Expansion%20and%20Closures) Store Openings and Closures (Fiscal Years) | Fiscal Year | Stores Opened | Stores Closed | Total Stores at End of Period | | :--- | :--- | :--- | :--- | | 2017 | 2 | 6 | 219 | | 2018 | 16 | 6 | 229 | | 2019 | 14 | 3 | 240 | | 2020 | 2 | 4 | 238 | | 2021 | 9 | 6 | 241 | - Tillys expects to open approximately **15 to 20 new stores** in fiscal **2022**, focusing on existing markets like California, Texas, and the Northeast, while maintaining a **disciplined approach to store growth and profitability**[32](index=32&type=chunk)[43](index=43&type=chunk) [Store Management, Culture and Training](index=13&type=section&id=1.5.3%20Store%20Management,%20Culture%20and%20Training) - The company emphasizes attracting, training, retaining, and motivating qualified employees, with a corporate culture that empowers store managers and rewards sales performance[44](index=44&type=chunk)[45](index=45&type=chunk) - Comprehensive training programs are provided at store, district, and regional levels, focusing on operational expertise and supervisory skills[46](index=46&type=chunk) - In response to the pandemic, health and safety measures, including safety protocols, daily wellness screenings, and personal protective equipment, have been implemented for employees and customers[48](index=48&type=chunk) [E-Commerce](index=13&type=section&id=1.6%20E-Commerce) E-commerce Net Sales (Fiscal Years) | Fiscal Year | Net Sales (Millions) | % of Total Net Sales | | :--- | :--- | :--- | | 2021 | $166 | 21.4% | | 2020 | $173.4 | 32.6% | | 2019 | $98.5 | 15.9% | - The e-commerce platform serves as both a sales channel and a marketing tool, reaching customers in **all 50 states and D.C.**, even with physical stores in only **33 states**[49](index=49&type=chunk) - Planned enhancements for fiscal **2022** include upgrading the website platform to a more mobile-responsive version, improving the mobile application, and increasing online personalization[49](index=49&type=chunk) [Marketing and Advertising](index=13&type=section&id=1.7%20Marketing%20and%20Advertising) - Tillys employs a **multi-pronged marketing strategy** including a customer loyalty program ('Tilly's Rewards'), email marketing, digital advertising, social media engagement, brand partnerships, catalogs, and community outreach[50](index=50&type=chunk)[51](index=51&type=chunk)[55](index=55&type=chunk) - The loyalty program aims to interact with customers directly, provide insights into shopping behaviors, and offer early access to product launches and promotions[51](index=51&type=chunk) - Digital marketing efforts include pay-per-click, display, retargeting, paid social, affiliate marketing, and co-op marketing with brands to drive online and in-store traffic[55](index=55&type=chunk) [Distribution](index=14&type=section&id=1.8%20Distribution) - The company operates a **126,000 square foot distribution facility** for store merchandise and an **81,000 square foot e-commerce fulfillment center**, both in Irvine, California[52](index=52&type=chunk)[53](index=53&type=chunk) - Merchandise is shipped to stores **multiple times per week** in a floor-ready format, utilizing both the company's own truck fleet for local stores and third-party distributors for others[52](index=52&type=chunk) - While current infrastructure supports growth for the next few years, Tillys is exploring **additional distribution investments** for longer-term anticipated growth[54](index=54&type=chunk) [Information Technology](index=14&type=section&id=1.9%20Information%20Technology) - Information technology systems provide **comprehensive business process support**, enabling **dynamic merchandise models**, operational efficiencies, and scalability[56](index=56&type=chunk) - Recent implementations include new point-of-sale, order management, and customer relationship management systems, along with a re-platforming of the e-commerce website to a cloud-based solution[57](index=57&type=chunk) - Planned upgrades for fiscal **2022** include further enhancements to the e-commerce platform and mobile application[57](index=57&type=chunk) [Competition](index=15&type=section&id=1.10%20Competition) - The teenage and young adult retail apparel, accessories, and footwear industry is **highly competitive**, with numerous publicly-traded and privately-held specialty retailers, department stores, off-price retailers, and online marketplaces[58](index=58&type=chunk) - Tillys competes based on merchandise offerings, store location, price, and customer identification, believing its **differentiated merchandising strategy**, store environment, flexible real estate, and company culture provide advantages[59](index=59&type=chunk) - Many competitors are larger with greater financial and marketing resources, and the company acknowledges that its in-store experience and product offerings are not exclusive, posing a **risk of competitive emulation**[59](index=59&type=chunk) [Trademarks](index=15&type=section&id=1.11%20Trademarks) - Tillys owns several registered trademarks, including 'Ambitious', 'Blue Crown', 'Full Tilt', 'RSQ', 'Sky and Sparrow', and 'Tilly's', which are considered **valuable assets**[60](index=60&type=chunk) - The company actively protects its trademarks and is not aware of any infringement claims or challenges in the United States[60](index=60&type=chunk) [Employees](index=15&type=section&id=1.12%20Employees) Employee Count (as of January 29, 2022) | Employee Type | Count | | :--- | :--- | | Full-time | 1,450 | | Part-time | 4,250 | | Corporate & Distribution | 475 | | Store Locations | 5,225 | | Total (fluctuates seasonally) | 4,800 - 7,400 | - None of Tillys' employees are represented by a labor union, and the company considers its relationship with employees to be good[61](index=61&type=chunk) [Government Regulation](index=15&type=section&id=1.13%20Government%20Regulation) - Tillys is subject to various government regulations, including labor and employment laws, advertising and promotions, privacy, safety, consumer protection, intellectual property, and accessibility laws[62](index=62&type=chunk) - The company monitors changes in these laws and believes it is in material compliance with applicable regulations[62](index=62&type=chunk) [Insurance](index=15&type=section&id=1.14%20Insurance) - Tillys uses insurance to mitigate exposure to enterprise risks, including workers' compensation, property damage, directors' and officers' liability, cyber/data security, and general liability[63](index=63&type=chunk) - Insurance requirements are evaluated ongoing to maintain adequate coverage levels[64](index=64&type=chunk) [Seasonality](index=16&type=section&id=1.15%20Seasonality) - Tillys' business is **seasonal**, with revenues and net income typically **smallest in the first quarter** and **largest in the fourth quarter**, driven by back-to-school and winter holiday shopping seasons[65](index=65&type=chunk) - Inventory levels, accounts payable, and accrued expenses generally peak in anticipation of increased revenues during these periods[65](index=65&type=chunk) [Environmental, Social, Governance (ESG) Matters](index=16&type=section&id=1.16%20Environmental,%20Social,%20Governance%20(ESG)%20Matters) [Environmental Matters](index=16&type=section&id=1.16.1%20Environmental%20Matters) - In fiscal **2021**, Tillys launched an online sustainability program featuring over **1,600 eco-friendly product choices** from third-party and proprietary brands, comprising approximately **6% of total inventory**[66](index=66&type=chunk) - The company joined the **Better Cotton Initiative (BCI)** in early **2022**, committing to source at least **10% Better Cotton** for proprietary products in fiscal **2022**[66](index=66&type=chunk) - Distribution centers and stores utilize **recycled materials** for packaging, **LED lighting** for energy efficiency, and **water-conserving fixtures** in restrooms[67](index=67&type=chunk)[68](index=68&type=chunk) - Corporate offices are equipped with lighting sensors and exterior LED lighting for energy savings, and the data center migrated to a **100% renewable energy-operated facility**[69](index=69&type=chunk)[70](index=70&type=chunk) [Social Matters](index=17&type=section&id=1.16.2%20Social%20Matters) - Tillys supports the **Tilly's Life Center Foundation (TLC)** with financial aid, office space, and staff assistance, and is a member of the **Orange County Racial Justice Group**[75](index=75&type=chunk) - The company provides direct financial support to school-based programs, donates end-of-season products to charities, and offers health and wellness programs for corporate employees[75](index=75&type=chunk) - Periodic diversity and anti-harassment training is provided to all employees, and **one paid day off per year** is offered for volunteer work[75](index=75&type=chunk) [Governance Matters](index=17&type=section&id=1.16.3%20Governance%20Matters) - Despite being a controlled company, **six of eight Board members are independent**, and all Board committees are chaired by and comprised solely of **independent directors**[72](index=72&type=chunk) - The company maintains a **Code of Ethical Business Conduct**, a **whistleblower hotline**, an **Insider Trading Policy**, and a **Regulation FD-compliant Investor Relations policy**[73](index=73&type=chunk)[74](index=74&type=chunk)[75](index=75&type=chunk) [Additional Information](index=18&type=section&id=1.17%20Additional%20Information) - Tillys makes its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments available **free of charge** on its website (www.tillys.com) and the SEC's website (www.sec.gov)[76](index=76&type=chunk) [Item 1A. Risk Factors](index=18&type=section&id=Item%201A.