Tilly’s(US:TLYS)2025-09-03 21:30Financial Data and Key Metrics Changes - The company reported a comparable net sales decrease of 4.5%, which was within the outlook range and represented a second consecutive quarter of sequential trend improvement from 2024 [9] - Total net sales were $151.3 million, a decrease of 7.1% compared to the previous year [12] - Earnings per share were $0.10, beating the earnings outlook range and marking the first profitable quarter since 2022 [10][15] - The company ended the quarter with total liquidity of $114 million and no borrowings [16] Business Line Data and Key Metrics Changes - Net sales from physical stores decreased by 7.3%, representing 81.1% of total net sales, while e-commerce net sales decreased by 6.6%, accounting for 18.9% of total net sales [13] - Gross margin improved by 180 basis points to 32.5% of net sales compared to 30.7% last year [13] - Total SG&A expenses were $46.4 million, a decrease of $4.4 million and 50 basis points as a percentage of net sales compared to last year's second quarter [14] Market Data and Key Metrics Changes - Total comparable net sales for fiscal August increased by 0.9% compared to last year, with comparable net sales from stores increasing by 4.5% [17] - E-commerce net sales decreased by 12.1% during fiscal August, primarily due to a distribution decision by a third-party brand [17] Company Strategy and Development Direction - The company aims to stabilize its business and improve product assortment while enhancing marketing efforts to build customer awareness [10][20] - Management is focused on reducing inventory levels and improving inventory aging, with a 14.5% reduction in total balance sheet inventory compared to last year [17] - The company plans to remain debt-free throughout fiscal 2025 and expects to close additional stores as part of its strategy [19] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about continued improvement in performance under new leadership [20] - The company anticipates a modest impact from tariffs on product costs for the remainder of fiscal 2025, with potential larger impacts in fiscal 2026 [12] - Management noted historical trends of sales slowdown after the back-to-school season, which informs their conservative outlook for the upcoming months [34] Other Important Information - The company ended the second quarter with 232 total stores, a net decrease of 15 stores or 6.1% compared to a year ago [13] - The company has 45 lease decisions remaining to be made by the end of the fiscal year, which may result in additional store closures [19] Q&A Session Summary Question: Broader opportunity and early priorities at Tilly's - The new CEO emphasized the importance of focusing on successful strategies while identifying areas for improvement [22][24] Question: Progression of comparable sales during the second quarter - Management noted a sequential improvement in sales, with fiscal May at -2%, June at -7.6%, and July at -3% [28] Question: Drivers of the positive comp in August - All apparel departments showed positive movement in August, contributing to overall sales improvement [28] Question: Outlook for the third quarter and potential sales erosion - Management indicated that historical patterns suggest a slowdown post-back-to-school, which informed their conservative sales outlook [34] Question: Gross margin and product margin improvements - The company reported improved product margins due to better inventory management and reduced markdowns [36][38] Question: Impact of tariffs and vendor pricing - Management noted that some vendors are adjusting prices in response to tariffs, but the net impact on costs has been limited [39][40] Question: Opportunities for further cost containment in SG&A - Management expects to see continued savings in store labor and other expenses in the upcoming quarters [42][43]