TILLY'S, INC.

Previous wording

Tillys is a destination specialty retailer of casual apparel, footwear, accessories and hardgoods for young men, young women, boys and girls. We believe we bring together an unparalleled selection of iconic global, emerging, and proprietary brands rooted in an active, outdoor and social lifestyle. The Tillys concept began in 1982, when our co-founders, Hezy Shaked and Tilly Levine, opened our first store in Orange County, California. As of May 3, 2025, we operated 238 stores in 33 states, averaging approximately 7,174 square feet per store, compared to 246 total stores at the same time last year. We also sell our products through our e-commerce ("e-com") website, www.tillys.com.

Current wording

Tillys is a destination specialty retailer of casual apparel, footwear, and accessories for young men, young women, boys and girls. We believe we bring together an unparalleled selection of iconic global, emerging, and proprietary brands rooted in an active, outdoor and social lifestyle. The Tillys concept began in 1982, when our co-founders, Hezy Shaked and Tilly Levine, opened our first store in Orange County, California. As of August 2, 2025, we operated 232 stores in 33 states, averaging approximately 7,143 square feet per store, compared to 247 total stores at the same time last year. We also sell our products through our e-commerce ("e-com") website, www.tillys.com.

Previous wording

We believe the combined impacts of persistent inflation, potential tariffs, and concerns about a potential economic recession in the current economic environment could negatively impact consumer spending generally and our customer base, in particular, which has had and may in the future have a significant, adverse impact on our operating results and financial condition.

Current wording

We believe the combined impacts of persistent inflation, enacted and potential tariffs, and concerns about a potential economic recession in the current economic environment could negatively impact consumer spending generally and our customer base, in particular, which has had and may in the future have a significant, adverse impact on our operating results and financial condition.

Previous wording

Inflation has resulted in increased costs for many products and services that are necessary for the operation of our business, such as product costs, labor costs, shipping costs, and digital marketing costs, among others. For example, store payroll and payroll-related expenses represented approximately 45% of our total selling, general and administrative expense in the first quarter of fiscal 2025. Our average hourly rate for store payroll in fiscal 2025 is estimated to be approximately 35% higher than in pre-pandemic fiscal 2019 and approximately 3% higher than in fiscal 2024. These and other cost increases may continue to have a material adverse impact on our results of operations and financial condition in fiscal 2025, particularly if we are unable to generate net sales growth.

Current wording

Inflation has resulted in increased costs for many products and services that are necessary for the operation of our business, such as product costs, labor costs, shipping costs, and digital marketing costs, among others. For example, store payroll and payroll-related expenses represented approximately 47% of our total selling, general and administrative expense in the first half of fiscal 2025. Our average hourly rate for store payroll in fiscal 2025 is estimated to be approximately 36% higher than in pre-pandemic fiscal 2019 and approximately 3% higher than in fiscal 2024. These and other cost increases may continue to have a material adverse impact on our results of operations and financial condition in fiscal 2025, particularly if we are unable to generate net sales growth.

Previous wording

We currently expect to close 12 stores during fiscal 2025, seven of which have already closed through May 2025, three additional closures are expected to occur in the second quarter, and two are expected to occur in the third quarter. The number of store closures during fiscal 2025 may increase by up to as many as 15 additional stores by the end of the fiscal year depending on the outcome of lease renewal negotiations with landlords.

Current wording

We currently expect to close 16 stores during fiscal 2025, 11 of which have already closed through August 2025, three additional closures are expected to occur in the third quarter, and two are expected to occur in the fourth quarter. The number of store closures during fiscal 2025 may increase to some extent by the end of the fiscal year depending on the outcome of lease renewal negotiations with landlords.

Previous wording

In assessing the performance of our business, we consider a variety of performance and financial measures. The key indicators of the financial condition and operating performance of our business are net sales, comparable store sales, gross profit, selling, general and administrative ("SG&A") expenses and operating loss.

Current wording

In assessing the performance of our business, we consider a variety of performance and financial measures. The key indicators of the financial condition and operating performance of our business are net sales, comparable store sales, gross profit, selling, general and administrative ("SG&A") expenses and operating income (loss).

Previous wording

Operating loss equals gross profit less SG&A expenses. Operating loss excludes interest income, interest expense and income taxes. Operating loss percentage measures operating loss as a percentage of our net sales.

