tlys-20240803

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

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FORM 10-Q

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☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended August 3, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-35535

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TILLY’S, INC.

(Exact name of Registrant as specified in its charter)

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Delaware						45-2164791
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

10 Whatney

Irvine, CA 92618

(Address of principal executive offices)

(949) 609-5599

(Registrant’s telephone number, including area code)

__________________________________________________

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, $0.001 par value per share	TLYS	New York Stock Exchange

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated Filer

☒

Non-accelerated filer

☐

Smaller reporting company

☒

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2) Yes ☐ No ☒

As of September 4, 2024, the registrant had the following shares of common stock outstanding:


Class A common stock $0.001 par value			22,845,799
Class B common stock $0.001 par value			7,306,108

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TILLY’S, INC.

FORM 10-Q

For the Quarterly Period Ended August 3, 2024

Index


		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	6
	Consolidated Balance Sheets as of August 3, 2024, February 3, 2024 and July 29, 2023	6
	Consolidated Statements of Operations for the Thirteen and Twenty-Six Weeks Ended August 3, 2024 and July 29, 2023	7
	Consolidated Statements of Comprehensive Income (Loss) for the Thirteen and Twenty-Six Weeks Ended August 3, 2024 and July 29, 2023	8
	Consolidated Statements of Stockholders’ Equity as of August 3, 2024 and July 29, 2023	9
	Consolidated Statements of Cash Flows for the Twenty-Six Weeks Ended August 3, 2024 and July 29, 2023	11
	Notes to the Consolidated Financial Statements	12

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29

Item 4.	Controls and Procedures	29

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	29

Item 1A.	Risk Factors	29

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30

Item 5.	Other Information	30

Item 6.	Exhibits	30

	Signatures	31

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Forward-Looking Statements

This Quarterly Report on Form 10-Q (this "Report") contains forward-looking statements that are subject to risks and uncertainties. All statements other than statements of historical or current fact included in this Report are forward-looking statements. Forward-looking statements refer to our current expectations and projections relating to our financial condition, results of operations, plans, objectives, strategies, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “anticipate”, “estimate”, “expect”, “project”, “plan”, “intend”, “believe”, “may”, “might”, “will”, “should”, “can have”, “likely” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. For example, all statements we make relating to our estimated and projected earnings, revenues, comparable store sales, operating income, earnings per share, costs, expenditures, cash flows, growth rates and financial results, our plans and objectives for future operations, growth or initiatives, strategies or the expected outcome or impact of pending or threatened litigation are forward-looking statements. All forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that we expected, including:

•the impacts of inflation on consumer spending generally and on our expense management, operating results and financial condition;

•our ability to adapt to declines in consumer confidence and decreases in consumer spending;

•the impact of fluctuations in the price and availability of raw materials, labor, and transportation;

•our ability to compete effectively in an environment of intense competition in stores, online and via social media marketing platforms;

•our ability to adapt to changing trends in traffic for our stores and changes in our customers' purchasing patterns;

•our ability to identify and respond to new and changing customer fashion preferences and fashion-related trends;

•our ability to secure desirable lease arrangements and other economics to improve our profitability;

•our ability to successfully open new stores and profitably operate our existing stores;

•our ability to attract customers to our e-commerce ("e-com") platform and generate acceptable levels of return from our digital marketing efforts and other e-com growth initiatives;

•our ability to generate adequate cash from our existing stores and e-com to support our business;

•our ability to generate sufficient undiscounted cash flows to recover our investment in long-lived and right-of-use assets;

•our ability to generate sufficient pre-tax income to fully utilize our deferred tax assets;

•the success of the malls, power centers, neighborhood and lifestyle centers, outlet centers and street-front locations in which our stores are located;

•our ability to adapt to unseasonable weather impacting sales of our seasonal merchandise;

•our dependence on third-party vendors to provide us with sufficient quantities of merchandise at acceptable prices and on time;

•our ability to adapt to significant changes in sales due to the seasonality of our business;

•our dependence upon key executive management or our inability to hire or retain the talent required for our business;

•our ability to establish, maintain and enhance a strong brand image;

•most of our merchandise is made in foreign countries, making price and availability of our merchandise susceptible to international trade conditions;

•our ability to balance proprietary branded merchandise with the third-party branded merchandise we sell;

•our ability to efficiently utilize our e-com fulfillment center;

•our ability to generate sufficient cash flows to make significant periodic lease payments for our stores, corporate offices and distribution centers;

•our ability to attract customers in the various retail venues and geographies in which our stores are located;

•our ability to respond to litigation claims we are subject to;

•our ability to respond to changes in employment and wage and hour laws;

•failure of our vendors and their manufacturing sources to use acceptable labor or other practices;

•our ability to effectively respond to disruptions in our supply chain and distribution center;

•our ability to adjust to increasing costs of mailing catalogs, paper and printing;

•failure of our information technology systems to support our business, before and after our planned upgrades;

•our ability to secure our data and comply with privacy laws and the security standards of the credit card industry;

•disruptions to our information systems in the ordinary course of business, as a result of systems upgrades or due to intentional attacks;

•our ability to protect our trademarks or other intellectual property rights;

•our potential liability if we or our vendors unknowingly infringe upon the intellectual property rights of third parties;

•natural disasters, unusually adverse weather conditions, port delays, boycotts, epidemics, pandemics, acts of war, terrorism, civil unrest and other unanticipated events;

•the potential effects of unionization and work stoppages or slowdowns by our employees;

•continuing costs incurred as a result of being a public company; and

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•our ability to respond to risks associated with climate change, environmental, social and governance initiatives, and sustainability initiatives.