%20Risk%20Factors) This section outlines significant risks and uncertainties impacting Tillys' business, financial condition, and operations [Risks Related to Our Business](index=18&type=section&id=1A.1%20Risks%20Related%20to%20Our%20Business) - The **COVID-19 pandemic** has materially disrupted operations, impacting consumer behavior, store traffic, supply chains, and inventory management, with ongoing uncertainties about future effects[78](index=78&type=chunk)[80](index=80&type=chunk) - Decreases in consumer spending due to economic conditions (e.g., inflation, employment levels) or non-economic factors (geopolitical issues, unseasonable weather) could **severely impact sales**[81](index=81&type=chunk)[82](index=82&type=chunk) - Significant lease payments for stores, corporate offices, and distribution centers strain cash flow, and future actions regarding leases (e.g., rent abatement, termination) due to disruptions could create **legal and financial risks**[83](index=83&type=chunk)[84](index=84&type=chunk) - Intense competition from various retailers, including larger competitors with greater resources, could require price reductions or impact operating cash flow[86](index=86&type=chunk)[88](index=88&type=chunk) - Failure to identify and respond to rapidly changing customer fashion preferences and trends could lead to **decreased sales, excess inventory, and lower profit margins**[90](index=90&type=chunk) - Dependence on third-party suppliers for merchandise, with no long-term contracts, exposes the company to risks of refusal to sell, quantity limits, price increases, and supply chain disruptions[99](index=99&type=chunk) - The majority of stores are concentrated in the southwestern and northeastern United States and Florida, making the business susceptible to region-specific disruptions like economic downturns, weather conditions, and natural disasters[107](index=107&type=chunk) [Risks Related to Information Technology, Data Privacy and Intellectual Property](index=25&type=section&id=1A.2%20Risks%20Related%20to%20Information%20Technology,%20Data%20Privacy%20and%20Intellectual%20Property) - Failure of information technology systems or inability to support growth could disrupt operations, including merchandise ordering, sales transactions, and e-commerce[113](index=113&type=chunk) - Compliance with evolving data protection laws (e.g., CCPA) could result in **substantial costs, enforcement actions, litigation, and negative publicity**[114](index=114&type=chunk)[116](index=116&type=chunk) - System security or operational failures, or intentional attacks (e.g., hacking), could disrupt internal operations, lead to data breaches, and harm reputation and financial results[117](index=117&type=chunk)[118](index=118&type=chunk) - Inability to protect trademarks and other intellectual property rights could damage brand identity and goodwill, leading to declining sales and costly litigation[119](index=119&type=chunk) [Risks Related to Our Ownership Structure and Ownership of Our Common Stock](index=26&type=section&id=1A.3%20Risks%20Related%20to%20Our%20Ownership%20Structure%20and%20Ownership%20of%20Our%20Common%20Stock) - The company's co-founders, Hezy Shaked and Tilly Levine, control a **substantial majority of the total voting power**, potentially preventing other stockholders from influencing corporate decisions and creating conflicts of interest[123](index=123&type=chunk)[124](index=124&type=chunk) - As a controlled company under NYSE rules, Tillys may rely on exemptions from certain corporate governance requirements, potentially reducing protections for Class A common stockholders[125](index=125&type=chunk) - The price of Class A common stock has been and may continue to be volatile, influenced by analyst research, financial forecasts, and the company's small public float[126](index=126&type=chunk)[127](index=127&type=chunk)[128](index=128&type=chunk)[131](index=131&type=chunk) - Anti-takeover provisions in corporate documents and Delaware law, combined with concentrated ownership, may inhibit or prohibit a takeover and limit the price investors would pay for common stock[134](index=134&type=chunk)[135](index=135&type=chunk) [General Risks](index=29&type=section&id=1A.4%20General%20Risks) - Epidemics, pandemics (like COVID-19), war, terrorism, civil unrest, or other public disruptions could negatively affect business by reducing store traffic and disrupting merchandise acquisition[138](index=138&type=chunk) - The company may be subject to unionization, work stoppages, slowdowns, or increased labor costs, which could adversely impact profitability[139](index=139&type=chunk) - Violations of or changes in laws, including employment laws and merchandise-related regulations, could increase operating costs, lead to fines, or harm the company's reputation[140](index=140&type=chunk) [Item 1B. Unresolved Staff Comments](index=30&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports that there are no unresolved staff comments - There are no unresolved staff comments[146](index=146&type=chunk) [Item 2. Properties](index=30&type=section&id=Item%202.%20Properties) Tillys leases all operational properties, including headquarters, distribution centers, and 241 retail stores Key Leased Properties | Property | Location | Size (sq ft) | Lease Term | | :--- | :--- | :--- | :--- | | Corporate HQ & Retail Support/Distribution | 10 & 12 Whatney, Irvine, CA | 172,000 | Jan 1, 2003 - Dec 31, 2027 | | Office & Warehouse | 11 Whatney, Irvine, CA | 26,000 | June 29, 2012 - June 30, 2022 (renewal expected) | | E-commerce Fulfillment Center | 17 Pasteur, Irvine, CA | 81,000 | Nov 1, 2021 - Oct 31, 2031 | - As of January 29, 2022, all **241 stores**, totaling approximately **1.8 million square feet**, are occupied under operating leases, typically with **10-year base terms** and renewal options[149](index=149&type=chunk) [Item 3. Legal Proceedings](index=31&type=section&id=Item%203.%20Legal%20Proceedings) Information regarding legal proceedings is incorporated by reference from Note 10 to the consolidated financial statements - Legal proceedings information is incorporated by reference from Note 10: Commitments and Contingencies[150](index=150&type=chunk) [Item 4. Mine Safety Disclosures](index=31&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to Tillys, Inc - Mine Safety Disclosures are not applicable[151](index=151&type=chunk) PART II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=32&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity,%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Tillys' Class A common stock trades on NYSE, with information on stockholders, dividends, and equity security transactions [Common Stock Market and Holders](index=32&type=section&id=5.1%20Common%20Stock%20Market%20and%20Holders) - Tillys' Class A common stock is traded on the NYSE under the symbol **'TLYS'**[154](index=154&type=chunk) Stockholders of Record (as of April 12, 2022) | Class | Stockholders of Record | | :--- | :--- | | Class A Common Stock | 5 | | Class B Common Stock | 2 | | Total | 7 | [Dividends on Common Stock](index=32&type=section&id=5.2%20Dividends%20on%20Common%20Stock) - Tillys paid special cash dividends of **$1.00 per share** in July and December **2021**, and in February of **2020, 2019, and 2018**, and **$0.70 per share** in February **2017**[155](index=155&type=chunk) - There is no assurance of additional cash dividends in the future, and no formal plans are currently in place[155](index=155&type=chunk) [Securities Authorized for Issuance under Equity Compensation Plans](index=32&type=section&id=5.3%20Securities%20Authorized%20for%20Issuance%20under%20Equity%20Compensation%20Plans) - Information regarding securities authorized for issuance under equity compensation plans is incorporated by reference to the **2022 Proxy Statement**[156](index=156&type=chunk) [Stock Performance Graph](index=32&type=section&id=5.4%20Stock%20Performance%20Graph) - A graph compares the five-year cumulative stockholder return of Tillys' Class A common stock to the **S&P Midcap 400 Index** and the **S&P 400 Apparel Retail Index**[157](index=157&type=chunk)[158](index=158&type=chunk) [Recent Sales of Unregistered Securities](index=32&type=section&id=5.5%20Recent%20Sales%20of%20Unregistered%20Securities) - Tillys did not sell any unregistered equity securities or purchase any of its securities during the fiscal year ended January 29, 2022[159](index=159&type=chunk) [Item 6. [Reserved.]](index=32&type=section&id=Item%206.%20%5BReserved.%5D) This item is reserved and contains no information - Item 6 is reserved[160](index=160&type=chunk) [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=33&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Tillys' financial condition and operational results, covering key trends, performance indicators, liquidity, and accounting policies [Overview](index=33&type=section&id=7.1%20Overview) - Tillys is a **leading destination specialty retailer** of casual apparel, footwear, accessories, and hardgoods for young men, young women, boys, and girls[164](index=164&type=chunk) Company Operations (as of January 29, 2022) | Metric | Value | | :--- | :--- | | Stores Operated | 241 | | States Present | 33 | | Average Store Size | 7,300 sq ft | [Known or Anticipated Trends](index=33&type=section&id=7.2%20Known%20or%20Anticipated%20Trends) [COVID-19 Pandemic](index=33&type=section&id=7.2.1%20COVID-19%20Pandemic) - The **COVID-19 pandemic** continues to adversely impact business, with uncertainties regarding its duration and severity, affecting consumer behavior, store traffic, supply chains, and operational capabilities[165](index=165&type=chunk) - Fiscal **2021** operating results were significantly aided by **pent-up consumer demand** and **federal stimulus payments**, making future business trends relative to fiscal **2021** difficult to predict[165](index=165&type=chunk) [Supply Chain Disruptions](index=33&type=section&id=7.2.2%20Supply%20Chain%20Disruptions) - Widespread pandemic issues in manufacturing countries and global transportation network disruptions, particularly in Southern California ports, are causing **shipping delays and increased costs**[166](index=166&type=chunk) - These issues have led to adjustments in merchandise planning, allocation, and pricing strategies, with unpredictable effects on fiscal **2022** net sales, results of operations, and inventory[166](index=166&type=chunk)[167](index=167&type=chunk) [Inflationary Cost Pressures](index=34&type=section&id=7.2.3%20Inflationary%20Cost%20Pressures) - Geo-political matters and supply chain disruptions have resulted in **significant price increases** for gasoline, food, and other consumables in early **2022**[168](index=168&type=chunk) - While not materially impacting the business to date, these price increases may negatively affect consumer behavior and, by extension, the company's results of operations and financial condition in fiscal **2022**[168](index=168&type=chunk) [Preliminary Fiscal 2022 New Store Openings and Capital Expenditure Plans](index=34&type=section&id=7.2.4%20Preliminary%20Fiscal%202022%20New%20Store%20Openings%20and%20Capital%20Expenditure%20Plans) - Tillys plans to open approximately **15 to 20 new stores** in fiscal **2022**, primarily in California, Texas, and the Northeast[169](index=169&type=chunk) Fiscal 2022 Capital Expenditure Plans | Category | Estimated Range | | :--- | :--- | | Total Capital Expenditures | $25 million to $30 million | | Includes | New stores, website/mobile app upgrades, distribution efficiencies, IT infrastructure | - Additional potential investments in distribution capacity are being explored for longer-term growth but are not yet included in the capital expenditure range[169](index=169&type=chunk) [How We Assess the Performance of Our Business](index=34&type=section&id=7.3%20How%20We%20Assess%20the%20Performance%20of%20Our%20Business) - Key indicators for assessing financial condition and operating performance include net sales, comparable store sales, gross profit, selling, general and administrative expenses (SG&A), and operating income[170](index=170&type=chunk) - Comparable store sales are defined as sales from the e-commerce platform and stores open on a daily basis compared to the same respective fiscal dates of the prior year, excluding gift card breakage and e-commerce shipping fees[174](index=174&type=chunk) - Gross profit is net sales less cost of goods sold, which includes direct merchandise costs, buying, distribution, and occupancy costs[175](index=175&type=chunk) - SG&A expenses comprise store selling expenses and corporate-level general and administrative expenses, with store selling expenses generally varying proportionately with net sales and store growth[178](index=178&type=chunk) [Results of Operations](index=36&type=section&id=7.4%20Results%20of%20Operations) [Summary of Operations Data](index=36&type=section&id=7.4.1%20Summary%20of%20Operations%20Data) Consolidated Statements of Operations Data (in thousands) | Metric | Fiscal Year Ended Jan 29, 2022 | Fiscal Year Ended Jan 30, 2021 | Fiscal Year Ended Feb 1, 2020 | | :--- | :--- | :--- | :--- | | Net sales | $775,694 | $531,329 | $619,300 | | Cost of goods sold | $499,031 | $389,139 | $432,592 | | Gross profit | $276,663 | $142,190 | $186,708 | | Total selling, general and administrative expenses | $189,068 | $145,230 | $158,253 | | Operating income (loss) | $87,595 | $(3,040) | $28,455 | | Income (loss) before income taxes | $87,001 | $(2,459) | $31,356 | | Income tax expense (benefit) | $22,752 | $(1,314) | $8,734 | | Net income (loss) | $64,249 | $(1,145) | $22,622 | Percentage of Net Sales | Metric | Fiscal Year Ended Jan 29, 2022 | Fiscal Year Ended Jan 30, 2021 | Fiscal Year Ended Feb 1, 2020 | | :--- | :--- | :--- | :--- | | Net sales | 100.0 % | 100.0 % | 100.0 % | | Cost of goods sold | 64.3 % | 73.2 % | 69.9 % | | Gross profit | 35.7 % | 26.8 % | 30.1 % | | Total selling, general and administrative expenses | 24.4 % | 27.3 % | 25.6 % | | Operating income (loss) | 11.3 % | (0.6)% | 4.6 % | | Income (loss) before income taxes | 11.2 % | (0.5)% | 5.1 % | | Income tax expense (benefit) | 2.9 % | (0.3)% | 1.4 % | | Net income (loss) | 8.3 % | (0.2)% | 3.7 % | [Store Operating Data](index=36&type=section&id=7.4.2%20Store%20Operating%20Data) Store Operating Data (Fiscal Years) | Metric | Fiscal Year Ended Jan 29, 2022 | Fiscal Year Ended Jan 30, 2021 | Fiscal Year Ended Feb 1, 2020 | | :--- | :--- | :--- | :--- | | Stores operating at end of period | 241 | 238 | 240 | | Comparable store sales change | 16.3% | 3.7% | 0.8% | | Total square feet at end of period (in thousands) | 1,764 | 1,751 | 1,776 | | Average net sales per brick-and-mortar store (in thousands) | $2,511 | $1,494 | $2,240 | | Average net sales per square foot | $342 | $202 | $301 | | E-commerce revenues (in thousands) | $165,950 | $173,433 | $98,457 | | E-commerce revenues as a percentage of net sales | 21.4% | 32.6% | 15.9% | [Fiscal Year 2021 Compared to Fiscal Year 2020](index=37&type=section&id=7.4.3%20Fiscal%20Year%202021%20Compared%20to%20Fiscal%20Year%202020) [Net Sales](index=37&type=section&id=7.4.3.1%20Net%20Sales) Net Sales Comparison (Fiscal 2021 vs. Fiscal 2020) | Metric | Fiscal 2021 (Millions) | Fiscal 2020 (Millions) | Change (Millions) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total Net Sales | $775.7 | $531.3 | $244.4 | 46.0% | | Physical Store Net Sales | $609.7 | $357.9 | $251.8 | 70.4% | | E-commerce Net Sales | $165.9 | $173.4 | $(7.5) | (4.3)% | - The significant increase in total net sales was primarily due to **pent-up consumer demand** and **federal stimulus payments** in fiscal **2021**, and the impact of pandemic-related store closures and restrictions in fiscal **2020**[183](index=183&type=chunk) - E-commerce net sales decreased as a percentage of total net sales (from **32.6% to 21.4%**) due to a shift in consumer preference back to physical stores after pandemic restrictions eased[186](index=186&type=chunk) [Gross Profit](index=37&type=section&id=7.4.3.2%20Gross%20Profit) Gross Profit Comparison (Fiscal 2021 vs. Fiscal 2020) | Metric | Fiscal 2021 (Millions) | Fiscal 2020 (Millions) | Change (Millions) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Gross Profit | $276.7 | $142.2 | $134.5 | 94.6% | | Gross Margin | 35.7% | 26.8% | 8.9 percentage points | | - Product margins improved by **130 basis points** due to reduced total markdowns[184](index=184&type=chunk) - Buying, distribution, and occupancy costs collectively improved by **760 basis points** as a percentage of net sales, primarily due to leveraging these costs against higher total net sales[184](index=184&type=chunk) [Selling, General and Administrative Expenses ("SG&A")](index=37&type=section&id=7.4.3.3%20Selling,%20General%20and%20Administrative%20Expenses%20(%22SG%26A%22)) SG&A Comparison (Fiscal 2021 vs. Fiscal 2020) | Metric | Fiscal 2021 (Millions) | Fiscal 2020 (Millions) | Change (Millions) | % of Net Sales (2021) | % of Net Sales (2020) | Change in % of Net Sales | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | SG&A | $189.1 | $145.2 | $43.8 | 24.4% | 27.3% | (2.9)% | - The decrease in SG&A as a percentage of net sales was primarily due to leveraging these expenses against higher total net sales[185](index=185&type=chunk) - Key drivers of SG&A changes included increases in store payroll (**$28.5M**), corporate bonus accruals (**$6.6M**), marketing expenses (**$3.9M**), and credit card fees (**$2.7M**), partially offset by a net decrease from a resolved California sales tax assessment[185](index=185&type=chunk) [Operating Income (Loss)](index=37&type=section&id=7.4.3.4%20Operating%20Income%20(Loss)) Operating Income (Loss) Comparison (Fiscal 2021 vs. Fiscal 2020) | Metric | Fiscal 2021 (Millions) | Fiscal 2020 (Millions) | Improvement (Millions) | | :--- | :--- | :--- | :--- | | Operating Income (Loss) | $87.6 | $(3.0) | $90.6 | | Operating Income (Loss) % of Net Sales | 11.3% | (0.6)% | | [Income Tax Expense (Benefit)](index=38&type=section&id=7.4.3.5%20Income%20Tax%20Expense%20(Benefit)) Income Tax Expense (Benefit) and Effective Tax Rate (Fiscal Years) | Metric | Fiscal 2021 (Millions) | Fiscal 2020 (Millions) | Effective Tax Rate (2021) | Effective Tax Rate (2020) | | :--- | :--- | :--- | :--- | :--- | | Income Tax Expense (Benefit) | $22.8 | $(1.3) | 26.2% | 53.5% (of pre-tax loss) | - The decrease in the effective income tax rate was primarily due to a normalization of the tax rate after fiscal **2020's** rate was distorted by low pre-tax losses[188](index=188&type=chunk) [Net Income (Loss) and Earnings (Loss) Per Share](index=38&type=section&id=7.4.3.6%20Net%20Income%20(Loss)%20and%20Earnings%20(Loss)%20Per%20Share) Net Income (Loss) and EPS (Fiscal Years) | Metric | Fiscal 2021 (Millions) | Fiscal 2020 (Millions) | Change (Millions) | | :--- | :--- | :--- | :--- | | Net Income (Loss) | $64.2 | $(1.1) | $65.4 | | Diluted EPS | $2.06 | $(0.04) | | [Liquidity and Capital Resources](index=38&type=section&id=7.5%20Liquidity%20and%20Capital%20Resources) [Overview](index=38&type=section&id=7.5.1%20Overview) - Primary liquidity sources are cash flows from operating activities and cash on hand[190](index=190&type=chunk) - Existing cash, marketable securities, and operating cash flows are expected to cover working capital and anticipated capital expenditures for the next **12 months**[191](index=191&type=chunk) [Working Capital](index=38&type=section&id=7.5.2%20Working%20Capital) Working Capital (Fiscal Years) | Metric | January 29, 2022 (Millions) | January 30, 2021 (Millions) | Change (Millions) | | :--- | :--- | :--- | :--- | | Working Capital | $91.8 | $77.5 | $14.3 | - The increase in working capital was primarily driven by higher net income, increases in cash, cash equivalents, marketable securities, and merchandise inventories, partially offset by special cash dividend payments[192](index=192&type=chunk) [Cash Flow Analysis](index=38&type=section&id=7.5.3%20Cash%20Flow%20Analysis) Summary of Cash Flow Activities (in thousands) | Activity | Fiscal Year Ended Jan 29, 2022 | Fiscal Year Ended Jan 30, 2021 | Fiscal Year Ended Feb 1, 2020 | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $63,402 | $38,897 | $36,434 | | Net cash used in investing activities | $(45,328) | $(3,197) | $(6,509) | | Net cash used in financing activities | $(52,057) | $(29,653) | $(27,948) | [Net Cash Provided by Operating Activities](index=38&type=section&id=7.5.3.1%20Net%20Cash%20Provided%20by%20Operating%20Activities) - Net cash provided by operating activities increased in fiscal **2021** compared to fiscal **2020**, primarily due to higher net sales in fiscal **2021**, which benefited from fewer pandemic-related store closures[195](index=195&type=chunk) [Net Cash Used in Investing Activities](index=39&type=section&id=7.5.3.2%20Net%20Cash%20Used%20in%20Investing%20Activities) Investing Activities (Fiscal Years, in thousands) | Metric | Fiscal 2021 | Fiscal 2020 | | :--- | :--- | :--- | | Net cash used in investing activities | $(45,328) | $(3,197) | | Capital expenditures | $13,425 | $8,471 | | Purchases of marketable securities | $162,321 | $80,896 | | Proceeds from maturities of marketable securities | $130,352 | $86,170 | [Net Cash Used in Financing Activities](index=39&type=section&id=7.5.3.3%20Net%20Cash%20Used%20in%20Financing%20Activities) Financing Activities (Fiscal Years, in thousands) | Metric | Fiscal 2021 | Fiscal 2020 | | :--- | :--- | :--- | | Net cash used in financing activities | $(52,057) | $(29,653) | | Cash dividends paid | $61,630 | $29,677 | | Proceeds from exercise of stock options | $9,573 | $24 | [Line of Credit](index=39&type=section&id=7.5.4%20Line%20of%20Credit) - On January **20, 2022**, Tillys entered into a new senior unsecured credit agreement providing a **$25.0 million revolving credit facility**, maturing on January **20, 2024**[201](index=201&type=chunk)[202](index=202&type=chunk) - Borrowings under the new facility bear interest at **SOFR plus 0.75%**, with a **1.00% per annum fee** on outstanding letters of credit[204](index=204&type=chunk) - The credit agreement includes financial covenants requiring maintenance of a total funded debt to EBITDA ratio no greater than **4.00 to 1.00** and a fixed charge coverage ratio of not less than **1.25 to 1.00**[205](index=205&type=chunk) - As of January **29, 2022**, Tillys was in compliance with all covenants and had no outstanding borrowings under the new credit agreement[208](index=208&type=chunk) [Contractual Obligations](index=40&type=section&id=7.5.5%20Contractual%20Obligations) - Tillys has long-term contractual obligations primarily related to non-cancellable operating leases for its corporate headquarters, distribution centers, and retail stores[212](index=212&type=chunk)[215](index=215&type=chunk) - Leases for corporate headquarters and distribution centers are with companies owned by co-founders, expiring between June **2022** and October **2031**[212](index=212&type=chunk)[213](index=213&type=chunk)[214](index=214&type=chunk) [Critical Accounting Policies and Estimates](index=40&type=section&id=7.6%20Critical%20Accounting%20Policies%20and%20Estimates) [Overview](index=40&type=section&id=7.6.1%20Overview) - The preparation of financial statements requires significant management judgment and estimates, which are reevaluated on an ongoing basis[216](index=216&type=chunk)[217](index=217&type=chunk) - Key accounting policies requiring significant judgment include revenue recognition, loyalty program, merchandise inventories, long-lived assets, operating leases, share-based compensation, and income taxes[219](index=219&type=chunk) [Revenue Recognition](index=41&type=section&id=7.6.2%20Revenue%20Recognition) - Revenue from store sales is recognized when merchandise is received and paid for by the customer, net of estimated returns[220](index=220&type=chunk) - For e-commerce sales, revenue is recognized when merchandise is shipped to the customer, net of sales taxes and estimated returns[220](index=220&type=chunk) - Revenues fluctuate seasonally, with the third and fourth fiscal quarters historically producing stronger sales due to back-to-school and holiday seasons[221](index=221&type=chunk) [Loyalty Program](index=41&type=section&id=7.6.3%20Loyalty%20Program) - Unredeemed awards and accumulated partial