Current wording

Operating income (loss) equals gross profit less SG&A expenses. Operating income (loss) excludes interest income, interest expense and income taxes. Operating income (loss) percentage measures operating income (loss) as a percentage of our net sales.

Previous wording

First Quarter (13 Weeks) Ended May 3, 2025 Compared to First Quarter (13 Weeks) Ended May 4, 2024

Current wording

Second Quarter (13 Weeks) Ended August 2, 2025 Compared to Second Quarter (13 Weeks) Ended August 3, 2024

Previous wording

Total net sales were $107.6 million, a decrease of 7.1%. Total comparable net sales, including both physical stores and e-com, decreased by 7.0% relative to the comparable 13-week period ended May 4, 2024.

Current wording

Total net sales were $151.3 million, a decrease of 7.1%. Total comparable net sales, including both physical stores and e-com, decreased by 4.5% relative to the comparable 13-week period ended August 3, 2024.

Previous wording

•Net sales from physical stores were $85.9 million, a decrease of 7.4%. Comparable store net sales decreased 7.1% relative to the comparable 13-week period ended May 4, 2024. Net sales from physical stores represented 79.8% of total net sales this year compared to 80.1% total net sales last year. We ended the first quarter with 238 total stores compared to 246 total stores at the end of the first quarter last year.

Current wording

•Net sales from physical stores were $122.7 million, a decrease of 7.3%. We ended the second quarter with 232 total stores, a decrease of 15 stores or 6.1%, compared to 247 total stores at the end of the second quarter last year. Comparable store net sales decreased 4.1% relative to the comparable 13-week period ended August 3, 2024. Net sales from physical stores represented 81.1% of total net sales this year compared to 81.3% total net sales last year.

Previous wording

•E-com net sales were $21.7 million, a decrease of 5.8%. E-com net sales decreased 6.6% relative to the comparable 13-week period ended May 4, 2024. E-com net sales represented 20.2% of total net sales this year compared to 19.9% of total net sales last year.

Current wording

•Net sales from e-com were $28.5 million, a decrease of 6.6%. E-com net sales decreased 6.2% relative to the comparable 13-week period ended August 3, 2024. E-com net sales represented 18.9% of total net sales this year compared to 18.7% of total net sales last year.

Previous wording

SG&A expenses were $44.0 million, or 40.9% of net sales, compared to $45.1 million, or 38.9% of net sales, last year. Primary SG&A variances, both in terms of percentage of net sales and total dollars, were as follows:

Current wording

SG&A expenses were $46.4 million, or 30.7% of net sales, compared to $50.8 million, or 31.2% of net sales, last year. Primary SG&A variances, both in terms of percentage of net sales and total dollars, were as follows:

Previous wording

Gross profit was $21.3 million, or 19.8% of net sales, compared to $24.3 million, or 21.0% of net sales, last year. Product margins improved by 40 basis points primarily due to improved initial markups, partially offset by increased inventory valuation reserves. Buying, distribution, and occupancy costs deleveraged by 160 basis points collectively, despite being $0.8 million lower than last year, primarily due to carrying these costs against a lower level of net sales this year.

Current wording

Gross profit was $70.4 million, or 27.2% of net sales, compared to $74.2 million, or 26.6% of net sales, last year. Product margins improved by 140 basis points primarily due to higher initial markups and lower markdowns as a result of operating with reduced, more current inventory. Buying, distribution, and occupancy costs deleveraged by 80 basis points collectively, despite being $3.2 million lower than last year, due to carrying these costs against a lower level of net sales this year. Occupancy costs decreased by $2.7 million, primarily due to operating 15 fewer net stores compared to last year.

Previous wording

Operating loss was $22.7 million, or 21.1% of net sales, compared to $20.8 million, or 17.9% of net sales, last year primarily as a result of the combination of the factors noted above.

Current wording

Operating loss was $20.0 million, or 7.7% of net sales, compared to $21.6 million, or 7.8% of net sales, last year primarily as a result of the combination of the factors noted above.

Previous wording

Income tax benefit was $0.1 million, or 0.6% of pre-tax loss, compared to $13 thousand, or 0.1% of pre-tax loss, last year. Both period's income tax results include the continuing impact of a full, non-cash deferred tax asset valuation allowance. The income tax benefit for the first quarter of fiscal 2025 also includes the refund of certain income tax credit carry forwards and state income tax carry back claims.

