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TI

TILLY'S, INC. (TLYS)·Q2 2026 Earnings Summary

Executive Summary

  • Q2 2026 delivered mixed top-line but clear profitability progress: revenue declined 7.1% year over year to $151.3M, while diluted EPS was $0.10 vs. $0.00 last year and -$0.74 in Q1, marking the first profitable quarter since 2022, driven by higher product margins and lower SG&A .
  • Comparable net sales fell 4.5% YoY, but cadence improved through the quarter and fiscal August comps turned positive (+0.9%); product margins expanded by 210 bps and inventories were 14.5% lower YoY, underscoring healthier inventory and pricing discipline .
  • Q3 2026 outlook: net sales $134–$140M, comps -2% to +2%, SG&A ≈$47M, EPS loss of $0.35 to $0.23, with debt-free liquidity of ~$83–$86M; guidance embeds typical post–back-to-school seasonal slowdown seen in Sept/Oct the last three years .
  • Stock narrative catalysts: first profitable quarter since 2022, positive August comps, continued SG&A discipline, and early AI/RFID investments (Impact Analytics, Nedap RFID) aimed at inventory optimization and omnichannel execution .

What Went Well and What Went Wrong

  • What Went Well

    • Returned to quarterly profitability: EPS $0.10, first profitable quarter since 2022; operating income $2.7M vs. loss last year, aided by +210 bps product margin improvement and lower SG&A .
    • Healthier inventory and mix: inventories -14.5% YoY; margin uplift from higher initial markups and lower markdowns; management pursuing “chase” on winners vs. overbuying .
    • Demand indicators improved: Q2 comp trajectory improved from June into July; fiscal August comps +0.9% with apparel positive across categories; marketing reach up (TikTok followers ~169k, 4x YoY) .

  • What Went Wrong

    • Revenue still contracting: total net sales -7.1% YoY; comps -4.5% with both stores (-7.3%) and e-com (-6.6%) down; e-com pressured by a vendor distribution shift (~$1.8M August impact) .
    • Structural deleverage: buying, distribution & occupancy (BDO) deleveraged 30 bps on lower sales despite $2.4M cost reductions; continued sensitivity to California wage inflation keeps store payroll under scrutiny .
    • Tariff risk remains fluid: FY25 net cost impact currently modest (~$0.5M), but FY26 impact likely larger though indeterminate given moving pieces and vendor pricing offsets .

Financial Results

MetricQ4 2025 (ended Feb 1, 2025)Q1 2026 (ended May 3, 2025)Q2 2026 (ended Aug 2, 2025)
Revenue ($USD Millions)$147.3 $107.6 $151.3
Diluted EPS ($)-$0.45 -$0.74 $0.10
Gross Margin (%)26.0% 19.8% 32.5%
SG&A ($USD Millions)$52.415 $43.974 $46.424
Operating Income ($USD Millions)-$14.148 -$22.689 $2.678
Net Income ($USD Millions)-$13.664 -$22.152 $3.165
Segment MixQ4 2025Q1 2026Q2 2026
Stores Net Sales ($M) / Mix$108.3; 73.5% $85.9; 79.8% $122.7; 81.1%
Stores YoY %-13.7% -7.4% -7.3%
E-com Net Sales ($M) / Mix$39.0; 26.5% $21.7; 20.2% $28.5; 18.9%
E-com YoY %-17.8% -5.8% -6.6%
KPIsQ4 2025Q1 2026Q2 2026
Comparable Net Sales (%)-11.2% -7.0% -4.5%
Product Margin Change (bps)+190 +40 +210
Inventory YoY Change (%)n/a-3.8% (Q1-end) -14.5% (Q2-end)
Store Count (end of qtr)240 238 232
Liquidity$46.7M cash & secs + $48.0M ABL (Q4) $37.2M cash & secs + $55.4M ABL (Q1) $50.7M cash + $63.0M ABL (Q2)

Actual vs S&P Global Consensus – Q2 2026

MetricActualConsensusSurprise
Revenue ($M)$151.3 $154.0*-$2.7M (-1.8%)*
Primary EPS ($)$0.10 -$0.04*+$0.14 (beat)*
Coverage (# of estimates)—1 (EPS), 1 (Revenue)*—