points from the customer loyalty program are accrued as deferred revenue, with a liability estimated based on expected redemptions and standalone selling price[223](index=223&type=chunk) [Merchandise Inventories](index=41&type=section&id=7.6.4%20Merchandise%20Inventories) - Merchandise inventories are valued at the lower of cost or net realizable value using the retail inventory method, which involves management judgments and estimates for markdowns[224](index=224&type=chunk) - Markdowns are recorded when the sales value of inventory diminishes, based on factors like demand, customer preferences, age, and fashion trends[225](index=225&type=chunk) - An inventory shrinkage reserve is calculated as a percentage of net sales for estimated merchandise losses between physical counts, based on historical percentages and trends[227](index=227&type=chunk) [Long-Lived Assets](index=42&type=section&id=7.6.5%20Long-Lived%20Assets) - The carrying value of long-lived assets (leasehold improvements, furniture, fixtures, equipment) is evaluated for impairment when events or changes in circumstances indicate non-recoverability[228](index=228&type=chunk) - Impairment review is based on estimated undiscounted future cash flows from operating activities compared to carrying value; if lower, an impairment loss is recognized based on estimated fair value[228](index=228&type=chunk) [Operating Leases](index=42&type=section&id=7.6.6%20Operating%20Leases) - Upon adoption of ASC 842, operating leases are recorded on the balance sheet as operating lease assets and liabilities, with liabilities based on the net present value of fixed lease components[230](index=230&type=chunk)[231](index=231&type=chunk) - The incremental borrowing rate (IBR) is used to calculate net present value, requiring complex judgment based on synthetic credit ratings and market interest rates[231](index=231&type=chunk) [Share-based Compensation](index=42&type=section&id=7.6.7%20Share-based%20Compensation) - Share-based compensation expense is measured at grant date fair value and recognized straight-line over the employee's service period[232](index=232&type=chunk) - The Black-Scholes option-pricing model is used to determine fair value of stock options, relying on assumptions such as expected option term, volatility, risk-free interest rates, and expected dividends[233](index=233&type=chunk) [Accounting for Income Taxes](index=43&type=section&id=7.6.8%20Accounting%20for%20Income%20Taxes) - Income taxes are accounted for under ASC Topic 740, accruing taxes payable/refundable and recognizing deferred tax assets/liabilities based on GAAP and tax basis differences[235](index=235&type=chunk) - Net deferred tax assets are recorded if realization is more likely than not, considering future taxable income and tax planning strategies[236](index=236&type=chunk) [Recent Accounting Pronouncements](index=43&type=section&id=7.7%20Recent%20Accounting%20Pronouncements) - ASU No. **2016-13** (Measurement of Credit Losses on Financial Instruments) will be effective in fiscal **2023**, modifying models for impairment of receivables and debt securities, with no material impact expected[302](index=302&type=chunk) - ASU No. **2020-04** (Reference Rate Reform) provides optional expedients for contracts affected by LIBOR discontinuation, effective through December **31, 2022**, with impact currently being evaluated[303](index=303&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=43&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section addresses Tillys' exposure to market risks, including interest rate, inflation, and foreign exchange rate risks [Interest Rate Risk](index=43&type=section&id=7A.1%20Interest%20Rate%20Risk) - Tillys is subject to interest rate risk on borrowings under its credit facility, which bears variable rates[239](index=239&type=chunk) - As of January **29, 2022**, and January **30, 2021**, there were no outstanding borrowings under the credit facility[239](index=239&type=chunk) [Impact of Inflation](index=43&type=section&id=7A.2%20Impact%20of%20Inflation) - Historically, the effects of inflation on operations and financial condition have been immaterial[240](index=240&type=chunk) - However, inflationary cost pressures on gasoline, food, and other consumables in early fiscal **2022** may materially impact consumer behavior and, consequently, the company's results of operations and financial condition[240](index=240&type=chunk) [Foreign Exchange Rate Risk](index=43&type=section&id=7A.3%20Foreign%20Exchange%20Rate%20Risk) - Tillys sources all merchandise through domestic vendors and purchases certain fixtures and materials from foreign suppliers, but all purchases are denominated in **U.S. dollars**[241](index=241&type=chunk) - The company does not hedge using derivative instruments and has not historically been impacted by changes in exchange rates[241](index=241&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=44&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents Tillys' audited consolidated financial statements, including balance sheets, statements of operations, cash flows, and detailed notes [Index to Consolidated Financial Statements](index=44&type=section&id=8.1%20Index%20to%20Consolidated%20Financial%20Statements) - The index lists the Report of Independent Registered Public Accounting Firm, Consolidated Balance Sheets, Consolidated Statements of Operations, Consolidated Statements of Comprehensive Income (Loss), Consolidated Statements of Stockholders' Equity, Consolidated Statements of Cash Flows, and Notes to Consolidated Financial Statements[243](index=243&type=chunk) [Report of Independent Registered Public Accounting Firm](index=45&type=section&id=8.2%20Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) - BDO USA, LLP issued an **unqualified opinion** on Tillys' consolidated financial statements for the period ended January **29, 2022**, in conformity with GAAP[244](index=244&type=chunk) - The firm also expressed an **unqualified opinion** on the effectiveness of the company's internal control over financial reporting as of January **29, 2022**[245](index=245&type=chunk) - A critical audit matter identified was the determination of incremental borrowing rates for leases, which involves complex judgment in developing synthetic credit ratings and identifying market interest rates[250](index=250&type=chunk)[251](index=251&type=chunk) [Consolidated Balance Sheets](index=47&type=section&id=8.3%20Consolidated%20Balance%20Sheets) Consolidated Balance Sheets (in thousands) | ASSETS | January 29, 2022 | January 30, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $42,201 | $76,184 | | Marketable securities | $97,027 | $64,955 | | Merchandise inventories | $65,645 | $55,698 | | Total current assets | $227,978 | $211,731 | | Operating lease assets | $216,508 | $229,864 | | Property and equipment, net | $47,530 | $52,639 | | Total assets | $504,823 | $507,456 | | LIABILITIES AND STOCKHOLDERS' EQUITY | | | | Accounts payable | $28,144 | $24,983 | | Accrued expenses | $19,073 | $30,682 | | Current portion of operating lease liabilities | $51,504 | $51,879 | | Total current liabilities | $136,167 | $134,191 | | Noncurrent portion of operating lease liabilities | $171,965 | $199,503 | | Total liabilities | $330,110 | $346,834 | | Total stockholders' equity | $174,713 | $160,622 | [Consolidated Statements of Operations](index=48&type=section&id=8.4%20Consolidated%20Statements%20of%20Operations) Consolidated Statements of Operations (in thousands, except per share data) | Metric | Fiscal Year Ended Jan 29, 2022 | Fiscal Year Ended Jan 30, 2021 | Fiscal Year Ended Feb 1, 2020 | | :--- | :--- | :--- | :--- | | Net sales | $775,694 | $531,329 | $619,300 | | Gross profit | $276,663 | $142,190 | $186,708 | | Operating income (loss) | $87,595 | $(3,040) | $28,455 | | Net income (loss) | $64,249 | $(1,145) | $22,622 | | Basic earnings (loss) per share | $2.10 | $(0.04) | $0.77 | | Diluted earnings (loss) per share | $2.06 | $(0.04) | $0.76 | [Consolidated Statements of Comprehensive Income (Loss)](index=49&type=section&id=8.5%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) Consolidated Statements of Comprehensive Income (Loss) (in thousands) | Metric | Fiscal Year Ended Jan 29, 2022 | Fiscal Year Ended Jan 30, 2021 | Fiscal Year Ended Feb 1, 2020 | | :--- | :--- | :--- | :--- | | Net income (loss) | $64,249 | $(1,145) | $22,622 | | Net change in unrealized losses on available-for-sale securities | $(21) | $(194) | $(12) | | Comprehensive income (loss) | $64,228 | $(1,339) | $22,610 | [Consolidated Statements of Stockholders' Equity](index=50&type=section&id=8.6%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Consolidated Statements of Stockholders' Equity (in thousands) | Metric | Balance at Feb 2, 2019 | Balance at Feb 1, 2020 | Balance at Jan 30, 2021 | Balance at Jan 29, 2022 | | :--- | :--- | :--- | :--- | :--- | | Total Stockholders' Equity | $163,327 | $159,901 | $160,622 | $174,713 | | Net income (loss) | | $22,622 | $(1,145) | $64,249 | | Dividends declared/paid | $(29,677) | $(29,677) | $(61,630) | | Share-based compensation expense | $2,136 | $2,036 | $1,920 | | Exercise of stock options | $1,590 | $24 | $9,573 | | Net change in unrealized losses on available-for-sale securities | $(12) | $(194) | $(21) | [Consolidated Statements of Cash Flows](index=51&type=section&id=8.7%20Consolidated%20Statements%20of%20Cash%20Flows) Consolidated Statements of Cash Flows (in thousands) | Activity | Fiscal Year Ended Jan 29, 2022 | Fiscal Year Ended Jan 30, 2021 | Fiscal Year Ended Feb 1, 2020 | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $63,402 | $38,897 | $36,434 | | Net cash used in investing activities | $(45,328) | $(3,197) | $(6,509) | | Net cash used in financing activities | $(52,057) | $(29,653) | $(27,948) | | Change in cash and cash equivalents | $(33,983) | $6,047 | $1,977 | | Cash and cash equivalents, end of period | $42,201 | $76,184 | $70,137 | [Notes to Consolidated Financial Statements](index=52&type=section&id=8.8%20Notes%20to%20Consolidated%20Financial%20Statements) [Note 1: Description of the Company and Basis of Presentation](index=52&type=section&id=8.8.1%20Note%201:%20Description%20of%20the%20Company%20and%20Basis%20of%20Presentation) - Tillys is a specialty retailer of casual apparel, footwear, accessories, and hardgoods, operating **241 stores in 33 states** and an e-commerce website[268](index=268&type=chunk) - The fiscal year ends on the Saturday closest to January **31**; fiscal years **2021, 2020, and 2019** each consisted of **52 weeks**[271](index=271&type=chunk) - The ongoing **COVID-19 pandemic** continues to adversely impact the business, affecting consumer behavior, store traffic, supply chains, and operational capabilities, with future impacts remaining uncertain[273](index=273&type=chunk) [Note 2: Summary of Significant Accounting Policies](index=52&type=section&id=8.8.2%20Note%202:%20Summary%20of%20Significant%20Accounting%20Policies) - Key accounting policies include cash and cash equivalents (short-term investments with initial maturity of **90 days or less**), marketable securities (classified as available-for-sale or held-to-maturity), and merchandise inventories (lower of cost or net realizable value using retail inventory method)[274](index=274&type=chunk)[275](index=275&type=chunk)[276](index=276&type=chunk) - Property