Tilly’s (NYSE:TLYS) reported fiscal 2025 fourth-quarter results that exceeded management’s early-December outlook, driven by accelerating comparable sales, stronger merchandise margins, and lower expenses. On the company’s earnings call held March 11, 2026, executives said the quarter marked the retailer’s first profitable fourth quarter since fiscal 2021 and capped a year that delivered the first positive comparable-sales fiscal year since that same period.
Comparable sales accelerated into year-end and into fiscal 2026
President and CEO Nate Smith said the company ended fiscal 2025 with “six consecutive months of accelerating positive comp momentum” and “18 consecutive positive comp weeks.” That momentum continued into the start of fiscal 2026, with comparable net sales up 20.1% in February, which management described as an “unprecedented start” to the year.
- August: +1%
- September: +1%
- October: +6%
- November: +8%
- December: +10.6%
- January: +12.4%
- February: +20.1%
Smith added that March had begun “even stronger” than February at the time of the call. Management attributed the improvement to strong conversion (described as a high-teens, double-digit percentage increase versus last year) and improving traffic, with both stores and e-commerce performing and “all departments positive.”
Fourth-quarter results: sales rose despite fewer stores, and margins expanded
EVP and CFO Michael Henry said the company finished fiscal 2025 with stronger sales and product margins than expected, along with lower expenses. For the 13-week period ended Jan. 31, 2026, total net sales were $155.1 million, up 5.3% year over year, even though Tilly’s ended the year with 17 fewer stores than a year earlier.
Comparable net sales increased 10.1% in the quarter, with comps rising 10.3% in physical stores and 9.8% in e-commerce. The fourth-quarter comp result helped lift full-year comparable sales slightly positive at +0.3%, which Henry noted was the first positive comp year since fiscal 2021.
Channel mix shifted modestly. Physical-store net sales increased 3.6% despite a 7.1% reduction in store count, representing 72.3% of total net sales versus 73.5% a year ago. E-commerce represented 27.7% of net sales versus 26.5% last year.
Gross margin expanded to 33.2% of net sales from 26.0% last year, an improvement of 720 basis points. Henry said product margins improved 470 basis points due to higher initial markups and lower total markdowns as the company operated with reduced and more current inventories. Buying, distribution, and occupancy costs improved 250 basis points (or $1.9 million), primarily from lower occupancy costs tied to the smaller store base, partially offset by higher shipping costs associated with online growth.
Profitability improved sharply as SG&A declined
Henry said SG&A expenses fell to $48.9 million, or 31.5% of net sales, compared with $52.4 million, or 35.6% of net sales, in the year-ago period. He attributed the reductions primarily to:
- $1.6 million lower store payroll and related benefits, mainly due to the reduced store count
- $0.7 million lower non-cash impairment charges
- $0.7 million lower e-commerce fulfillment labor
- Other smaller reductions across multiple line items
Operating income was $2.6 million, or 1.7% of net sales, compared to an operating loss of $14.1 million, or 9.6% of net sales, last year. Net income was $2.9 million, or $0.10 per diluted share, versus a net loss of $13.7 million, or $0.45 per share, in the prior-year quarter. Henry said income tax expense was $18,000 and both years reflected “a full non-cash valuation allowance” on deferred tax assets.
Balance sheet, inventory, and investment initiatives
Tilly’s ended fiscal 2025 with total liquidity of $87.8 million, consisting of $46.3 million in cash, no debt, and $41.5 million of borrowing capacity under its asset-based credit facility. Net inventories were 10.8% lower year over year, and management said inventory aging improved.
Capital expenditures were $4.7 million in fiscal 2025, down from $8.2 million in fiscal 2024. Looking ahead, management discussed ongoing investments that it said are already producing benefits, including a price optimization tool (which Henry said contributed meaningfully to improved fourth-quarter product margins) and warehouse management software implemented in mid-fiscal 2024 (which Smith said is driving labor efficiencies in distribution centers). The company also expects to continue investing in fiscal 2026, including an AI-driven merchandise allocation tool.
Store strategy shifts toward selective growth; Q1 outlook provided
After a year of store optimization that resulted in 21 closures, Smith said Tilly’s is pivoting from a closure posture to a “disciplined approach to new store openings” in fiscal 2026, targeting 4 to 6 new stores. Management said there are four known closures planned late in the first quarter and it does not currently expect to close a significant number of additional stores this year.
On capital spending, Henry said the company does not expect fiscal 2026 capex to reach $10 million and suggested it should be in a similar range to the past two years, “not more than $8–$9 million” based on current expectations. He also cited sales per square foot of roughly $260 at the end of fiscal 2025, which he said remains below historical levels and is expected to improve, supporting greater confidence in expansion over time.
For fiscal 2026 first quarter, Henry guided total net sales to approximately $119 million to $125 million, implying a comparable net sales increase of 16% to 22%. The company expects product margin improvements of about 310 to 330 basis points compared to last year’s first quarter, and SG&A of about $44 million to $45 million before any potential non-cash impairment charges.
Tilly’s expects a pre-tax loss and net loss in a range of approximately $10.1 million to $8.0 million, with loss per share of $0.34 to $0.27, compared with a loss per share of $0.74 in the year-ago first quarter. Management expects to end the first quarter with 220 total stores, a net decrease of 18 stores, or 7.6%, from the end of the first quarter of fiscal 2025.
While the company declined to provide full-year guidance, Henry offered an illustrative framework, estimating that an annualized comparable net sales increase of approximately 8% to 9% would be needed to begin generating profitability for fiscal 2026 as a whole, subject to assumptions about product margins, inventory levels, and expenses. Smith and Henry also discussed efforts aimed at improving margins and efficiency, including RFID (which Smith said could reduce manual inventory counting time by 80% to 90%) and other operational initiatives intended to limit SG&A growth relative to sales.
Management said it expects further improvement in both top-line and bottom-line performance in each quarter of fiscal 2026 given current trends, while acknowledging the potential influence of the broader consumer spending environment on discretionary retail demand.
About Tilly’s (NYSE:TLYS)
Tilly’s, Inc is an American specialty retailer of casual apparel, footwear, accessories and hardgoods. Founded in 1982 by Hezy Shaked and Tilly Levine, the company has grown from a single denim and tops store in Garden Grove, California, to a nationwide retail chain. Headquartered in Irvine, California, Tilly’s serves a youth-oriented market with an emphasis on surf, skate and streetwear brands.
The company’s merchandise assortment includes products from leading lifestyle brands such as Vans, Nike, Billabong and Quiksilver, alongside its own private-label offerings.
