Fiscal 2026 second quarter
Filed Sep 2, 2026Tilly's, Inc. Beats Outlook, Reports Third Consecutive Quarter of Double-Digit Percentage Comp Sales Increases
Second-quarter net sales increased 8.1%, total comparable net sales increased 12.1%, gross margin improved by 300 basis points, and net income increased to $8.4 million from $3.2 million. E-commerce grew 20.9%, outpacing physical-store sales growth, while third-quarter guidance calls for another year-over-year profit improvement.
Key metrics
as reported| Metric | Value | q/q | y/y |
|---|---|---|---|
| Net sales, thirteen weeks ended August 1, 2026GAAP | $163,508 (In thousands) | – | 8.1% |
| Total comparable net sales, thirteen weeks ended August 1, 2026other | 12.1% increase | – | 12.1% |
| Gross profit, thirteen weeks ended August 1, 2026GAAP | $58,095 (In thousands) | – | $9.0 million |
| Gross margin, thirteen weeks ended August 1, 2026GAAP | 35.5% of net sales | – | 300 basis points |
| Total cost of goods sold, thirteen weeks ended August 1, 2026GAAP | $105,413 (In thousands) | – | – |
| Total selling, general and administrative expenses, thirteen weeks ended August 1, 2026GAAP | $49,922 (In thousands) | – | $3.5 million |
| SG&A expenses as a percentage of net sales, thirteen weeks ended August 1, 2026GAAP | 30.5% of net sales | – | 20 basis points |
| Operating income, thirteen weeks ended August 1, 2026GAAP | $8,173 (In thousands) | – | – |
| Operating margin, thirteen weeks ended August 1, 2026GAAP | 5.0% of net sales | – | – |
| Other income, net, thirteen weeks ended August 1, 2026GAAP | $294 (In thousands) | – | – |
| Income before income taxes, thirteen weeks ended August 1, 2026GAAP | $8,467 (In thousands) | – | – |
| Income tax expense, thirteen weeks ended August 1, 2026GAAP | $86 (In thousands) | – | – |
| Effective income tax rate, thirteen weeks ended August 1, 2026GAAP | 1.0% of pre-tax income | – | – |
| Net income, thirteen weeks ended August 1, 2026GAAP | $8,381 (In thousands) | – | $5.2 million |
| Diluted net income per share, thirteen weeks ended August 1, 2026GAAP | $0.27 | – | $0.17 per diluted share |
| Basic net income per share, thirteen weeks ended August 1, 2026GAAP | $0.28 | – | – |
| Weighted average diluted shares outstanding, thirteen weeks ended August 1, 2026GAAP | 31,159 (In thousands) | – | – |
| Net sales, twenty-six weeks ended August 1, 2026GAAP | $288,226 (In thousands) | – | 11.3% |
| Total comparable net sales, twenty-six weeks ended August 1, 2026other | 16.5% increase | – | 16.5% |
| Gross profit, twenty-six weeks ended August 1, 2026GAAP | $94,167 (In thousands) | – | $23.8 million |
| Gross margin, twenty-six weeks ended August 1, 2026GAAP | 32.7% of net sales | – | 550 basis points |
| Total selling, general and administrative expenses, twenty-six weeks ended August 1, 2026GAAP | $94,092 (In thousands) | – | $3.7 million |
| Operating income (loss), twenty-six weeks ended August 1, 2026GAAP | $75 (In thousands) | – | $20.1 million |
| Net income (loss), twenty-six weeks ended August 1, 2026GAAP | $428 (In thousands) | – | $19.4 million |
| Diluted net income (loss) per share, twenty-six weeks ended August 1, 2026GAAP | $0.01 | – | $0.64 per diluted share |
| Net cash provided by operating activities, twenty-six weeks ended August 1, 2026GAAP | $18,492 (In thousands) | – | – |
| Purchases of property and equipment, twenty-six weeks ended August 1, 2026GAAP | $(2,833) (In thousands) | – | – |
| Cash and cash equivalents, August 1, 2026GAAP | $52,334 (In thousands) | – | – |
| Marketable securities, August 1, 2026GAAP | $9,863 (In thousands) | – | – |
| Merchandise inventories, August 1, 2026GAAP | $80,161 (In thousands) | – | decreased by 1.3% |
Segments
| Segment | Revenue | q/q | y/y |
|---|---|---|---|
| Physical storesComparable net sales from physical stores increased by 10.3% relative to the comparable 13-week period ended August 2, 2025. Physical stores represented 78.9% of total net sales this year compared to 81.1% last year, and the Company ended the quarter with 220 total stores compared to 232 total stores at the end of the second quarter last year. | $129.0 million | – | 5.1% |
| E-commerceE-com net sales represented 21.1% of total net sales this year compared to 18.9% of total net sales last year. | $34.5 million | – | 20.9% |
Fiscal 2026 third quarter ending October 31, 2026 outlook
- Revenueapproximately $150 million to $155 million
- Operating expensesapproximately $47 million to $49 million
- Tax ratelow to mid-teens as a percentage of pre-tax income
- NoteEstimated comparable net sales increase of 10% to 14%, respectively, relative to last year's third quarter.
