Good day. And welcome to Tilly's First Quarter 2025 Earnings Conference Call. All participants will be in listen-only mode. By pressing the star key followed by zero. Please note this event is being recorded. I would now like to turn the conference over to Gar Jackson, Investor Relations. Please go ahead.

Good afternoon, and welcome to the Tilly's fiscal 2025 first quarter earnings call. Michael Henry, Executive Vice President and Chief Financial Officer will discuss the company's business and operating results. Then he and Hezy Shaked, co-founder, executive chairman, president, and chief executive officer will host a Q&A session. For a copy of Tilly's earnings press release, please visit the Investor Relations section of the company's website at tillys.com. From this section, shortly after the conclusion of the call, you will also be able to find a recorded replay of this call for the next thirty days. Certain forward-looking statements will be made during this call that reflect Tilly's judgment analysis as of today, June 4, 2025, and actual results may differ materially from current expectations based on various factors affecting Tilly's business. Accordingly, you should not place undue reliance on these forward-looking statements. For a more thorough discussion of the risks and uncertainties associated with any forward-looking statements, please see the disclaimer regarding forward-looking statements that is included in our fiscal 2025 first quarter earnings release which is furnished to the SEC today on Form 8-K as well as our other filings with the SEC referenced in that disclaimer. Today's call will be limited to one hour and will include a Q&A session after our prepared remarks. And I'll turn the call over to Mike.

Thanks, Gar, and to all joining us today. Our fiscal 2025 first quarter net sales were within our outlook range provided during our March earnings call. Our first quarter comparable net sales decreased 7%, which was a sequential improvement from our 11.2% comparable net sales decrease in the fourth quarter of fiscal 2024. The comparable net sales trend of our business has continued to improve in fiscal May, starting the second quarter, with a decrease of just 2.2%. Consequently, we believe our merchandise assortment is on trend and moving us in the right direction. And we are encouraged to see signs of potential stabilization in our business. As we look ahead in fiscal 2025, the potential impact of tariffs on product costs remains a concern, yet the currently known impacts on our product costs appear to be relatively minor. We have worked closely with all of our proprietary branded partners to attempt to mitigate as much tariff impact as is reasonably possible. While tariffs have generally become less burdensome in recent weeks, we all realize this could change given the evolving nature of the tariff situation. Despite external uncertainties, we are actively pursuing opportunities to build mind share with current and prospective customers and we've had a busy last couple of months on the marketing front. Which we believe has contributed to some degree the sequential improvement in the comparable net sales trend of our business. In early March, we launched our Tilly's TikTok shop, introducing a new source of Tilly's content with a digital storefront for today's generation of consumers. We hosted a launch party in West Hollywood, attended by various youth culture influencers and celebrities. Our shop has grown to a level that began outperforming our daily order volume through Amazon in mid-April and continues to grow. During…

If at any time your question has been addressed and you would like to withdraw your question, first question comes from Matt Koranda with Roth Capital. Please go ahead.

Hey, guys. Thanks. Maybe just curious about the cadence of the first quarter. If you could unpack it a little bit more, between February, March, April, any discernible trends sort of coinciding with some of the macro volatility that we saw or weather events? And maybe just if you can provide, like, a transaction versus ticket breakdown of the 7% and negative 7% comp and the improvement sequentially that you saw, that'd be helpful.

Sure, Matt. So through the first quarter, fiscal February was down 5.7%, March was down 13.8%, and then April was plus 1.5%. In terms of transactions, traffic was down low single digits in the first quarter. It remains down low single digits, but slightly better than that in May. The average sale was down low single digits during the first quarter. It's actually up one so far in May. And then total transactions are down 5% to 6%.

Okay. That's helpful. Thanks for the breakdown, Mike. And then just for the second quarter guidance, I guess, so zero percent to five percent drop. In the quarter. We've seen a negative 2% trend in May. I guess, we're kinda just at the midpoint of that guidance thus far. Anything to call out from last year in terms of calendar shift in June, July, anything we should be mindful of there? And then maybe just for Hezy, if he's on the call, anything on the assortment that's working? I know you guys called out sort of more comfort with the inventory balance and the assortment and what's working there.

