TILLY'S, INC. Q4 FY2024 earnings call

• Made organizational changes in merchandising team to stabilize sales. - Reduced inventory commitments for fiscal 2025 to target faster turns and improve product margins. - Targeted expense reductions in SG&A through lease scrutiny, store distribution, payroll management, and contractual commitments. - Plan to continue investing in marketing, new store opportunities, and operating efficiencies.

Total net sales of $147.3 million decreased by 14.9% compared to the fourth quarter of fiscal 2023. Total comparable net sales decreased by 11.2%. Physical store net sales increased by 13.7% (73.5% of total net sales) while e-commerce net sales decreased by 17.8% (26.5% of total net sales). Gross margin was 26% of net sales compared to 27% last year. SG&A expenses were $52.4 million (35.6% of net sales) vs $55.2 million (31.9%) last year. Pretax loss was $13.4 million, net loss was $13.7 million.

• First quarter 2025 total net sales estimated $105 million to $111 million, comparable store net sales decrease 8% to 3%. - SG&A expenses expected $42 million to $43 million. - Pretax loss range $20 million to $17 million. - Estimated loss per share $0.68 to $0.58. - Plan to finalize extension of asset-backed credit facility with Wells Fargo Bank through July 2028 by end of first quarter.

• Minor tariff impact on some private label vendors. - Economic recession and consumer spending headwinds. - Potential for more store closures if performance doesn't improve.

Q: Just around tariff impact or potential tariff impact. Can you just refresh our memories around potential tariff impact?

A: Yes, looked into it, minor effect on few private label vendors, one at stage might split increased cost, hard to quantify now.

Q: How are you thinking about store openings this year? Are you planning to open any or are we in more of closure mode at this point? What should we anticipate for CapEx this year?

A: Still opportunistic on store openings with good ROI, opened two recent profitable stores, plan to close more unprofitable stores, CapEx placeholder is five stores, 7 store closures planned (3 in Q1, 4 in Q2).

Q: Just backing up to the fourth quarter results and the comp, can you give commentary on the down 11% comp for the fourth quarter?

A: November was weakest month down 21%, December and January down 6%-7%, fiscal February finished at minus 5.7% inclusive of short window of positive comps in stores due to warmer weather.

Q: Can you talk about the sensitivities in the first quarter range and any changes seen in February?

A: Week three of February was soft, week four had heat wave with positive comps, Easter shift affects outlook, cautious optimism with warmer weather potentially leading to upper end of range.

Q: Just talk higher level about sort of what inning we are in terms of the merchandising and assortment change? When will the new team fully have their fingerprints on all products?

A: Changed top merchant, realigned team, expect results by July, had to mark down merchandise affecting comps, expect to clear markdowns by July and see results then.

Q: Can you comment on what's embedded in the cash balance guide at the end of the quarter in terms of inventory? Are we assuming that the inventory balance is down year-over-year at the end of the quarter?

A: Planning to operate with lower unit inventories all year, below last year's levels, so long as comps don't drop consistently to minus 10%, won't need to access credit facility.

Q: I just wanted to sort of follow up around the thinking on the credit line and the cash balance. And just wondering if there are other areas you feel you can reduce SG&A, given kind of the run rate of the business?

A: Renegotiated contractual commitments, expect payroll dollars to be down in Q1 despite minimum wage increases, looked at every department budget, expect SG&A to be lower than 2024 if business turns up