Q2 2026 Tillys Inc Earnings Call Transcript
Key Points
- Tilly's Inc (TLYS) delivered its third consecutive quarter of double-digit comparable net sales growth, with a 12.1% increase in Q2 and a 14.6% increase in fiscal August, marking 13 consecutive months of growth.
- The company achieved its fifth consecutive quarter of year-over-year profit improvement, returning to profitability on both a trailing four-quarter and year-to-date basis for the first time since fiscal 2022.
- Product margins improved by 140 basis points in Q2, driven by stronger full-price selling, more current inventory aging, and the positive impact of AI price optimization on clearance items.
- E-commerce net sales grew by 20.9% in Q2, supported by a near doubling of TikTok followers to over 325,000 and a 20% increase in active loyalty program membership to 4.6 million.
- The company maintains a debt-free balance sheet with $62.2 million in cash and investments, and no borrowings, providing strong liquidity of approximately $125 million expected at the end of Q3.
- Tilly's Inc (TLYS) is investing in future growth with plans to launch an AI-driven smart inventory allocation tool and implement RFID in stores by early 2027, while tentatively targeting five to eight new store openings in fiscal 2027.
- Footwear was the only department that did not post a double-digit comp sales gain in Q2, indicating a specific weakness in that category.
- The company's Q3 guidance accounts for a potential deceleration in comp sales after back-to-school, as three of the last four years saw September comps slow by about eight points relative to August.
- SG&A expenses increased by $3.5 million in Q2, driven by $1.5 million in bonus accruals and $0.8 million in higher marketing expenses, which could pressure margins if sales growth slows.
- Total net sales from physical stores increased only 5.1% in Q2, despite a 12.1% total comp increase, due to operating 12 fewer stores year-over-year, reflecting a reduced physical footprint.
- The company expects to end fiscal 2026 with 218 total stores, a net decrease from the prior year, and faces 60 to 65 lease decisions in fiscal 2027, creating potential for further closures.
- Income tax expense remains impacted by a full non-cash deferred tax asset valuation allowance, which could limit future tax benefits despite returning to profitability.
Greetings and welcome to the Tilly second quarter 2026 earnings conference call. (Operator Instructions)
It is now my pleasure to introduce your host, Gar Jackson with Investor Relations. Thank you. You may begin.
Thank you. Good afternoon and welcome to Tilly's fiscal 2026 second quarter earnings call. Nate Smith, President and Chief Executive Officer, and Mike Henry, Executive Vice President and Chief Financial Officer, will discuss the company's business and operating results, followed by a Q&A session with analysts.
For a copy of Tilly's earnings press release, please visit the Investor Relations section of the company's website at tillys.com. From the same section shortly after the conclusion of the call, you will also be able to find a recorded replay of this call for the next 30 days. Certain forward-looking statements will be made during this call that reflect Tilly's judgment and analysis only as of today, September 2, 2026, and actual results may differ materially from current
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