Go ahead. Sorry. Go ahead. Okay. I was gonna say, your first part of your question on the cadence of Q2, each of the months were down single digits last year. So not expecting any difficulty from comparisons per se. As we go through the quarter. Just as a reminder, the bulk of the sales volume, the quarter is right at the end because we start the beginning of the back-to-school season in the back half of July. So the largest sales weeks of the quarter are actually the last two to three weeks of the quarter. So much of the business of the quarter will be done then. May is typically only about 25% of the second quarter, and I'm looking historically. But a lot of business yet to come kinda there towards the end of July. Going into back-to-school. And I'd point out that each of the last three years, even as we comped negative, the back-to-school season's been our strongest season of performance in each of those years. So that's what gives us some cautious optimism here with starting May about a minus two, and heading into what has been our strongest period of the year each of the last few years. That can lend itself to the possibility to get to flat and heaven forbid, positive, hopefully. We'll see as those come upon us.

As the seller is the merchant on a chime into. As far as the merchandise, there's no doubt that it's looking better, it's selling better, and proof is that our traffic is up, now we can say consistently in the last several weeks. So and that's why you're seeing the gap closing between the negative sales. I won't be specific about brands or anything like that, but things are getting better from here. As far as the merchandise.

Maybe just last one for me. I guess if we think about I know it's still a fluid situation with tariff impacts and how to kind of think about them for the end of the year. But I would assume just given the inventory balance right now, that there is no impact to the second quarter on the margin front from tariffs. Could you just clarify maybe that? And then also how to just how to think about how we should be reading in the impact for the rest of the year if we were to be in, I guess, like, the current tariff posture that we're in right now.

Sure, Matt. So really not seeing a material impact over the remainder of the course of the year at this time. And obviously, the tariff discussion has been quite volatile, but at this stage, we'd expect our product margins to be consistent with last year maybe a little better than last year at the better end of our range, maybe slightly worse than last year on the bottom end of our range. And we expect to deliver improved product margins relative to at this stage with what we know about tariffs. So really not seeing a material impact in any period going forward with what we know as of today.

Okay. I appreciate that. I'll leave it there. Thank you.

And your next question comes from Marni Shapiro with The Retail Tracker. Please go ahead.

Hey, guys. Congrats on the improvement. And in stores, it looks fantastic. We just talk about two things? I'm curious. The in-person events seem to be working for you guys, which is fantastic. Can we talk a little bit about your plans as we move into the prime back-to-school period? And then, also, I'm curious, Hezy, more for you. Especially in May, was the change in sales and traffic are you seeing it is it weather or is it the customer responding to product, you know, especially that first table on the junior side. I'm curious where you're seeing the improvements most.

I hope I'm not gonna jinx it. It is I'm knocking wood. Yes. Exactly. It's the merchandise and the marketing that brings the people to the stores. Right? So we still have a lot of work to do. But it's more encouraging than we have seen in the last year and a half. I think if you look at the junior side, it's becoming really spot on. The men's role was did a different job on that. As anxious to see the next six months as anybody else. But I'm much more encouraged now than it was a year ago.

Alright. So I think And is across the junior spectrum that things are selling? Or is it seasonal product? I'm just curious what it looks like a little bit.

Across the board. Excellent. The board.

Fantastic. Thank you.

Again, if you have a question, please press star. Being no further questions, this concludes our question and answer session. I would like to turn the conference back over to Mike. Oh, and it appears we have one final question from Jeff Van Sinderen with B. Riley. Please go ahead.

Hello. This is Richard Magneson for Jeff Van Sinderen. Thank you for taking our call. First off, it appears that some activist investors have been acquiring shares lately. So have you been in discussions with any activists, and have they requested board seats?

No. We haven't been in any discussion with new investors, and nobody asked for a board seat.

Okay. Thank you. And then this is regarding the video. What do you expect going forward? Do you see any way you could start leveraging there or any improvement there? It seems like your product margin continues to leverage. I was wondering with Al, if he's on that.

The dollars are gonna continue to be lower than last year. We've obviously closed a number of stores in the past year. And as I noted, we're continuing to close stores. We've already closed four here. Just closed four in the month of May. We'll have three more this quarter, two more next quarter. With additional stores closing, some of the raw dollars of occupancy will come down. Whether we leverage or not will depend on our ability to get back to flat and then positive comps in terms of any ability to produce some kind of leverage on that bucket of cost.

Alright. Thank you.

This will conclude our question and answer session. I would like to turn the conference back over to Mike for any closing remarks.

Thank you all for joining us on the call today. We look forward to sharing our second quarter results with you in early September. Have a good evening.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.