Values with an asterisk (*) are retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Sales ($M)Q3 2026N/A$134–$140 New
Comparable Net Sales (%)Q3 2026N/A-2% to +2% New
SG&A ($M)Q3 2026N/A≈$47 (excl. impairments) New
Net Income ($M)Q3 2026N/A-$10.5 to -$7.0 New
Diluted EPS ($)Q3 2026N/A-$0.35 to -$0.23 New
Effective Tax RateQ3 2026N/ANear zero (valuation allowance) New
Store Count (end of qtr)Q3 2026N/A230 (4 closures, 2 openings) New
Liquidity ($M)Q3 2026N/A~$83–$86 (cash $20–$25; ABL $61–$63) New
DebtFY 2025N/AExpect no borrowings New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2025, Q1 2026)Current Period (Q2 2026)Trend
AI/Technology & OmnichannelAnnounced RFID rollout with Nedap to elevate omnichannel accuracy (May) .Impact Analytics AI-native merchandising/pricing partnership (July) .Building digital capabilities.
Supply Chain/TariffsTariff impact expected to be minor; private label exposure limited but fluid .FY25 net impact ~+$0.5M; FY26 likely larger but uncertain; vendor pricing/mix offsets .Still volatile; managed near-term.
Product/Merchandising ResetQ4 miss tied to wrong assortment; leadership/merchant changes; expect improvement by summer .Apparel strength across categories; higher IMU, lower markdowns; chase model emphasized .Improving assortment discipline.
Marketing & EngagementTikTok shop launched; events with influencers to rebuild mindshare .TikTok followers 4x to ~169k; August events and collaborations driving awareness .Growing reach and engagement.
Store FootprintAggressive lease scrutiny; targeted closures and selective openings .Net -15 stores YoY; plan 230 by Q3-end; additional closures possible .Rationalizing fleet.
Channel DynamicsE-com mix elevated in Q4; cadence improvement in Q1 .E-com pressured by vendor distribution change (~$1.8M August impact) .Temporary e-com headwind.
Liquidity & CreditEnded FY24 with $46.7M cash/secs + $48M ABL; targeted expense cuts .Q2 liquidity $113.7M; expect $83–$86M Q3-end; no borrowings anticipated .Strong liquidity discipline.

Management Commentary

  • “Our earnings per share of $0.10 beat our earnings outlook range for the quarter and represented our first profitable quarter since 2022... we are making progress toward improving our business” — Michael Henry, CFO .
  • “Product margins improved by 210 basis points primarily due to the combination of higher initial markups and lower markdowns as a result of operating with reduced, more current inventory” — Press Release .
  • “All of our apparel departments moved positively in August… the apparel side of things… all elements of apparel being positive” — CFO on August trends .
  • “The impact of tariffs remains a fluid situation… currently known net impacts on our product margins for 2025 are limited to just $0.5 million; the impact on fiscal 2026 is likely to be larger” — CFO .
  • “We’ve quadrupled our TikTok following to over 169,000 followers since the start of the second quarter last year… aided by the launch of our TikTok shop” — CFO .

Q&A Highlights

  • Cadence and outlook: Q2 monthly comps were May -2%, June -7.6%, July -3%; August turned slightly positive. Q3 guide assumes typical post–back-to-school slowdown seen the last three years in Sept/Oct .
  • Gross margin drivers: Healthier inventory (down 14.5% YoY) enabling higher IMU and lower markdowns; product margins expected to see similar bps improvement in Q3 .
  • E-commerce disruption: A third-party brand’s distribution decision reduced August e-com by ~$1.8M; viewed as a broader vendor change, not TLYS-specific .
  • SG&A discipline: Continued store labor savings expected in Q3/Q4; targeting lower SG&A dollars YoY despite wage inflation, particularly in California .
  • Tariffs: Net FY25 impact modest with vendor price actions and sourcing changes; FY26 unknown; embedded into outlook .

Estimates Context

  • Q2 2026 vs S&P Global consensus: revenue $151.3M vs $154.0M* (miss), EPS $0.10 vs -$0.04* (beat). Coverage thin (1 estimate each), implying higher estimate uncertainty .
  • Q3 2026 S&P Global consensus: revenue $136.9M*, EPS -$0.30*; company’s guidance brackets revenue and EPS outcomes consistent with a narrowed loss trajectory .
    Values with an asterisk (*) are retrieved from S&P Global.

Key Takeaways for Investors

  • Profitability inflection with EPS $0.10 and operating income positive, supported by durable product margin expansion and SG&A control; watch for sustainability through holiday .
  • Demand trend improving into back-to-school; August comps turned positive, but management remains conservative on Sept/Oct seasonality given three-year history .
  • Mix and inventory strategy are working: 14.5% lower inventories and “chase” approach reduced markdowns; similar product margin uplift expected in Q3 .
  • E-com vendor distribution shift is a transitory headwind (~$1.8M August hit); monitor for normalization or broader vendor decisions impacting channel mix .
  • Liquidity robust and debt-free; company does not anticipate borrowing in FY25, providing flexibility to navigate demand and invest in capabilities .
  • AI/RFID initiatives (Impact Analytics, Nedap) are medium-term levers for allocation, replenishment, and omnichannel accuracy that can further improve margin dollars and customer experience .
  • Near-term trading lens: headline EPS beat vs. modest revenue miss, positive August comp, and disciplined outlook could support sentiment; watch Q3 cadence and holiday setup as key stock drivers .