Executive Summary

Fiscal Q3 2025 results have not been released yet; Tilly’s set its Q3 earnings date for December 3, 2025, and provided an outlook in September calling for net sales of $134–$140M, SG&A of ~$47M, and a net loss of $7.0–$10.5M ($0.23–$0.35 per share) .
Sequential trends improved through fiscal 2025: comps declined 7.0% in Q1 and 4.5% in Q2, with fiscal August comps up 0.9%, and gross margin expanded to 32.5% in Q2 on higher initial markups and lower markdowns .
Last year’s Q3 (fiscal 2024) saw net sales of $143.4M (-13.8% YoY), a net loss of $12.9M (-$0.43), and gross margin at 25.9%, pressured by deleverage on lower sales and distribution/occupancy costs; management cited a 53rd-week calendar shift as a key headwind ($18.4M net sales shift) .
Key stock reaction catalyst on Dec 3: comps and product margin trajectory vs. the Q3 outlook and whether SG&A discipline and store rationalization offset traffic softness; watch early commentary from the new CEO and any AI/price-optimization updates for merchandising execution signals .

What Went Well and What Went Wrong

What Went Well

Q2 2025 gross margin expanded to 32.5% (+180 bps YoY) on higher IMU and lower markdowns; operating income turned positive ($2.7M) and net income reached $3.2M ($0.10) .
Sequential comps improved quarter-over-quarter with fiscal August up 0.9%, suggesting stabilization into Q3 2025; inventories -14.5% YoY at Q2-end indicate cleaner stock position .
Strategic initiatives: implementation of AI-driven tools (Impact Analytics) and price optimization, plus marketing upgrades (website search, mobile app) to boost merchandising and traffic; management noted improved store traffic momentum .

What Went Wrong

Q3 last year (fiscal 2024) saw net sales down 13.8% and a net loss of $12.9M; deleverage from buying/distribution/occupancy drove gross margin down to 25.9% .
Early Q4 last year commentary showed comps starting highly negative due to Thanksgiving timing and promotions; Q3 2024 call highlighted the need for top-line growth to leverage largely fixed SG&A (store payroll nearly half of SG&A) .
Promotional pressure and markdowns challenged merchandise margins; management avoided repeating a storewide Black Friday promo that eroded margins, but indicated clearance needs in January could pressure product margin improvements .

Financial Results

Note: Q3 2025 actuals are pending (scheduled for Dec 3, 2025). We compare Q3 2024 actuals, Q1–Q2 2025 actuals, and Q3 2025 outlook.

Metric	Q3 2024 (ended Nov 2, 2024)	Q1 2025 (ended May 3, 2025)	Q2 2025 (ended Aug 2, 2025)	Q3 2025 Outlook
Net Sales ($USD Millions)	$143.4	$107.6	$151.3	$134–$140
Gross Margin %	25.9%	19.8%	32.5%	N/A
SG&A ($USD Millions)	$51.3	$44.0	$46.4	~$47
Operating Income ($USD Millions)	-$14.1	-$22.7	$2.7	N/A
Net Income ($USD Millions)	-$12.9	-$22.2	$3.2	-$10.5 to -$7.0
Diluted EPS ($USD)	-$0.43	-$0.74	$0.10	-$0.35 to -$0.23
Tax Rate (Effective)	~0%	~0.6% benefit	~(1.3)% benefit	Near-zero

Channel Mix (Net Sales and Penetration)

Channel	Q3 2024 Net Sales ($M)	Mix %	Q1 2025 Net Sales ($M)	Mix %	Q2 2025 Net Sales ($M)	Mix %
Physical Stores	$111.3	77.6%	$85.9	79.8%	$122.7	81.1%
E-commerce	$32.2	22.4%	$21.7	20.2%	$28.5	18.9%

Key Performance Indicators

KPI	Q3 2024	Q1 2025	Q2 2025
Comparable Net Sales Change (%)	-3.4%	-7.0%	-4.5%
E-comm Comp (%)	+4.9%	-6.6%	-6.2%
Store Count (end of quarter)	246	238	232
Gross Margin (%)	25.9%	19.8%	32.5%
Inventories YoY	+11.8%	-3.8%	-14.5%

Estimate Comparison

Wall Street consensus (S&P Global) for Q3 2025 was unavailable at time of writing due to access limits. Expectation comparisons to consensus cannot be provided. Values retrieved from S&P Global were unavailable due to system request limits.

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Net Sales ($M)	Q3 2025	None disclosed previously	$134–$140	Introduced
Comparable Net Sales (%)	Q3 2025	None disclosed previously	-2% to +2%	Introduced
SG&A ($M)	Q3 2025	None disclosed previously	~$47 (excl. impairment)	Introduced
Net Loss ($M)	Q3 2025	None disclosed previously	-$10.5 to -$7.0	Introduced
EPS ($)	Q3 2025	None disclosed previously	-$0.35 to -$0.23	Introduced
Store Count (end of Q)	Q3 2025	None disclosed previously	230 (two closures, two openings)	Introduced
Liquidity ($M)	Q3 2025	None disclosed previously	$83–$86 total, $20–$25 cash/marketable securities; $61–$63 ABL capacity; no debt	Introduced
Tax Rate	Q3 2025	Near zero historically	Near-zero effective rate	Maintained

Context: In the prior year’s Q3 (fiscal 2024), Tilly’s provided Q4 outlook including product margin improvement (~200 bps), SG&A ~$52M, and net loss of ~$13.0–$9.5M, reflecting efforts to avoid storewide Black Friday promos that hurt margins last year .