- NoteProduct margins to be slightly improved compared to last year's third quarter.
- NoteNet income of approximately $2.2 million to $3.7 million, respectively to net sales.
- NoteNet income per diluted share of $0.07 to $0.12, respectively, based on approximately 32.0 million diluted shares.
- Note220 stores open at the end of the third quarter of fiscal 2026 compared to 230 at the end of last year's third quarter.
- NoteTotal liquidity of approximately $125 million or more, comprised of cash and investments of approximately $62 million to $65 million and available, undrawn borrowing capacity of approximately $63 million under its asset-back credit facility.
What drove it
- Total comparable net sales increased by 12.1% in the second quarter, supported by a 10.3% increase in physical-store comparable net sales.
- E-commerce net sales increased by 20.9%, increasing e-commerce's mix of total net sales to 21.1% from 18.9%.
- Product margins improved by 140 basis points, marking the Company's seventh consecutive quarter with year-over-year product margin improvement.
- Buying, distribution, and occupancy costs improved by 160 basis points as a percentage of net sales due to higher net sales.
- Second-quarter SG&A increased primarily because of incentive bonus accruals of $1.5 million, marketing expenses of $0.8 million, and store payroll and related benefits of $0.6 million.
- First-half product margins improved by 240 basis points primarily due to improved full-price selling associated with more current inventory aging and improved average unit retail prices on aged, clearance items.
Concerns
- The Company had 220 total stores at the end of the second quarter, down 12 stores or 5.2% from 232 stores at the end of the second quarter last year.
- Higher e-commerce shipping expenses associated with e-commerce net sales growth largely offset lower occupancy costs in the second quarter and partially offset those costs in the first half.
- Second-quarter SG&A increased by $3.5 million, including incentive bonus accruals, marketing expenses, and store payroll and related benefits.
- The Company continues to have a full, non-cash deferred tax asset valuation allowance.
What to watch
- Whether total comparable net sales can sustain the 14.6% increase reported for fiscal August ended August 29, 2026 through the fiscal 2026 third quarter.
- Delivery against third-quarter net sales guidance of approximately $150 million to $155 million and the estimated comparable net sales increase of 10% to 14%.
- Whether product margins are slightly improved versus last year's third quarter, as guided.
- Third-quarter SG&A expense performance against the approximately $47 million to $49 million outlook.
- Delivery of third-quarter net income guidance of approximately $2.2 million to $3.7 million and diluted EPS guidance of $0.07 to $0.12.
- Third-quarter liquidity relative to the expectation of approximately $125 million or more.
Balance sheet and cash flow
- Total available liquidity was $125.5 million as of August 1, 2026, comprised of $62.2 million of cash, cash equivalents, and marketable securities and $63.3 million of available, undrawn borrowing capacity under its asset-backed credit facility.
- Cash and cash equivalents were $52,334 (In thousands) as of August 1, 2026, compared with $46,313 (In thousands) as of January 31, 2026 and $50,680 (In thousands) as of August 2, 2025.
- Marketable securities were $9,863 (In thousands) as of August 1, 2026.
- Merchandise inventories were $80,161 (In thousands) as of August 1, 2026, compared with $81,229 (In thousands) as of August 2, 2025.
