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Tilly’s Team Manages “Crazy” Environment

Youth retailer Deals With Pandemic, Inflation & More

A pandemic, inflation concerns, and a changing retail landscape has kept the executive team at Tilly’s Inc. more than busy since the start at 2020.

Tilly’s (NYSE: TLYS) last two quarters of fiscal year 2021—which were $206.1 million and $204.5 million, respectively, and broke records for quarterly performance—bolstered the company’s revenue to grow 34% over two years to $724.7 million for the 12 months ended June 30.

Those records landed the retailer of casual apparel, footwear and accessories for young adults on the Business Journal’s Fastest-Growing Public Companies list in the No. 12 spot among large companies with more than $500 million in revenue.

The Business Journal’s list measures revenue for the 12 months ended June 30, 2022 over the same period ending in 2020, including the first half of the year when COVID-19 lockdowns stunted business.

For Tilly’s, the pandemic forced the Irvine-based retailer to shutter more than 200 of its stores across the United States for two months.

“We had our worst year ever in 2020, losing money for the first time as a result of the pandemic shutdowns,” Executive Vice President and Chief Financial Officer Mike Henry told the Business Journal. “Then turn the page to 2021 and we had our most incredible, record-setting year ever, coming out of pandemic restrictions and aided by the impact of federal stimulus payments.”

Stockholders Wary

Wall Street has been skeptical of the retailer as of late, with shares down about 55% to $7.86 as of last Monday since a 52-week high of $17.47 in November.

“I think we have managed as well as can possibly be expected through all of the crazy complications that have happened the last two years. All they seem to see is the sales are down, but we have managed as well as anyone else out there,” Henry said, describing the last two years as a whipsaw.

Even though Tilly’s sales have slowed in the first half of 2022, it’s still operating above pandemic and pre-pandemic levels.

Revenue slipped 11% and 17% in the first two quarters of the year, but are still up 89% and 24%, respectively, from 2020, and up 12% and 4% from 2019.

“We are still producing growth relative to 2019, despite the fact we are off from last year. We knew this was going to be a challenging year compared to 2021,” said Henry, a 2021 recipient of the Lifetime Achievement Award at the Business Journal’s annual CFO of the Year event.

The company still has a goal to grow store count by more than 10 each year. The company operated 242 stores in 33 states as of July and has opened seven new stores year-to-date with four more slated to open ahead of Thanksgiving.

Retail store sales for the first half of 2022 were $254.7 million or 81% of total sales, and e-commerce made up $59.5 million or 19%. During the same period two years ago, e-commerce represented 39% of sales.

“E-commerce went from 16% of [total] sales in 2019 to 33% of sales in 2020, then came back down as we saw a resurgence of store business once everything opened up following the pandemic restrictions,” Henry said.

He expects the online sales percentage to stay in the 20s, with steady growth over time.

Revitalizing, Repurchasing

Last November, the retailer released an update to its app with improved navigation, a more responsive design and the company’s rewards program integrated into it. Another update, improving again on user experience and making the app more “customer-friendly,” will release before the holiday season.

The execs also say that investors can expect more excitement in the near future as the retailer re-introduces live events, which have historically driven a lot of store traffic, according to Henry.

Past activities include partnerships with augmented reality groups for movie premieres and virtual scavenger events, giveaways, and DJ or celebrity visits.

In the spring, Tilly’s board authorized up to 2 million shares to be repurchased over a 12-month period.

The company has repurchased more than 987,400 of its common stock for $9 million as of the end of July and continues to execute the buy-back program under the plan set back in March, according to Henry.

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Meghan Kliewer
Meghan Kliewer
Meghan is an Orange County native that joined OCBJ as an intern in 2017. Soon after graduating from Cal State Fullerton with a degree in Communications and minor in Business Administration, she was promoted to the position of Research Director. Outside of the office, Meghan teaches yoga and attends music festivals.
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