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Tilly’s Aims to Bring Back ‘the Fun Vibe’

Shares of Tilly’s Inc. (NYSE: TLYS) fell 24% on March 11 after it announced fiscal fourth-quarter earnings that, like the prior three quarters, set company quarterly records for both net sales and operating income.

Executives at the Irvine-based retailer say that drop—coming after steady stock gains over the course of 2021—was an “overreaction” by Wall Street to tamp down expectations for the upcoming few quarters by the company.

The execs also say that investors can expect more excitement this year as the retailer re-introduces live events at its 244 stores in 33 states.

Past events have driven a lot of store traffic, according to Chief Financial Officer Mike Henry.

“It’s bringing the fun back, the vibe of Tilly’s,” he told the Business Journal. “We’re re-engaging with the customers directly.”

Specifics haven’t yet been announced; past activities included partnerships with augmented reality groups for movie premieres and virtual scavenger events.

Tilly’s, a retailer of casual apparel, footwear and accessories for young men and women, has more than 5,000 companywide employees, including almost 700 in OC.

Stores Over Online 

In 2020, sales fell 14% because the pandemic forced the closure of many of its stores.

The company reported 2021 sales jumped 46% to $775.7 million, led by a 70% increase in physical store sales of $609.7 million while e-commerce sales—which had a breakout year in 2020—fell 4.3% to $165.9 million.

The return of revenue growth at stores has caused the company to plan to open 15 to 20 stores this year, particularly in Texas. Last year, Tilly’s opened three net new stores.

“Once we knew the environment was getting better, we decided to up the numbers,” Chief Executive Ed Thomas told the Business Journal.  

New categories of products are also under development, according to Thomas.

Even with a renewal of in-store activity, updates to the existing Tilly’s website will go live in the second quarter. Tying into a newer mobile app and integrating Tilly’s rewards program, the team expects e-commerce to remain a key part of its operations, and grow at a steady pace.

“E-comm is considerably larger than it was, about 55% more than 2019,” Thomas said.

Building Recognition

The company forecasted first-quarter sales of $143 million to $148 million, which implies a year-over-year decline of 10% to 13%. It predicted adjusted profit of break-even to five cents. Analysts were expecting an average of 21 cents on sales of $166 million.

The company said last year’s record first quarter was “driven by a unique environment” such as federal stimulus payments combined with “considerable pent-up demand.”

Officials also added that the current business environment has many unpredictable risks including the pandemic, inflation and supply chain difficulties.

Tilly’s CFO Henry mentioned his frustration with the one-day decline of 24%, calling it “an overreaction.”

Four days later, the company announced a year-long share repurchase program. The company didn’t disclose the amount it would buy back nor the range of prices it’d pay to buy back shares. The company had $139.2 million in cash and marketable securities as of Jan. 29.

At press time, shares were around $10 with a $290 million market cap. Shares have fallen around 40% since a 52-week high of $17.80 in November, though the company’s stock price is nearly three times higher than at the onset of the pandemic.

Supply Shortages

Even though supply shortages also continue to disrupt its business, Thomas sees the inventory problems starting to ease up, hopefully by the end of spring.

Most goods are tied up at the Southern California ports, according to officials.

For 2022, Tilly’s will continue to rely on the formula that allows them to sell over 400 different brands in store and continue growth in existing markets, he said.

“We’ve been building brand recognition in the newer markets, and we’re continuing that mission,” Thomas said.

Analysts are projecting fiscal 2022 sales will decline 7% to $721.6 million.

The company’s executives are more optimistic that they can adapt.

“Our ability to execute and change, adjust what we do and what we see in the environment” is a strength of the team, Henry said.

“We’ve been around for a long time as an OC-based company. [Even with] a small store base, our story is really about growth. And we’re going to continue to focus on that.”

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