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 in Q3 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 Q4 are expected to increase by 4%-8%, with total net sales projected between $146 million and $151 million [19] Company Strategy and Development Direction - The company aims to increase the sales penetration of proprietary brands to approximately 40%, up three points from the current year-to-date penetration, to enhance product exclusivity and margins [7][8] - Tilly's is focusing on social commerce, with significant growth from its TikTok shop launched in March [8] - The company is implementing technological upgrades, including an AI-driven price optimization tool and plans for RFID implementation to improve inventory accuracy and customer experience [11][12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in stabilizing the business, noting the first positive quarterly comparable net sales since Q4 2021 [5] - The team is enthusiastic about the progress made and the opportunities ahead, emphasizing the need for continued sales growth and operational improvements [12][21] Other Important Information - The company ended Q3 with total liquidity of $100.7 million, including cash of $39 million and unused borrowing capacity of $61.6 million [18] - Year-to-date capital expenditures were $3.4 million, down from $6.7 million last year [18] 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, suggesting a 50/50 impact from both factors [25] Question: Is the acceleration into Q4 promotion-driven? - Management clarified that the acceleration is not promotion-driven, with expectations for product margin improvements despite the typical lower margins in Q4 [26] Question: What is the composition of the improving comp? - The improvement is mainly driven by better 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? - Management indicated that the increase in private label penetration to 40% could happen over the next three to five months, supported by strong sell-through rates [32][33] Question: What is the outlook for SG&A expenses? - Management noted that SG&A control has been effective, with expectations for continued efficiency improvements as sales per square foot productivity increases [38] Question: Are there more store closures expected? - Management confirmed that there could be additional closures depending on lease negotiations, emphasizing a consistent effort to close unprofitable stores [42]