Executive Summary

Q1 2026 net sales were $107.6M (-7.1% YoY), with comparable net sales down 7.0% but improving sequentially from Q4’s -11.2%; gross margin was 19.8% and diluted EPS was -$0.74 .
Against S&P Global consensus, revenue slightly missed ($107.6M vs $108.2M*) and EPS missed (-$0.74 vs -$0.66*); EBITDA was below consensus (-$18.9M actual vs -$17.4M*) — a result of SG&A and occupancy deleverage despite modest product margin improvement .
Q2 2026 guidance targets net sales of $150–$158M and EPS of -$0.09 to $0.07, suggesting pathway to near break-even; fiscal May comps were -2.2%, with back-to-school positioned as the quarter’s key volume driver .
Liquidity remains solid and debt-free: $37.2M in cash/marketable securities and $55.4M undrawn ABL capacity at Q1; company expects liquidity of ~$106–$111M at Q2 end and no borrowing needs absent a sustained ~10% comp decline .
Strategic catalysts: sequential comp improvement, disciplined store closures, targeted marketing (TikTok shop, influencer activations), and RFID deployment (Nedap iD Cloud) to improve inventory accuracy and omnichannel execution .

What Went Well and What Went Wrong

What Went Well

Sequential comp trend improved: Q1 comps -7.0% vs Q4 -11.2%; fiscal May started Q2 at -2.2%, and management highlighted better traffic and early signs of stabilization .
Product margins improved by 40 bps YoY in Q1 due to higher initial markups, partially offset by inventory reserves; gross margin held at 19.8% despite top-line pressure .
Liquidity strong and debt-free: $92.6M total liquidity at Q1 (cash/marketable $37.2M + $55.4M undrawn ABL), extended ABL with Wells Fargo to 2027, and expectation to avoid borrowing throughout fiscal 2025 .
Quote: “We believe our merchandise assortment is on trend… encouraged by signs that our business may be starting to stabilize.” — Hezy Shaked, CEO .

What Went Wrong

SG&A and occupancy deleveraged: SG&A was $44.0M (40.9% of sales), up 190 bps YoY as a percentage; buying/distribution/occupancy deleveraged 160 bps, worsening operating loss to $22.7M (21.1% of sales) .
EPS and EBITDA missed consensus, reflecting scale challenges with lower sales and fixed-cost structure; net loss widened to -$22.2M (-$0.74 EPS) from -$19.6M (-$0.65 EPS) YoY .
Store footprint rationalization continues: Q1 ended with 238 stores (-8 YoY), plans for 7 closures and 1 opening in Q2, plus potentially up to 15 more closures near year-end subject to leases — emphasizing ongoing pressure on occupancy leverage .

Financial Results

Metric	Q3 2025	Q4 2025	Q1 2026
Revenue ($USD Millions)	$143.4	$147.3	$107.6
Gross Margin (%)	25.9%	26.0%	19.8%
Operating Margin (%)	-9.8%	-9.6%	-21.1%
Diluted EPS ($USD)	-$0.43	-$0.45	-$0.74

Channel Mix	Q3 2025	Q4 2025	Q1 2026
Stores Net Sales ($M)	$111.3	$108.3	$85.9
Stores % of Total	77.6%	73.5%	79.8%
E-com Net Sales ($M)	$32.2	$39.0	$21.7
E-com % of Total	22.4%	26.5%	20.2%

KPIs	Q3 2025	Q4 2025	Q1 2026
Comparable Net Sales Change (%)	-3.4%	-11.2%	-7.0%
Store Count (End of Quarter)	246	240	238
Inventory YoY Change (%)	+11.8%	+9.5% vs FY23	-3.8%
Cash + Marketable Securities ($M)	$51.7	$46.7	$37.2

Q1 2026 Actual vs S&P Global Consensus	Actual	Consensus*	Beat/Miss
Revenue ($USD Millions)	$107.6	$108.2*	Miss
Primary EPS ($USD)	-$0.74	-$0.66*	Miss
EBITDA ($USD Millions)	-$18.9	-$17.4*	Miss

Values retrieved from S&P Global.*

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Net Sales ($M)	Q2 2026	n/a	$150–$158	New
Comparable Net Sales (%)	Q2 2026	n/a	-5% to flat	New
SG&A ($M)	Q2 2026	n/a	$48–$49 (excl. impairments)	New
EPS ($)	Q2 2026	n/a	-$0.09 to $0.07	New
Store Count (End of Q2)	Q2 2026	n/a	232 (7 closures, 1 opening)	New
Liquidity ($M)	Q2 2026	n/a	$106–$111; cash/marketable $43–$48; undrawn ABL ~$63	New
Credit Facility Use	FY 2025	n/a	No borrowings expected; use only if comps ~-10% sustained	Maintained vs Q4 posture