We derive many of our forward-looking statements from our operating budgets and forecasts, which are based upon detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect our actual results.

See “Risk Factors” within our most recent Annual Report on Form 10-K for a more complete discussion of the risks and uncertainties mentioned above and for discussion of other risks and uncertainties. All forward-looking statements attributable to us are expressly qualified in their entirety by these cautionary statements as well as others made in this Report and hereafter in our other SEC filings and public communications. You should evaluate all forward-looking statements made by us in the context of these risks and uncertainties.

We caution you that the risks and uncertainties identified by us may not be all of the factors that are important to you. Furthermore, the disclosures and forward-looking statements included in this Report are made only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

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Part I. Financial Information

Item 1. Financial Statements (Unaudited)

TILLY’S, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except par value)

(Unaudited)


	August 3, 2024		February 3, 2024		July 29, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	36,749	$	47,027	$	54,578
Marketable securities	39,947		48,021		49,700
Receivables	13,176		5,947		10,922
Merchandise inventories	95,011		63,159		91,251
Prepaid expenses and other current assets	9,539		11,905		9,209
Total current assets	194,422		176,059		215,660
Operating lease assets	188,711		203,825		224,537
Property and equipment, net	44,612		48,063		48,353
Deferred tax assets, net	—		—		12,973
Other assets	1,452		1,598		1,764
TOTAL ASSETS	$	429,197	$	429,545	$	503,287

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	42,961	$	14,506	$	44,763
Accrued expenses	20,011		13,063		18,972

Deferred revenue	13,615		14,957		14,012
Accrued compensation and benefits	11,488		9,902		8,358

Current portion of operating lease liabilities	51,414		48,672		51,243
Current portion of operating lease liabilities, related party	3,269		3,121		2,977
Other liabilities	270		336		425
Total current liabilities	143,028		104,557		140,750
Noncurrent portion of operating lease liabilities	141,565		160,531		176,310
Noncurrent portion of operating lease liabilities, related party	17,596		19,267		20,865
Other liabilities	235		321		447
Total long-term liabilities	159,396		180,119		197,622
Total liabilities	302,424		284,676		338,372
Commitments and contingencies (Notes 2 and 5)
Stockholders’ equity:
Common stock (Class A), $0.001 par value; 100,000 shares authorized; 22,846, 22,714 and 22,654 shares issued and outstanding, respectively	23		23		23
Common stock (Class B), $0.001 par value; 35,000 shares authorized; 7,306, 7,306 and 7,306 shares issued and outstanding, respectively	7		7		7
Preferred stock, $0.001 par value; 10,000 shares authorized; no shares issued or outstanding	—		—		—
Additional paid-in capital	173,939		172,478		171,195
Accumulated deficit	(47,652)		(27,962)		(6,563)
Accumulated other comprehensive income	456		323		253
Total stockholders’ equity	126,773		144,869		164,915
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	429,197	$	429,545	$	503,287

The accompanying notes are an integral part of these consolidated financial statements.

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TILLY’S, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)


	Thirteen Weeks Ended				Twenty-Six Weeks Ended
	August 3, 2024		July 29, 2023		August 3, 2024		July 29, 2023
Net sales	$	162,867	$	159,951	$	278,723	$	283,588

Cost of goods sold (includes buying, distribution, and occupancy costs)	112,013		114,704		202,625		211,472
Rent expense, related party	934		931		1,865		1,862
Total cost of goods sold (includes buying, distribution, and occupancy costs)	112,947		115,635		204,490		213,334
Gross profit	49,920		44,316		74,233		70,254

Selling, general and administrative expenses	50,648		46,868		95,616		89,934
Rent expense, related party	131		133		264		266
Total selling, general, and administrative expenses	50,779		47,001		95,880		90,200

Operating loss	(859)		(2,685)		(21,647)		(19,946)
Other income, net	786		1,220		1,940		2,284
Loss before income taxes	(73)		(1,465)		(19,707)		(17,662)
Income tax benefit	(4)		(340)		(17)		(4,569)
Net loss	$	(69)	$	(1,125)	$	(19,690)	$	(13,093)
Basic net loss per share of Class A and Class B common stock	$	(0.00)	$	(0.04)	$	(0.66)	$	(0.44)
Diluted net loss per share of Class A and Class B common stock	$	(0.00)	$	(0.04)	$	(0.66)	$	(0.44)
Weighted average basic shares outstanding	30,029		29,831		29,995		29,815
Weighted average diluted shares outstanding	30,029		29,831		29,995		29,815

The accompanying notes are an integral part of these consolidated financial statements.

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TILLY’S, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

(Unaudited)


	Thirteen Weeks Ended				Twenty-Six Weeks Ended
	August 3, 2024		July 29, 2023		August 3, 2024		July 29, 2023
Net loss	$	(69)	$	(1,125)	$	(19,690)	$	(13,093)
Other comprehensive income, net of tax:
Net change in unrealized gain (loss) on available-for-sale securities, net of tax	98		(68)		133		48
Other comprehensive income (loss), net of tax	98		(68)		133

SEC Form 10-Q filed by Tilly's Inc.