Financial Data and Key Metrics Changes - Total net sales for Q3 2025 were $139.6 million, a decrease of 2.7% year-over-year. Comparable net sales increased by 2%, with physical stores up 5.3% and e-commerce down 9% [15][19] - Gross margin improved to 30.5%, up 460 basis points from 25.9% last year, driven by higher initial markups and lower markdowns [16] - Net loss improved to $1.4 million, or $0.05 per share, compared to a net loss of $12.9 million, or $0.43 per share, last year [18] Business Line Data and Key Metrics Changes - Physical store sales represented 79% of total net sales, up from 77.6% last year, while e-commerce sales accounted for 21%, down from 22.4% [15] - The decline in e-commerce sales was primarily due to a 51% reduction in clearance sales compared to the previous year, indicating healthier full-price sales [15] Market Data and Key Metrics Changes - The positive sales trend observed in Q3 has continued into Q4, with double-digit store comps and an accelerating sales trend in October and November compared to August and September [6][19] - Comparable net sales for the quarter-to-date through December 2, 2025, increased by 6.7% compared to the same period last year [19] Company Strategy and Development Direction - The company aims to increase the sales penetration of proprietary brands to approximately 40%, up three percentage points from the current year-to-date penetration [7] - Tilly's is focusing on a balanced approach between proprietary and third-party brands to enhance sales and product margins [8] - The company is investing in social commerce, with significant growth from its TikTok shop launched in March [8] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in stabilizing the business and moving towards consistent profitability, citing the positive sales results as evidence of progress [5][21] - The company plans to continue improving product margins and expects to generate margin improvements of approximately 300 to 350 basis points in Q4 compared to last year [19] Other Important Information - The company ended Q3 with total liquidity of $100.7 million, including cash of $39 million and available borrowing capacity of $61.6 million [18] - Tilly's plans to close seven stores by the end of Q4, bringing the total store count to 223, a net decrease of 17 stores from the end of Fiscal 2024 [20] Q&A Session Summary Question: What contributed to the return to positive comps? - Management attributed the positive comps to a combination of improved assortment and effective marketing strategies, suggesting a 50/50 impact from both [25] Question: What is driving the acceleration into Q4? - The acceleration is not promotionally driven; product margins are expected to improve significantly, indicating a focus on quality merchandise and effective brand management [26] Question: What is the composition of the improving comp? - The improvement is primarily driven by increased conversion rates, average sale values, and transaction counts, with traffic remaining roughly flat [29] Question: How soon can the company achieve the targeted private brand penetration? - The company is confident in increasing private label penetration over the next three to five months, supported by strong sell-through rates [32] Question: How sustainable are the SG&A reductions? - The sustainability of SG&A reductions will depend on improved sales per square foot productivity, with ongoing efforts to maintain efficiency in store operations [38] Question: What is the outlook for store closures? - The company will continue to evaluate store performance and may close additional stores if lease negotiations do not yield acceptable terms [42]