Earnings Call Themes & Trends

Topic	Q1 2025 (prior)	Q2 2025 (prior)	Current Period (Q3 2025 pre-release)	Trend
AI/Technology Initiatives	Marketing and digital upgrades (search, mobile app relaunch) underway from late FY2024; price optimization targeted for early 2025	Partnership with Impact Analytics to drive inventory optimization and AI-native reporting tools	Expect commentary on AI deployment status and early benefits under new CEO	Building execution momentum
Supply Chain & Distribution	Temporary labor planning in DC, timing of receipts adjusted to smooth flows; ports/flow concerns noted	Inventory down 14.5% YoY; cleaner receipts support margins	No update yet; watch for holiday fulfillment cadence and clearance approach	Improving inventory discipline
Tariffs/Macro	Macro inflation/tariff risks referenced in FLS statements	Continued macro watch; included in risk disclosures	Macro risks persist; impact will be gauged via holiday comps/margins	Stable macro caution
Product Margin & Promotions	Product margins modestly improved; markdowns/aging reserves pressured GM in Q3 2024	+210 bps product margin improvement; avoided broad promos; merchandising cleaner	Outlook implies -2% to +2% comps with disciplined promotions; margin execution a key focus	Improving GM; execution-dependent
Traffic & Comps	Store traffic improved for 2 consecutive quarters (Q3 2024); comps -7.0% in Q1	Comps -4.5%; fiscal August +0.9%	To be updated Dec 3; comps vs guidance will drive narrative	Sequential stabilization
Store Fleet Strategy	10 closures planned in Q4 2024; end at 239; rationalization underway	232 stores at Q2-end; plan for 230 at Q3-end; more possible in Q4 pending leases	Expect updated closures/openings and lease renegotiation progress	Rationalizing footprint

Management Commentary

“We believe we are beginning to see the positive impacts of our efforts to stabilize our business. Our comparable net sales trend has improved each quarter since the end of fiscal 2024, including through fiscal August to begin the third quarter.” – Hezy Shaked (Q2 2025 PR) .
“Fiscal August produced our first month of comparable net sales growth since February 2022… We are also in the process of implementing a new price optimization tool… expected to launch in early 2025.” – Michael Henry (Q3 2024 call) .
“We did a percent off the entire store… last year… all that really did was erode our margin… we did not repeat this year.” – Michael Henry (Q3 2024 call) .
“I am excited to welcome Nate Smith… as our new Chief Executive Officer… we seek to continue building upon our progress… toward generating improved sales results and profitability over time.” – Hezy Shaked (Q2 2025 PR) .
“Nate’s… strategic vision will help revitalize our brand and drive further improvements.” – Hezy Shaked (CEO appointment) .

Q&A Highlights

Merchandise margins: improved IMU offset by markdowns; avoiding broad storewide promos supports >200 bps product margin improvement vs last year’s worst quarter .
Inventory management: adjusted receipt timing to smooth DC labor and ensure Black Friday readiness; unit inventory increase was temporary; clearance in January contemplated to align inventory .
Fixed-cost leverage: SG&A (store payroll nearly half) remains largely fixed; requires top-line recovery to leverage; ongoing cost renegotiation and occupancy reduction efforts .
Comps cadence: early November was tough with wild week-to-week swings due to Thanksgiving timing; shifted comps showed positive store comps in recent days on a shifted basis .
Tax and outlook clarity: near-zero effective tax rate due to full valuation allowance; Q4 last year guided product margin +~200 bps, SG&A ~$52M, and net loss -$13.0M to -$9.5M, framing how holiday strategy impacts profitability .

Estimates Context

S&P Global consensus EPS and revenue estimates for Q3 2025 were unavailable at time of writing due to system access limits. Accordingly, we cannot provide beats/misses vs Street for Q3 2025 now. Values retrieved from S&P Global were unavailable due to request limits.

Key Takeaways for Investors

Heading into Dec 3, focus on comps vs the -2% to +2% guidance and confirmation of product margin discipline; margin expansion and avoided broad promos are key to near-term sentiment .
Q2 2025 demonstrated execution improvements (GM 32.5%, positive operating income and EPS); sustaining this in Q3 would support thesis stabilization .
Store rationalization and lease negotiations continue; expect updated end-of-quarter count (230) and impact on occupancy costs and SG&A .
Liquidity remains healthy ($83–$86M expected at Q3-end, no debt); watch cash/marketable securities mix and ABL capacity utilization heading into holiday .
New CEO appointment and AI-enabled merchandising/price optimization tools could be medium-term drivers of improved product vitality and inventory productivity; look for concrete progress updates on Dec 3 .
Last year’s calendar/timing distortions and promotion missteps are being addressed; sustained IMU improvement with targeted promotions should drive GM recovery but requires top-line cooperation and disciplined clearance in January .
Without Street consensus today, traders should prep scenario analysis around the company’s guidance ranges; magnitude of deviation from guidance will likely drive post-print reaction.

TILLY'S, INC. (TLYS)·Q3 2025 Earnings Summary