- Net cash provided by operating activities was $18,492 (In thousands) for the twenty-six weeks ended August 1, 2026, compared with $5,850 (In thousands) in the prior-year period.
- Net cash used in investing activities was $(12,588) (In thousands), including purchases of marketable securities of $(14,755) (In thousands) and purchases of property and equipment of $(2,833) (In thousands).
- Cash and cash equivalents increased by $6,021 (In thousands) during the twenty-six weeks ended August 1, 2026.
Analysis
Tilly's reported a stronger second quarter, with net sales of $163.5 million, up 8.1%, and total comparable net sales up 12.1%. The comparable-sales result extended the Company's streak to four consecutive quarters of year-over-year comparable net sales growth. E-commerce was the principal mix contributor, growing 20.9% to $34.5 million and rising to 21.1% of sales from 18.9%, while physical-store sales rose 5.1% despite a 12-store reduction in the store base from the prior-year quarter.
Profitability improved materially. Gross profit was $58.1 million and gross margin was 35.5% of net sales, compared with $49.1 million and 32.5% last year. Product margins improved by 140 basis points, and buying, distribution, and occupancy costs improved by 160 basis points as higher sales absorbed these costs. SG&A increased to $49.9 million, but declined to 30.5% of net sales from 30.7%, resulting in operating income of $8.2 million, or 5.0% of sales, versus $2.7 million, or 1.8%, a year earlier.
GAAP net income was $8.4 million, or $0.27 per diluted share, compared with $3.2 million, or $0.10 per diluted share, in the prior-year quarter. The first half also returned to profitability, producing net income of $0.4 million, or $0.01 per diluted share, after a net loss of $(19.0) million, or $(0.63) per share, last year. First-half gross margin expanded by 550 basis points to 32.7%, supported by improved full-price selling, more current inventory aging, improved pricing on aged clearance inventory, and leverage of buying, distribution, and occupancy costs.
Liquidity was $125.5 million at August 1, 2026, including $62.2 million of cash, cash equivalents, and marketable securities and $63.3 million of undrawn asset-backed credit-facility capacity. Merchandise inventories decreased by 1.3% from the end of the second quarter last year. First-half operating cash flow was $18.5 million, while property-and-equipment purchases were $2.8 million. The filing did not report dividends or share repurchases.
The third-quarter outlook anticipates net sales of approximately $150 million to $155 million, an estimated comparable-sales increase of 10% to 14%, slightly improved product margins, and net income of approximately $2.2 million to $3.7 million. Fiscal August comparable net sales increased 14.6%, marking the 13th consecutive month of comparable-sales growth. The outlook also calls for approximately $47 million to $49 million of SG&A expense, $0.07 to $0.12 of diluted EPS, 220 stores at quarter end, and total liquidity of approximately $125 million or more.
Management, verbatim
We maintained our positive operating momentum throughout the second quarter and the important back-to-school season. We have now produced four consecutive quarters of year-over-year comparable net sales growth and, inclusive of fiscal August to start the third quarter, thirteen consecutive months of year-over-year comparable net sales growth. We also delivered our fifth consecutive quarter of year-over-year profit improvement in the second quarter.
Nate Smith, President and Chief Executive Officer
We are now profitable on a trailing four quarters basis and on a year-to-date basis for fiscal 2026. Based on our year-to-date performance and assuming our positive momentum continues, we believe we are well positioned to produce our first profitable fiscal year since 2022.
Nate Smith, President and Chief Executive Officer
Not in the filing
stated, not guessed- Previous-period outlook was not provided, so no comparison of actual results with prior guidance is available.
- Non-GAAP financial measures, including non-GAAP EPS, non-GAAP operating income, and adjusted EBITDA, were not reported.
- Quarterly operating cash flow was not reported.
- Free cash flow was not reported.
- Debt outstanding was not reported.
- Share repurchases and dividends were not reported.
- Quarter-over-quarter comparisons for second-quarter operating results were not reported.
- Third-quarter gross-margin guidance was not reported. The Company guided only that product margins would be slightly improved compared to last year's third quarter.
AlphAI analysis generated from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure was cross-checked against the filing text; consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.