Tilly’s Inc., a struggling chain that caters to teenagers, on Dec. 3 reported its first positive comparable quarterly net sales since fiscal year 2021 as the retailer aims to reignite growth by leaning into TikTok-fueled sales, expanding its proprietary brands and rolling out new AI-driven inventory tools.
The retailer’s third-quarter results showed that comparable net sales, a key retail metric, increased 2%. New Chief Executive Nate Smith said that Tilly’s last reported comparable sales growth in the fourth quarter of fiscal 2021, “and that positive momentum has continued into this year’s fourth quarter.”
Chief Financial Officer Mike Henry told analysts that November marked the retailer’s fourth consecutive month of comparable net sales growth.
“We’re encouraged by the forward momentum we’ve been building during fiscal 2025, as evidenced by our sequential improvement in quarterly comparable net sales trends since the end of Fiscal 2024 into positive territory for the third and fourth quarters of 2025,” Henry added.
The results confirm Wall Street’s growing confidence in the company and Smith, who took over in August. The shares have quadrupled since hitting an all-time low of 57 cents in May. At press time, the shares traded at $1.96 and a $60 million market cap (NYSE: TLYS).
The company also noted that it was working with influencers to drive brand awareness, including Loren Gray, who has a reported 53 million followers on TikTok and is so popular among teenagers that some have dubbed her the “Queen of TikTok.” Gray, who became famous for posting trendy short videos, is featured on Tilly’s website in front of a red convertible with the subtitle, “Snow Day in LA.”
The company, which hired Gray in October, held an event with her at the Irvine Spectrum Center on Dec. 6.
“Loren Gray blazed a new path during the dawn of vertical video, pioneering the short form video landscape making her one of the most followed creators in the world today,” Tilly’s said in a statement in October.
“This partnership is a celebration of mutual ideals. Tillys’ ongoing ‘Discover Your Style’ campaign encourages individuality through fashion, while Loren’s own path was sparked by embracing her personal style as a teen—a decision that inspired her to start posting on social media and move to Hollywood.”
Smith told investors that “we will continue to invest in exclusive opportunities to build awareness, consideration and following for Tilly’s.”
Showcasing Trend-Relevant Brands
The Irvine-based apparel company generated total net sales of $139.6 million, down 2.7% compared to a year ago (NYSE: TLYS). The result beat one analyst’s forecast of a 4.6% decrease to $136.9 million for third-quarter revenue.
Tilly’s now expects net sales in the range of approximately $146 million to $151 million for the fiscal fourth quarter and an increase in comparable net sales of 4% to 8%. The retailer expects to close additional stores in the final fiscal quarter, ending the year with 223 locations.
Smith attributed much of the growth to the retailer’s recent changes in merchandise assortment to improve business, “by bringing in third-party brands that are trend-relevant and then obviously mixing that in with proprietary brands and collections that really resonate with our customers.”
More Proprietary Brands
Shares of the company, which went public in 2012, reached an all-time high, around $25 each in 2018. In fiscal 2022, sales also reached an all-time high of $776 million.
The retailer started losing its footing in the youth apparel industry when sales fell 13% to $672.3 million for fiscal 2023, which ended Jan. 31 of that year. The stock, which topped $17 in 2022, began a long decline as the company attempted several efforts to restart sales.
Ed Thomas, who had served as CEO since 2015, tried two years of turnaround efforts before retiring at the start of 2024. By this time, shares had fallen in half.
Co-founder and Chairman Hezy Shaked re-entered as interim CEO and initially planned to step down once a successor was found. Afterwards, investment firm Pleasant Lake Partners LLC revealed a stake in Tilly’s that has grown to 36%.
Smith told investors on the December conference call that he sees an early opportunity for growth by expanding its assortment of proprietary brands, which aligns with consumer demand. The company plans to increase sales penetration of its proprietary brands from 37% to 40%
“Our customers have been choosing our proprietary brands to a greater extent this year than in the past, and we believe more opportunities exist,” Smith said on the earnings call.
“We must consistently remain on trend and produce a high-quality assortment to accomplish our goal.”
Smith said offering a more diversified selection provides “a better balance” without derailing the third-party brands it sells in its stores such as Vans, Converse or Levi’s.
TikTok is also fueling growth. The company started selling products via the mobile app’s online shop in March, resulting in “rapid growth in sales,” Smith said. The company also noted that it was working with influencers to drive brand awareness, including Gray.
On the operational side, Tilly’s is joining the bandwagon of firms turning to AI technologies to improve operations, including the recent launch of an AI-driven price optimization tool.
“Early indications are that this tool is leading to improved average unit retail selling prices with sharper, more surgical pricing decisions, leading to improved product margins and sell-through rates,” Smith said.
Next year, the retailer said it plans to debut “an AI-driven merchandise replenishment and allocation tool to improve inventory efficiency in our stores and online.”