Context on Q1 2026 guidance vs actual: Q1 guidance (from March) called for $105–$111M revenue, SG&A $42–$43M, and EPS of -$0.68 to -$0.58; actual revenue was in range, but SG&A came in higher ($44.0M) and EPS below the guided range (-$0.74), reflecting deleverage and marketing spend .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q3 2025, Q4 2025)	Current Period (Q1 2026)	Trend
Tariffs/Macro	Q4: Tariff impact expected to be minor for limited private label vendors; macro headwinds acknowledged .	Management sees currently minor tariff impact; product margins expected consistent to slightly better YoY within guidance ranges .	Stabilizing; monitoring volatility.
Marketing & Engagement	Q3: LA Chargers sponsorship; improved store traffic over two quarters .	TikTok shop launched; influencer events (Mike Tyson, Travis Barker); sequential comp improvement linked to marketing .	Positive momentum.
Inventory Discipline & Store Closures	Q3: Pulled-forward receipts; store count rationalization planned .	Inventories -3.8% YoY; continued closures (7 in Q2; possibly 15 more), aiming for occupancy cost reduction .	Tightening footprint; improving turns.
Product Margin Management	Q3: Product margin within -10 bps YoY; planned improvement Q4 .	Q1 product margin +40 bps YoY; gross margin 19.8% despite deleverage .	Improving IMU; offset by reserves.
Back-to-School Cadence	Q3: Black Friday timing sensitivity; week-to-week volatility .	Q2: Back half of July drives Q2 volume; May ~25% of quarter; history of strongest season in back-to-school .	Seasonal strength expected.
Technology/Operations	Q3: Price optimization tool targeted for early 2025; mobile app relaunch .	RFID rollout via Nedap iD Cloud to elevate omnichannel accuracy and availability .	Operational upgrades continuing.
Liquidity/ABL	Q4: Intends ABL extension; no borrowing expected unless comps worsen .	Debt-free; liquidity $92.6M; expects $106–$111M at Q2 end; ABL extended to 2027 .	Strong liquidity.

Management Commentary

“Our fiscal 2025 first quarter comparable net sales… were a sequential improvement… We believe our merchandise assortment is on trend… encouraged by signs that our business may be starting to stabilize.” — Hezy Shaked, CEO .
“We launched our Tilly’s TikTok shop… began outperforming our daily order volume through Amazon in mid-April… These efforts are aimed at solidifying our authentic position… with the goal of building greater customer affinity.” — Michael Henry, CFO .
“Product margins improved by 40 basis points… higher initial markups, partially offset by increased inventory valuation reserves.” — Michael Henry .
“We expect to end the second quarter with… total liquidity of approximately $106–$111 million… Based on current projections, we expect to remain a debt-free company throughout Fiscal 2025.” — Michael Henry .
RFID initiative: “Starting in Q2 2025, Tilly’s will deploy Nedap’s iD Cloud… to enhance inventory accuracy, optimize product availability, and streamline operational efficiencies.” — Nedap PR; Erik Quade, CIO .

Q&A Highlights

Cadence detail: Q1 monthly comps — Feb -5.7%, Mar -13.8%, Apr +1.5%; May traffic up and average sale +1%, suggesting improving demand and merchandising resonance .
Tariffs: Management not seeing material impacts; product margins expected consistent to slightly better YoY within ranges .
Back-to-school: Largest Q2 sales weeks are last 2–3 weeks; May ~25% of Q2; history of strongest seasonal performance offers cautious optimism toward flat/positive comps .
Occupancy/BDO leverage: Dollar costs to decline with closures, but leverage requires comp stabilization to flat/positive; ongoing lease renegotiations .
Activism: No discussions or board requests from activist investors per management .

Estimates Context

Q1 2026 vs consensus: Revenue $107.6M vs $108.2M* (miss); EPS -$0.74 vs -$0.66* (miss); EBITDA -$18.9M vs -$17.4M* (miss). Magnitude reflects SG&A and occupancy deleverage on lower sales, partially offset by +40 bps product margin improvement .
Q2 2026 setup: Company guides revenue $150–$158M and EPS -$0.09 to $0.07; consensus at $154.0M* and -$0.04* sits near midpoints, implying modest improvements needed in comps and cost control to meet/beat .
Values retrieved from S&P Global.*

Key Takeaways for Investors

Sequential comp improvement and Q2 guide toward near break-even are constructive; watch back-to-school cadence in late July as the key determinant for Q2 outcome .
Cost deleverage remains the critical swing factor; SG&A planned at $48–$49M in Q2 must be tightly managed to avoid EPS slippage versus consensus .
Channel mix is returning toward stores (79.8% of sales) as traffic improves; ongoing closures should reduce occupancy dollars but require comps stabilization to yield margin leverage .
Product margin progress (IMU improvement) is encouraging; avoid broad promotions that erode margin — management’s Q4 experience supports a more targeted approach .
Liquidity and debt-free balance sheet limit downside risk; management indicates no borrowing needs unless comps worsen toward ~-10% sustained .
Operational upgrades (RFID iD Cloud) and marketing activations (TikTok shop, influencers) can underpin omnichannel accuracy and demand; monitor early execution benefits through inventory accuracy and fulfillment KPIs .
Near-term trading: Skew to event-driven into back-to-school; positive comp inflection or a tighter SG&A print could catalyze upside. Medium term: Store rationalization + margin discipline + tech enablement form the path to normalized earnings power if comps recover to flat/low-single-digit growth .

TILLY'S, INC. (TLYS)·Q1 2026 Earnings Summary