and equipment are stated at cost less accumulated depreciation, with impairment evaluated when carrying value may not be recoverable[279](index=279&type=chunk)[281](index=281&type=chunk) - Revenue recognition for store sales is at customer receipt, and for e-commerce sales, at shipment, net of estimated returns and taxes[285](index=285&type=chunk) - Share-based compensation is measured at grant date fair value and recognized over the service period, while income taxes are accrued based on GAAP and tax basis differences[295](index=295&type=chunk)[296](index=296&type=chunk) Net Sales by Channel (in thousands) | Channel | Fiscal Year Ended Jan 29, 2022 | Fiscal Year Ended Jan 30, 2021 | Fiscal Year Ended Feb 1, 2020 | | :--- | :--- | :--- | :--- | | Retail stores | $609,744 | $357,896 | $520,843 | | E-commerce | $165,950 | $173,433 | $98,457 | | Total net sales | $775,694 | $531,329 | $619,300 | Net Sales by Brand Type | Brand Type | Fiscal Year Ended Jan 29, 2022 | Fiscal Year Ended Jan 30, 2021 | Fiscal Year Ended Feb 1, 2020 | | :--- | :--- | :--- | :--- | | Third-party | 70% | 74% | 75% | | Proprietary | 30% | 26% | 25% | | Total net sales | 100% | 100% | 100% | [Note 3: Marketable Securities](index=57&type=section&id=8.8.3%20Note%203:%20Marketable%20Securities) - Marketable securities as of January **29, 2022**, consisted of commercial paper (available-for-sale) and fixed income securities (held-to-maturity), all less than **one year from maturity**[304](index=304&type=chunk) Marketable Securities (in thousands) | Category | Cost or Amortized Cost (Jan 29, 2022) | Estimated Fair Value (Jan 29, 2022) | Cost or Amortized Cost (Jan 30, 2021) | Estimated Fair Value (Jan 30, 2021) | | :--- | :--- | :--- | :--- | :--- | | Commercial paper | $64,235 | $64,233 | $64,928 | $64,955 | | Fixed income securities | $32,794 | $32,794 | — | — | | Total marketable securities | $97,029 | $97,027 | $64,928 | $64,955 | [Note 4: Receivables](index=58&type=section&id=8.8.4%20Note%204:%20Receivables) Receivables (in thousands) | Category | January 29, 2022 | January 30, 2021 | | :--- | :--- | :--- | | Credit and debit card receivables | $2,692 | $2,816 | | Tenant allowances due from landlords | $1,367 | $3,854 | | CARES Act employee retention credit | $1,313 | $1,239 | | Other | $1,333 | $815 | | Total receivables | $6,705 | $8,724 | - The allowance for doubtful accounts was **zero** for fiscal years **2021 and 2020**, with year-end receivables primarily collected within the following fiscal quarter[307](index=307&type=chunk) [Note 5: Prepaid Expenses and Other Current Assets](index=58&type=section&id=8.8.5%20Note%205:%20Prepaid%20Expenses%20and%20Other%20Current%20Assets) Prepaid Expenses and Other Current Assets (in thousands) | Category | January 29, 2022 | January 30, 2021 | | :--- | :--- | :--- | | Prepaid income taxes | $9,756 | — | | Prepaid insurance | $2,585 | $1,984 | | Prepaid maintenance | $1,896 | $1,366 | | Prepaid rent | $1,406 | $2,015 | | Other | $757 | $805 | | Total prepaid expenses and other current assets | $16,400 | $6,170 | [Note 6: Property and Equipment](index=58&type=section&id=8.8.6%20Note%206:%20Property%20and%20Equipment) Property and Equipment, Net (in thousands) | Category | January 29, 2022 | January 30, 2021 | | :--- | :--- | :--- | | Leasehold improvements | $150,239 | $146,565 | | Furniture and fixtures | $46,397 | $46,239 | | Computer hardware and software | $41,414 | $38,286 | | Machinery and equipment | $33,550 | $32,634 | | Vehicles | $2,187 | $2,394 | | Construction in progress | $3,615 | $4,805 | | Property and equipment, gross | $277,402 | $270,923 | | Accumulated depreciation | $(229,872) | $(218,284) | | Property and equipment, net | $47,530 | $52,639 | Depreciation Expense and Capital Expenditures (in thousands) | Metric | Fiscal 2021 | Fiscal 2020 | Fiscal 2019 | | :--- | :--- | :--- | :--- | | Depreciation expense | $16,836 | $19,100 | $20,900 | | Cash paid for capital expenditures | $13,425 | $8,471 | $14,299 | - Non-cash impairment charges of **$0.1 million**, **$1.0 million**, and **$0.3 million** were recorded in fiscal years **2021, 2020, and 2019**, respectively, to write down long-lived assets to their estimated fair values[311](index=311&type=chunk) [Note 7: Accrued Expenses](index=59&type=section&id=8.8.7%20Note%207:%20Accrued%20Expenses) Accrued Expenses (in thousands) | Category | January 29, 2022 | January 30, 2021 | | :--- | :--- | :--- | | Accrued freight | $3,924 | $4,752 | | Sales and use taxes payable | $2,650 | $5,901 | | Merchandise returns | $1,852 | $1,371 | | Accrued construction | $1,080 | $2,495 | | Income taxes payable | — | $6,526 | | Other | $9,567 | $9,637 | | Total accrued expenses | $19,073 | $30,682 | [Note 8: Line of Credit](index=59&type=section&id=8.8.8%20Note%208:%20Line%20of%20Credit) - A new senior unsecured credit agreement was entered into on January **20, 2022**, providing a **$25.0 million revolving credit facility** maturing on January **20, 2024**, replacing a prior asset-backed agreement[313](index=313&type=chunk)[314](index=314&type=chunk) - The new facility bears interest at **SOFR plus 0.75%** and includes financial covenants such as a total funded debt to EBITDA ratio (max **4.00:1.00**) and a fixed charge coverage ratio (min **1.25:1.00**)[316](index=316&type=chunk)[317](index=317&type=chunk) - As of January **29, 2022**, Tillys was in compliance with all covenants and had no outstanding borrowings under the new credit agreement, with only a **$2.025 million** standby letter of credit utilized[320](index=320&type=chunk)[322](index=322&type=chunk) [Note 9: Leases](index=60&type=section&id=8.8.9%20Note%209:%20Leases) - Tillys leases all retail and corporate operations facilities, with store lease terms generally up to **ten years** and provisions for rent escalations and contingent rent[325](index=325&type=chunk)[326](index=326&type=chunk) - Related party leases include office and warehouse space from companies owned by co-founders, with rent expenses of **$2.0 million, $0.4 million, and $1.1 million** for fiscal **2021** for the respective facilities[327](index=327&type=chunk)[328](index=328&type=chunk)[329](index=329&type=chunk) Maturity of Operating Lease Liabilities (as of January 29, 2022, in thousands) | Fiscal Year | Related Party | Other | Total | | :--- | :--- | :--- | :--- | | 2022 | $3,434 | $64,112 | $67,546 | | 2023 | $3,416 | $53,668 | $57,084 | | 2024 | $3,543 | $43,297 | $46,840 | | 2025 | $3,676 | $34,136 | $37,812 | | 2026 | $3,814 | $22,698 | $26,512 | | Thereafter | $9,768 | $46,818 | $56,586 | | Total minimum lease payments | $27,651 | $264,729 | $292,380 | | Less: Interest | $4,118 | $41,260 | $45,378 | | Present value of operating lease liabilities | $23,533 | $223,469 | $247,002 | Total Lease Expense (in thousands) | Metric | Fiscal Year Ended Jan 29, 2022 | Fiscal Year Ended Jan 30, 2021 | Fiscal Year Ended Feb 1, 2020 | | :--- | :--- | :--- | :--- | | Fixed operating lease expense | $62,003 | $62,089 | $63,707 | | Variable lease expense | $18,106 | $16,302 | $16,684 | | Total lease expense | $80,109 | $78,391 | $80,391 | [Note 10: Commitments and Contingencies](index=62&type=section&id=8.8.10%20Note%2010:%20Commitments%20and%20Contingencies) - Tillys has made indemnifications, commitments, and guarantees in the normal course of business, primarily for facility leases and directors/officers, with no recorded liability for these as their maximum potential future payments are often unlimited[333](index=333&type=chunk) Future Minimum Payments for Purchase Obligations (in thousands) | Fiscal Year | Amount | | :--- | :--- | | 2022 | $3,200 | | 2023 | $800 | | 2024 | $500 | | 2025 | $200 | | 2026 | $100 | | Total | $4,700 | - The company is involved in legal proceedings, including a class action lawsuit regarding California wage and hour laws, for which a loss provision of **$0.2 million** was established in March **2022** for a settlement agreement[335](index=335&type=chunk)[336](index=336&type=chunk)[338](index=338&type=chunk) [Note 11: Fair Value Measurements](index=63&type=section&id=8.8.11%20Note%2011:%20Fair%20Value%20Measurements) - Fair value is determined using a **three-level hierarchy** (Level 1: quoted active markets, Level 2: observable inputs, Level 3: unobservable inputs)[339](index=339&type=chunk)[340](index=340&type=chunk)[341](index=341&type=chunk) - Financial assets measured at fair value on a recurring basis include marketable securities (commercial paper, fixed income securities) and certain cash equivalents (money market securities)[342](index=342&type=chunk) Financial Assets by Fair Value Hierarchy (in thousands) | Category | Level 1 (Jan 29, 2022) | Level 2 (Jan 29, 2022) | Level 1 (Jan 30, 2021) | Level 2 (Jan 30, 2021) | | :--- | :--- | :--- | :--- | :--- | | Money market securities | $32,764 | — | $67,115 | — | | Commercial paper (cash equivalents) | — | $4,999 | — | — | | Commercial paper (marketable securities) | — | $64,233 | — | $64,955 | - Non-recurring impairment charges for long-lived assets were **$0.1 million** (**1 store**), **$1.0 million** (**12 stores**), and **$0.3 million** (**1 store**) in fiscal years **2021, 2020, and 2019**, respectively[346](index=346&type=chunk)[348](index=348&type=chunk) [Note 12: Share-Based Compensation](index=64&type=section&id=8.8.12%20Note%2012:%20Share-Based%20Compensation) - The **2012 Equity and Incentive Award Plan** authorizes up to **6,613,900 shares** for issuance, with **2,300,365 shares** available for future issuance as of January **29, 2022**[349](index=349&type=chunk) Stock Option Activity (Fiscal 2021) | Metric | Stock Options | Weighted Average Exercise Price | | :--- | :--- | :--- | | Outstanding at Jan 30, 2021 | 2,602,212 | $8.19 | | Granted | 523,700 | $10.94 | | Exercised | (1,221,972) | $7.83 | | Forfeited | (301,729) | $9.19 | | Expired | (32,000) | $16.26 | | Outstanding at Jan 29, 2022 | 1,570,211 | $9.02 | | Exercisable at Jan 29, 2022 | 430,141 | $10.94 | Share-Based Compensation Expense (in thousands) | Category | Fiscal Year Ended Jan 29, 2022 | Fiscal Year Ended Jan 30, 2021 | Fiscal Year Ended Feb 1, 2020 | | :--- | :--- | :--- | :--- | | Cost of goods sold | $193 | $584 | $482 | | Selling, general and administrative expenses | $1,727 | $1,452 | $1,654 | | Total share-based compensation | $1,920 | $2,036 | $2,136 | | Less: Income tax expense benefit | $(239) | $(537) | $(565) | | Total share-based compensation, net of tax | $1,681 | $1,499 | $1,571 | - As of January **29, 2022**, there was **$3.8 million** of total unrecognized share-based compensation expense, with a weighted average remaining recognition period of **2.6 years**[360](index=360&type=chunk) [Note 13: Retirement Savings Plan](index=66&type=section&id=8.8.13%20Note%2013:%20Retirement%20Savings%20Plan) - The Tillys **401(k) Plan** covers employees aged **21+** with at least **three months of employment**[361](index=361&type=chunk) Employer Contributions to 401(k) Plan (in millions) | Fiscal Year | Amount | | :--- | :--- | | 2021 | $0.9 | | 2020 | $0 | | 2019 | $0.7 | [Note 14: Income Taxes](index=66&type=section&id=8.8.14%20Note%2014:%20Income%20Taxes) Components of Income Tax Expense (in thousands) | Category | Fiscal Year Ended Jan 29, 2022 | Fiscal Year Ended Jan 30, 2021 | Fiscal Year Ended Feb 1, 2020 | | :--- | :--- | :--- | :--- | | Current Federal | $16,147 | $2,279 | $11,211 | | Current State | $6,094 | $1,284 | $3,238 | | Deferred Federal | $709 | $(3,889) | $(4,704) | | Deferred State | $(198) | $(988) | $(1,011) | | Total income tax (benefit) expense | $22,752 | $(1,314) | $8,734 | Net Deferred Tax Asset (in thousands) | Category | January 29, 2022 | January 30, 2021 | | :