Current wording

Income tax benefit was $0.2 million, or 0.9% of pre-tax loss, compared to $17 thousand, or 0.1% of pre-tax loss, last year. Both years' income tax results include the continuing impact of a full, non-cash deferred tax asset valuation allowance. This year's income tax benefit also includes the refund of certain income tax credit carryforwards and state income tax carryback claims.

Previous wording

Net loss was $22.2 million, or $0.74 net loss per share, compared to $19.6 million, or $0.65 net loss per share, last year.

Current wording

Net loss was $19.0 million, or $0.63 net loss per share, compared to $19.7 million, or $0.66 net loss per share, last year.

Previous wording

Our business relies on cash flows from operating activities as well as cash on hand as our primary sources of liquidity. We currently expect to finance company operations, new store openings and remodels, and all of our planned capital expenditures with existing cash on hand, marketable securities and cash flows from operations.

Current wording

Our business typically relies on cash flows from operating activities as well as cash on hand, cash equivalents and marketable securities as our primary sources of liquidity. We currently expect to finance our operations and all planned capital expenditures with existing cash on hand, cash flows from operations and, if necessary, available borrowing capacity under our asset-backed credit facility. We do not anticipate needing to borrow under our credit facility at any time during fiscal 2025.

Previous wording

Working capital at May 3, 2025, was $10.5 million compared to $31.6 million at February 1, 2025, a decrease of $21.1 million. The primary changes in our working capital during the first quarter of fiscal 2025 were as follows:

Current wording

Working capital at August 2, 2025, was $17.9 million compared to $31.6 million at February 1, 2025, a decrease of $13.7 million. The primary changes in our working capital during the first half of fiscal 2025 were as follows:

Previous wording

A summary of operating, investing and financing activities for the thirteen weeks ended May 3, 2025 compared to the thirteen weeks ended May 4, 2024 is shown in the following table (in thousands):

Current wording

A summary of operating, investing and financing activities for the twenty-six weeks ended August 2, 2025 compared to the twenty-six weeks ended August 3, 2024 is shown in the following table (in thousands):

Previous wording

Net Cash Provided by (Used in) Investing Activities

Current wording

Net Cash Provided By (Used in) Operating Activities

Previous wording

Net cash used in operating activities was $8.1 million this year compared to $25.7 million last year. The $17.6 million decrease in net cash used in operating activities compared to last year was primarily due to a decrease in merchandise inventory balances and an increase in related accounts payable as a result of efficient management of merchandise inventories and timing of payments, respectively.

Current wording

Net cash provided by operating activities was $5.9 million this year compared to net cash used of $15.2 million last year. The $21.1 million decrease in net cash used in operating activities compared to last year was primarily due to a decrease in merchandise inventory balances and an increase in related accounts payable as a result of efficient management of merchandise inventories and timing of payments, respectively.

Previous wording

Net cash provided by investing activities was $14.3 million this year compared to net cash used of $1.6 million last year. Net cash provided by investing activities in the first quarter of fiscal 2025 consisted of maturities of marketable securities of $15.8 million, partially offset by capital expenditures totaling $1.5 million. Net cash used in investing activities in the first quarter of fiscal 2024 consisted of purchases of marketable securities of $29.5 million and capital expenditures totaling $2.1 million, partially offset by maturities of marketable securities of $30.0 million.

Current wording

Net cash provided by investing activities was $23.8 million this year compared to $4.6 million last year. Net cash provided by investing activities in the first half of fiscal 2025 consisted of maturities of marketable securities of $25.8 million, partially offset by capital expenditures totaling $2.1 million. Net cash provided by investing activities in the first half of fiscal 2024 consisted of maturities of marketable securities of $48.5 million, partially offset by purchases of marketable securities of $39.3 million and capital expenditures totaling $4.6 million.

Previous wording

As of May 3, 2025, we were in compliance with all of our covenants, were eligible to borrow up to a total of $55.4 million and had no outstanding borrowings under the Credit Agreement. The only utilization of the letters of credit sub-limit under the Credit Agreement was a $2.0 million irrevocable standby letter of credit.

Current wording

As of August 2, 2025, we were in compliance with all of our covenants, were eligible to borrow up to a total of $63.0 million and had no outstanding borrowings under the Credit Agreement. The only utilization of the letters of credit sub-limit under the Credit Agreement was a $2.0 million irrevocable standby letter of credit.