Financial Data and Key Metrics Changes - Fiscal 2021 was the most profitable year in the company's history, with fourth quarter comparable net sales growing by 12.5% and earnings per share reaching $0.38, the best fourth quarter earnings in public company history [7][23] - Total net sales for the fourth quarter were $204.5 million, an increase of $26.6 million or 14.9% compared to $177.9 million last year [17] - Gross profit improved to $70.4 million, or 34.4% of net sales, compared to $58.3 million, or 32.7% of net sales last year [19] - Net income improved to $12.1 million, or $0.38 per diluted share, compared to $8.9 million, or $0.29 per diluted share last year [23] Business Line Data and Key Metrics Changes - Total net sales from physical stores were $152.2 million, an increase of $29.6 million or 24.2% compared to $122.5 million last year, representing 74.4% of total net sales [17] - E-commerce net sales were $52.3 million, a decrease of $3.1 million or 5.6% compared to $55.4 million last year, but still 57% above the fourth quarter of fiscal 2019 [18] Market Data and Key Metrics Changes - The company ended the fiscal year with 241 total stores, a net increase of three stores compared to the end of fiscal 2020 [19] - Store traffic is still down relative to 2019, continuing a multi-year decline that started before the pandemic [14] Company Strategy and Development Direction - The company plans to open 15 to 20 new stores during fiscal 2022, with 10 nearing lease execution [13] - Capital expenditure priorities for fiscal 2022 include upgrading mobile app and website platforms, IT infrastructure, and improving distribution efficiencies [15] - The company remains cautiously optimistic about business prospects for fiscal 2022 due to new merchandise trends [12] Management's Comments on Operating Environment and Future Outlook - Management noted ongoing risks related to COVID-19, supply chain difficulties, labor challenges, and increasing costs [12][26] - The company anticipates a decline in comparable net sales relative to last year due to the unique impacts of last year's pent-up demand and federal stimulus payments [11][27] - For the first quarter of fiscal 2022, total comparable net sales increased by 10.4% compared to last year, with expectations of a decline in the latter half of the quarter [27][30] Other Important Information - The company ended the fiscal year with total cash and marketable securities of $139 million and no debt outstanding [24] - Total capital expenditures for fiscal 2021 were $13.4 million, compared to $8.5 million last year, primarily due to new store openings [25] Q&A Session Summary Question: Supply chain and inflationary influences - Management acknowledged ongoing supply chain challenges, particularly in footwear and seasonal categories, but noted some improvement [36] - Price increases from brands have been observed, but not across the board, and management plans to adjust pricing as necessary [39] Question: Inventory and promotional strategies - Management indicated that inventory levels are being carefully monitored and adjusted in response to sales forecasts [56] - There is an expectation to be incrementally more promotional to manage inventory levels [55] Question: Consumer behavior changes - Management has not observed significant changes in consumer behavior, with store traffic up relative to last year but down compared to 2019 [68] Question: Margin expectations - Management expects product margins to decline relative to last year but remain better than in 2019, with various cost pressures impacting margins [73]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 __________________________________________________ FORM 10-Q __________________________________________________ ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended October 30, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number: 001-35535 ______________________________________________ ...

[Forward-Looking Statements](index=4&type=section&id=Forward-Looking%20Statements) This section identifies forward-looking statements and lists risk factors that could cause actual results to differ - Forward-looking statements are identified by terms like "anticipate," "estimate," "expect," and "project," relating to financial condition, operations, and future performance[9](index=9&type=chunk) - Key risks include the ongoing impacts of the COVID-19 pandemic, changes in store traffic and purchasing patterns, ability to open and operate stores profitably, e-commerce effectiveness, brand image, cash generation, fashion trend identification, intense competition, mall success, consumer confidence, seasonality, social media marketing, inventory management, natural disasters, supply chain dependence, cost increases (energy, transportation, labor), balance of proprietary vs. third-party brands, mailing costs, international trade conditions, vendor practices, executive management dependence, expansion adaptation, IT system failures, supply chain disruptions, indebtedness, transportation reliance, comparable store sales volatility, information system disruptions, intellectual property protection, governmental laws, data security, internal control maintenance, and public company costs[10](index=10&type=chunk)[15](index=15&type=chunk) PART I. FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=6&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents Tilly's unaudited consolidated financial statements, providing a snapshot of financial health and performance [Consolidated Balance Sheets](index=6&type=section&id=Consolidated%20Balance%20Sheets) | Metric (in thousands) | July 31, 2021 | January 30, 2021 | August 1, 2020 | | :-------------------- | :------------ | :--------------- | :------------- | | Cash and cash equivalents | $81,894 | $76,184 | $132,955 | | Marketable securities | $66,644 | $64,955 | $15,939 | | Merchandise inventories | $86,853 | $55,698 | $68,067 | | Total current assets | $256,344 | $212,156 | $234,204 | | Total assets | $535,163 | $507,456 | $544,471 | | Accounts payable | $59,053 | $24,983 | $48,710 | | Total current liabilities | $166,528 | $134,191 | $172,944 | | Total liabilities | $363,931 | $346,834 | $395,903 | | Total stockholders' equity | $171,232 | $160,622 | $148,568 | [Consolidated Statements of Operations](index=7&type=section&id=Consolidated%20Statements%20of%20Operations) | Metric (in thousands, except per share) | 13 Weeks Ended July 31, 2021 | 13 Weeks Ended August 1, 2020 | 26 Weeks Ended July 31, 2021 | 26 Weeks Ended August 1, 2020 | | :------------------------------------ | :--------------------------- | :---------------------------- | :--------------------------- | :---------------------------- | | Net sales | $201,952 | $135,845 | $365,109 | $213,134 | | Gross profit | $74,727 | $41,674 | $129,566 | $43,268 | | Operating income (loss) | $26,427 | $7,709 | $41,301 | $(20,692) | | Net income (loss) | $20,398 | $5,266 | $31,357 | $(12,129) | | Basic EPS | $0.67 | $0.18 | $1.04 | $(0.41) | | Diluted EPS | $0.66 | $0.18 | $1.02 | $(0.41) | [Consolidated Statements of Comprehensive Income (Loss)](index=8&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) | Metric (in thousands) | 13 Weeks Ended July 31, 2021 | 13 Weeks Ended August 1, 2020 | 26 Weeks Ended July 31, 2021 | 26 Weeks Ended August 1, 2020 | | :-------------------- | :--------------------------- | :---------------------------- | :--------------------------- | :---------------------------- | | Net income (loss) | $20,398 | $5,266 | $31,357 | $(12,129) | | Other comprehensive (loss) income, net of tax | $(11) | $(200) | $(8) | $(213) | | Comprehensive income (loss) | $20,387 | $5,066 | $31,349 | $(12,342) | [Consolidated Statement of Stockholders' Equity](index=9&type=section&id=Consolidated%20Statement%20of%20Stockholders'%20Equity) | Metric (in thousands) | Balance at January 30, 2021 | Net income | Dividends paid | Share-based compensation expense | Exercises of stock options | Net change in unrealized gain on available-for-sale securities | Balance at July 31, 2021 | | :-------------------- | :-------------------------- | :--------- | :------------- | :------------------------------- | :------------------------- | :----------------------------------------------------------- | :----------------------- | | Total Stockholders' Equity | $160,622 | $31,357 | $(30,710) | $896 | $9,075 | $(8) | $171,232 | - Tilly's paid a one-time special cash dividend of **$1.00 per share**, totaling **$30.7 million**, on July 9, 2021[25](index=25&type=chunk)[28](index=28&type=chunk) [Consolidated Statements of Cash Flows](index=12&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) | Metric (in thousands) | 26 Weeks Ended July 31, 2021 | 26 Weeks Ended August 1, 2020 | | :-------------------- | :--------------------------- | :---------------------------- | | Net cash provided by operating activities | $37,442 | $18,843 | | Net cash (used in) provided by investing activities | $(10,097) | $49,977 | | Net cash used in financing activities | $(21,635) | $(6,002) | | Change in cash and cash equivalents | $5,710 | $62,818 | | Cash and cash equivalents, end of period | $81,894 | $132,955 | [Notes to the Consolidated Financial Statements](index=13&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures for the consolidated financial statements [Note 1: Description of the Company and Basis of Presentation](index=13&type=section&id=Note%201:%20Description%20of%20the%20Company%20and%20Basis%20of%20Presentation) - Tillys is a specialty retailer of casual apparel, footwear, and accessories for young men, women, boys, and girls, offering iconic global, emerging, and proprietary brands[33](index=33&type=chunk) - As of July 31, 2021, Tillys operated **244 stores** in **33 states** and also sells products through its e-commerce website[33](index=33&type=chunk) - The COVID-19 pandemic continues to create uncertainties and has impacted consumer behavior, store traffic, operations, supply chains, and overall economic stability, making future business trends difficult to predict[40](index=40&type=chunk)[41](index=41&type=chunk) [Note 2: Summary of Significant Accounting Policies](index=14&type=section&id=Note%202:%20Summary%20of%20Significant%20Accounting%20Policies) - Revenue from store sales is recognized when the customer receives and pays for merchandise, net of estimated returns. E-commerce revenue is recognized upon shipment, net of sales taxes and estimated returns[43](index=43&type=chunk) | Sales Channel (in thousands) | 13 Weeks Ended July 31, 2021 | 13 Weeks Ended August 1, 2020 | 26 Weeks Ended July 31, 2021 | 26 Weeks Ended August 1, 2020 | | :--------------------------- | :--------------------------- | :---------------------------- | :--------------------------- | :---------------------------- | | Retail stores | $164,626 | $83,858 | $292,302 | $130,811 | | E-commerce | $37,326 | $51,987 | $72,807 | $82,323 | | Total net sales | $201,952 | $135,845 | $365,109 | $213,134 | | Department | 13 Weeks Ended July 31, 2021 | 13 Weeks Ended August 1, 2020 | 26 Weeks Ended July 31, 2021 | 26 Weeks Ended August 1, 2020 | | :--------- | :--------------------------- | :---------------------------- | :--------------------------- | :---------------------------- | | Mens | 36% | 35% | 36% | 35% | | Womens | 28% | 27% | 28% | 27% | | Accessories | 17% | 16% | 16% | 16% | | Footwear | 10% | 13% | 11% | 13% | | Boys | 4% | 5% | 4% | 5% | | Girls | 4% | 4% | 4% | 4% | | Hardgoods | 1% | —% | 1% | —% | | Brand Type | 13 Weeks Ended July 31, 2021 | 13 Weeks Ended August 1, 2020 | 26 Weeks Ended July 31, 2021 | 26 Weeks Ended August 1, 2020 | | :--------- | :--------------------------- | :---------------------------- | :--------------------------- | :---------------------------- | | Third-party | 70% | 77% | 71% | 77% | | Proprietary | 30% | 23% | 29% | 23% | - The company accrues for estimated sales returns, with reserves of **$3.9 million** as of July 31, 2021, up from **$1.4 million** at January 30, 2021, and **$2.1 million** at August 1, 2020[44](index=44&type=chunk) - Tilly's recognizes gift card revenue upon redemption and loyalty program awards as an increase to net sales, with deferred revenue for the loyalty program at **$5.1 million** as of July 31, 2021[45](index=45&type=chunk)[47](index=47&type=chunk) - The company leases all retail and corporate facilities, with lease terms generally for ten years. COVID-19 related lease concessions have been substantially negotiated for most stores[48](index=48&type=chunk)[50](index=50&type=chunk) | Lease Expense (in thousands) | 13 Weeks Ended July 31, 2021 | 13 Weeks Ended August 1, 2020 | 26 Weeks Ended July 31, 2021 | 26 Weeks Ended August 1, 2020 | | :--------------------------- | :--------------------------- | :---------------------------- | :--------------------------- | :---------------------------- | | Fixed operating lease expense | $15,257 | $15,288 | $30,882 | $31,203 | | Variable lease expense | $4,846 | $4,453 | $8,736 | $8,294 | | Total lease expense | $20,103 | $19,741 | $39,618 | $39,497 | - Income tax expense for the twenty-six weeks ended July 31, 2021, was **$9.7 million (23.7% of pre-tax income)**, compared to a benefit of **$(7.8) million (39.3% of pre-tax loss)** in the prior year, primarily due to deferred income tax benefits from stock option exercises and the prior year's CARES Act impact[59](index=59&type=chunk) - The company adopted ASU 2019-12 (Simplifying the Accounting of Income Taxes) in Q1 fiscal 2021 with an **immaterial impact** and expects ASU 2016-13 (Credit Losses) to be effective in Q1 fiscal 2023, also with an **immaterial impact**[60](index=60&type=chunk)[61](index=61&type=chunk) [Note 3: Marketable Securities](index=17&type=section&id=Note%203:%20Marketable%20Securities) - Marketable securities include commercial paper (available-for-sale) and fixed income securities (held-to-maturity), all with maturities less than one year[63](index=63&type=chunk) | Marketable Securities (in thousands) | July 31, 2021 Fair Value | January 30, 2021 Fair Value | August 1, 2020 Fair Value | | :----------------------------------- | :----------------------- | :-------------------------- | :------------------------ | | Commercial paper | $59,978 | $64,955 | $9,974 | | Fixed income securities | $6,666 | N/A | $5,965 | | Total marketable securities | $66,644 | $64,955 | $15,939 | | Gains on Investments (in thousands) | 13 Weeks Ended July 31, 2021 | 13 Weeks Ended August 1, 2020 | 26 Weeks Ended July 31, 2021 | 26 Weeks Ended August 1, 2020 | | :---------------------------------- | :--------------------------- | :---------------------------- | :--------------------------- | :---------------------------- | | Gains on investments | $43 | $302 | $72 | $554 | [Note 4: Asset-Backed Credit Facility](index=18&type=section&id=Note%204:%20Asset-Backed%20Credit%20Facility) - Tilly's entered into a new asset-backed credit agreement on November 9, 2020, providing a senior secured revolving credit facility of **up to $65.0 million**, maturing on November 9, 2023[66](index=66&type=chunk)[67](index=67&type=chunk) - The borrowing base is determined by eligible credit card receivables and inventory. As of July 31, 2021, the company was eligible to borrow **up to $63.0 million** and had **no outstanding borrowings**[68](index=68&type=chunk)[73](index=73&type=chunk) - On June 8, 2021, a Consent Agreement authorized the payment of **up to $31 million** in cash dividends, leading to a **$30.7 million** special cash dividend on July 9, 2021[71](index=71&type=chunk) [Note 5: Commitments and Contingencies](index=19&type=section&id=Note%205:%20Commitments%20and%20Contingencies) - The company is involved in lawsuits and claims in the ordinary course of business, including a putative class action (Juan Carlos Gonzales) and a PAGA case, for which a loss is currently **not probable or estimable**[75](index=75&type=chunk)[76](index=76&type=chunk) - Another putative class action (Skylar Ward) alleging wage and hour violations was denied class certification in October 2020, with the plaintiff appealing this decision[77](index=77&type=chunk) [Note 6: Fair Value Measurements](index=20&type=section&id=Note%206:%20Fair%20Value%20Measurements) - Fair value is determined using a three-level hierarchy (Level 1: quoted prices in active markets; Level 2: observable inputs other than Level 1; Level 3: unobservable inputs)[78](index=78&type=chunk)[79](index=79&type=chunk) - Financial assets measured at fair value on a recurring basis include marketable securities (available-for-sale) and certain cash equivalents (money market securities, commercial paper)[78](index=78&type=chunk) | Financial Assets (in thousands) | July 31, 2021 (Level 1) | July 31, 2021 (Level 2) | January 30, 2021 (Level 1) | January 30, 2021 (Level 2) | August 1, 2020 (Level 1) | August 1, 2020 (Level 2) | | :------------------------------ | :---------------------- | :---------------------- | :------------------------- | :------------------------- | :----------------------- | :----------------------- | | Money market securities | $63,097 | $— | $67,115 | $— | $128,036 | $— | | Commercial paper | $— | $59,978 | $— | $64,955 | $— | $9,974 | - During the twenty-six weeks ended July 31, 2021, the company recorded **$0.1 million** in impairment charges for one store's long-lived assets, writing down its carrying value to estimated fair value[84](index=84&type=chunk) [Note 7: Share-Based Compensation](index=22&type=section&id=Note%207:%20Share-Based%20Compensation) - The 2012 Plan authorizes **up to 6,613,900 shares** for issuance of options, shares, or rights, with **2,272,522 shares** available for future issuance as of July 31, 2021[86](index=86&type=chunk) | Stock Option Activity (26 Weeks Ended July 31, 2021) | Number of Stock Options | Weighted Average Exercise Price | | :--------------------------------------------------- | :---------------------- | :------------------------------ | | Outstanding at January 31, 2021 | 2,602,212 | $8.19 | | Granted | 508,700 | $10.79 | | Exercised | (1,154,258) | $7.86 | | Forfeited | (258,886) | $9.31 | | Expired | (32,000) | $16.26 | | Outstanding at July 31, 2021 | 1,665,768 | $8.88 | - Restricted Stock Awards (RSAs) are granted to independent Board members, vesting 50% on each of the first two anniversaries of the grant date[92](index=92&type=chunk) | Share-Based Compensation Expense (in thousands) | 13 Weeks Ended July 31, 2021 | 13 Weeks Ended August 1, 2020 | 26 Weeks Ended July 31, 2021 | 26 Weeks Ended August 1, 2020 | | :---------------------------------------------- | :--------------------------- | :---------------------------- | :--------------------------- | :---------------------------- | | Cost of goods sold | $82 | $141 | $43 | $287 | | Selling, general and administrative expenses | $449 | $367 | $853 | $722 | | Total share-based compensation expense | $531 | $508 | $896 | $1,009 | - As of July 31, 2021, there was **$4.9 million** of total unrecognized share-based compensation expense with a weighted average remaining recognition period of **2.9 years**[94](index=94&type=chunk) [Note 8: Earnings (Loss) Per Share](index=23&type=section&id=Note%208:%20Earnings%20(Loss)%20Per%20Share) - Basic EPS is calculated based on weighted average common shares outstanding, while diluted EPS includes the effect of dilutive potential common shares (stock options and RSAs) using the treasury stock method[95](index=95&type=chunk) | EPS Data (in thousands, except per share) | 13 Weeks Ended July 31, 2021 | 13 Weeks Ended August 1, 2020 | 26 Weeks Ended July 31, 2021 | 26 Weeks Ended August 1, 2020 | | :---------------------------------------- | :--------------------------- | :---------------------------- | :--------------------------- | :---------------------------- | | Net income (loss) | $20,398 | $5,266 | $31,357 | $(12,129) | | Weighted average basic shares outstanding | 30,500 | 29,694 | 30,189 | 29,686 | | Dilutive effect of stock options and restricted stock | 613 | 6 | 648 | — | | Weighted average shares for diluted EPS | 31,113 | 29,700 | 30,837 | 29,686 | | Basic EPS | $0.67 | $0.18 | $1.04 | $(0.41) | | Diluted EPS | $0.66 | $0.18 | $1.02 | $(0.41) | | Anti-Dilutive Stock Options (in thousands) | 13 Weeks Ended July 31, 2021 | 13 Weeks Ended August 1, 2020 | 26 Weeks Ended July 31, 2021 | 26 Weeks Ended August 1, 2020 | | :----------------------------------------- | :--------------------------- | :---------------------------- | :--------------------------- | :---------------------------- | | Stock options | 659 | 2,593 | 803 | 2,593 | | Restricted stock | 20 | 51 | 20 | 72 | | Total | 679 | 2,644 | 823 | 2,665 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Tilly's financial condition and operational results, focusing on key performance indicators and liquidity [Overview](index=25&type=section&id=Overview) - Tillys is a specialty retailer of casual apparel, footwear, accessories, and hardgoods for young men, women, boys, and girls, operating **244 stores** in **33 states** as of July 31, 2021, and an e-commerce website[100](index=100&type=chunk) - The COVID-19 pandemic continues to cause significant uncertainties and impacts on consumer behavior, store traffic, supply chains, and overall operations, making future business trends unpredictable[101](index=101&type=chunk) [How We Assess the Performance of Our Business](index=25&type=section&id=How%20We%20Assess%20the%20Performance%20of%20Our%20Business) - Key performance indicators include net sales, comparable store sales, gross profit, selling, general and administrative expenses, and operating income[102](index=102&type=chunk) - Net sales include revenue from store and e-commerce sales, net of returns, shipping/handling fees, gift card redemptions, and loyalty program awards[103](index=103&type=chunk) - The business is seasonal, with the third and fourth quarters historically generating stronger sales and operating results due to back-to-school and holiday seasons[104](index=104&type=chunk) - Comparable store sales are defined as sales from the e-commerce platform and stores open daily compared to the same fiscal dates last year, excluding gift card breakage and e-commerce shipping/handling fees[105](index=105&type=chunk) - Gross profit is net sales less cost of goods sold, which includes direct merchandise costs, buying, distribution, and occupancy costs. It is impacted by initial markups, markdowns, shrinkage, and sales mix shifts[106](index=106&type=chunk)[108](index=108&type=chunk) - SG&A expenses comprise store selling expenses (personnel, advertising, card processing) and corporate general and administrative expenses (payroll, legal, IT, HR). SG&A as a percentage of net sales is typically higher in lower volume periods[109](index=109&type=chunk) - Operating income (loss) equals gross profit less SG&A expenses, excluding interest and income taxes[110](index=110&type=chunk) - Drawing conclusions from comparative financial performance against fiscal 2020 is challenging due to the varying impacts of the COVID-19 pandemic, including consumer habits, stimulus payments, store reopening timings, e-commerce performance, and back-to-school season dynamics[111](index=111&type=chunk)[112](index=112&type=chunk) [Results of Operations](index=28&type=section&id=Results%20of%20Operations) | Metric (in thousands) | 13 Weeks Ended July 31, 2021 | 13 Weeks Ended August 1, 2020 | 26 Weeks Ended July 31, 2021 | 26 Weeks Ended August 1, 2020 | | :-------------------- | :--------------------------- | :---------------------------- | :--------------------------- | :---------------------------- | | Net sales | $201,952 | $135,845 | $365,109 | $213,134 | | Gross profit | $74,727 | $41,674 | $129,566 | $43,268 | | Operating income (loss) | $26,427 | $7,709 | $41,301 | $(20,692) | | Net income (loss) | $20,398 | $5,266 | $31,357 | $(12,129) | | Basic EPS | $0.67 | $0.18 | $1.04 | $(0.41) | | Diluted EPS | $0.66 | $0.18 | $1.02 | $(0.41) | | Operating Data | 13 Weeks Ended July 31, 2021 | 13 Weeks Ended August 1, 2020 | 26 Weeks Ended July 31, 2021 | 26 Weeks Ended August 1, 2020 | | :------------- | :--------------------------- | :---------------------------- | :--------------------------- | :---------------------------- | | Stores operating at end of period | 244 | 238 | 244 | 238 | | Comparable store sales change | 10.6% | 8.3% | 9.5% | 8.6% | | E-commerce revenues as a percentage of net sales | 18.5% | 38.3% | 19.9% | 38.6% | [Second Quarter (13 Weeks) Ended July 31, 2021 Compared to Second Quarter (13 Weeks) Ended August 1, 2020](index=29&type=section&id=Second%20Quarter%20(13%20Weeks)%20Ended%20July%2031,%202021%20Compared%20to%20Second%20Quarter%20(13%20Weeks)%20Ended%20August%201,%202020) - Net sales **increased by $66.1 million (48.7%)** to **$202.0 million**, driven by a **96.3% increase** in physical store sales to **$164.6 million** due to fewer COVID-19 related closures, partially offset by a **28.2% decrease** in e-commerce sales to **$37.3 million**[115](index=115&type=chunk)[120](index=120&type=chunk) - Gross profit **rose to $74.7 million (37.0% of net sales)** from **$41.7 million (30.7% of net sales)** last year, benefiting from **800 basis points leverage** in buying, distribution, and occupancy costs, despite a **170 basis point decrease** in product margins[116](index=116&type=chunk) - SG&A expenses **increased to $48.3 million (23.9% of net sales)** from **$34.0 million (25.0% of net sales)**, primarily due to higher store payroll and corporate bonus accruals[117](index=117&type=chunk) - Operating income **increased significantly to $26.4 million (13.1% of net sales)** from **$7.7 million (5.7% of net sales)**[118](index=118&type=chunk) - Net income reached a **record $20.4 million ($0.66 per diluted share)**, **up from $5.3 million ($0.18 per diluted share)** in the prior year[120](index=120&type=chunk) [First Half (26 Weeks) Ended July 31, 2021 Compared to First Half (26 Weeks) Ended August 1, 2020](index=30&type=section&id=First%20Half%20(26%20Weeks)%20Ended%20July%2031,%202021%20Compared%20to%20First%20Half%20(26%20Weeks)%20Ended%20August%201,%202020) - Total net sales **increased by $152.0 million (71.3%)** to **$365.1 million**, with physical store sales **up 123.5%** to **$292.3 million** and e-commerce sales **down 11.6%** to **$72.8 million**[121](index=121&type=chunk)[128](index=128&type=chunk) - Gross profit **improved to $129.6 million (35.5% of net sales)** from **$43.3 million (20.3% of net sales)**, driven by **1300 basis points leverage** in buying, distribution, and occupancy costs and **220 basis points improvement** in product margins[122](index=122&type=chunk) - SG&A expenses **increased to $88.3 million (24.2% of net sales)** from **$64.0 million (30.0% of net sales)**, primarily due to higher store payroll, corporate bonus accruals, and increased corporate staffing[123](index=123&type=chunk) - Operating income **improved significantly to $41.3 million (11.3% of net sales)** from an **operating loss of $(20.7) million (9.7% of net sales)** in the prior year[124](index=124&type=chunk) - Net income **improved to $31.4 million ($1.02 per diluted share)** from a **net loss of $(12.1) million ($(0.41) per share)** in the prior year[126](index=126&type=chunk) [Liquidity and Capital Resources](index=30&type=section&id=Liquidity%20and%20Capital%20Resources) - The company relies on cash flows from operating activities, cash on hand, and marketable securities for liquidity, expecting these to be **sufficient for working capital and capital expenditures for the next 12 months**[127](index=127&type=chunk)[128](index=128&type=chunk) | Working Capital (in millions) | Amount | Description | | :---------------------------- | :----- | :---------- | | Working capital at January 30, 2021 | $78.0 | | | Increase in cash, cash equivalents, and marketable securities | $38.1 | Primarily due to higher net income. | | Increase primarily due to timing of income tax payments | $9.5 | | | Payment of special cash dividend | $(30.7) | | | Decrease primarily due to corporate bonus accruals and timing of accrued compensation and benefits | $(6.7) | | | Other net increases | $1.7 | | | Working capital at July 31, 2021 | $89.9 | | - The asset-backed credit facility provides **up to $65.0 million**, with **$63.0 million available for borrowing** as of July 31, 2021, and had **no outstanding borrowings**[132](index=132&type=chunk)[139](index=139&type=chunk) - The CARES Act has allowed the company to defer payroll taxes, apply for tax credits, and accelerate depreciation, impacting liquidity[140](index=140&type=chunk) [Cash Flow Analysis](index=32&type=section&id=Cash%20Flow%20Analysis) | Cash Flow Activity (in thousands) | 26 Weeks Ended July 31, 2021 | 26 Weeks Ended August 1, 2020 | | :-------------------------------- | :--------------------------- | :---------------------------- | | Net cash provided by operating activities | $37,442 | $18,843 | | Net cash (used in) provided by investing activities | $(10,097) | $49,977 | | Net cash used in financing activities | $(21,635) | $(6,002) | | Net increase in cash and cash equivalents | $5,710 | $62,818 | - Net cash from operating activities **increased by $18.6 million** to **$37.4 million**, primarily due to higher net sales in fiscal 2021 compared to store closures in the prior year[143](index=143&type=chunk) - Net cash used in investing activities **was $10.1 million**, a **shift from $50.0 million provided last year**, mainly due to higher purchases of marketable securities (**$66.6 million**) and capital expenditures (**$8.5 million**), partially offset by maturities (**$65.0 million**)[145](index=145&type=chunk) - Net cash used in financing activities **was $21.6 million**, **up from $6.0 million last year**, primarily due to **$30.7 million in dividends paid**, partially offset by **$9.1 million from stock option exercises**[147](index=147&type=chunk) [Contractual Obligations](index=33&type=section&id=Contractual%20Obligations) - **No material changes** to contractual obligations were reported as of July 31, 2021, compared to the Annual Report on Form 10-K for fiscal year ended January 30, 2021[148](index=148&type=chunk) [Off-Balance Sheet Arrangements](index=33&type=section&id=Off-Balance%20Sheet%20Arrangements) - The company has **no off-balance sheet arrangements** other than purchase obligations and its revolving credit facility[149](index=149&type=chunk) [Critical Accounting Policies and Estimates](index=33&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) - The preparation of financial statements requires estimates and assumptions, which are made more difficult by the significant, adverse impacts of the COVID-19 pandemic[150](index=150&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=33&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes in market risks were reported as of July 31, 2021, compared to the prior Annual Report - **No material changes** in market risks were reported as of July 31, 2021, compared to the Annual Report on Form 10-K for fiscal year ended January 30, 2021[151](index=151&type=chunk) [Item 4. Controls and Procedures](index=33&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were effective with no material changes in internal control over financial reporting - Management, including the CEO and CFO, concluded that disclosure controls and procedures were **effective at a reasonable assurance level** as of July 31, 2021[152](index=152&type=chunk) - **No material changes** in internal control over financial reporting occurred during the period covered by this report[153](index=153&type=chunk) - Management acknowledges that control systems provide only reasonable, not absolute, assurance and have **inherent limitations**, including potential for errors, fraud, or management override[154](index=154&type=chunk)[155](index=155&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=35&type=section&id=Item%201.%20Legal%20Proceedings) This section incorporates legal proceedings information by reference from Note 5 of the financial statements - Information on legal proceedings is incorporated by reference from Note 5: Commitments and Contingencies[158](index=158&type=chunk) [Item 1A. Risk Factors](index=35&type=section&id=Item%201A.%20Risk%20Factors) This section refers readers to the Annual Report on Form 10-K for a detailed discussion of business risks - Readers are referred to the "Risk Factors" section in the Annual Report on Form 10-K for a detailed discussion of business risks[159](index=159&type=chunk) [Item 6. Exhibits](index=35&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including a Consent Agreement and certifications - Exhibits include a Consent Agreement dated June 8, 2021, CEO and CFO certifications (Rule 13a-14(a) and 18 U.S.C. Section 1350), and interactive data files (iXBRL) for the financial statements and notes[161](index=161&type=chunk) [Signatures](index=37&type=section&id=Signatures) This section contains the signatures of the company's President, CEO, and CFO, certifying the report - The report is signed by Edmond Thomas (President, CEO, and Director) and Michael Henry (EVP, CFO) on September 8, 2021[166](index=166&type=chunk)

2021 ICR CONFERENCE INVESTOR PRESENTATION SAFE HARBOR STATEMENT This presentation, and responses to certain questions about this presentation, will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, particularly with regard to future financial and operating expectations, business plans and key initiatives. All such statements are subject to risks and uncertainties that could cause actual results or events to differ materially from those indicated b ...