TILLYS INC

Shareholders and Board of Directors

Irvine, California

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Tilly’s, Inc. (the “Company”) as of February 3, 2024 and January 28, 2023, the related consolidated statements of operations, comprehensive (loss) income, stockholders’ equity, and cash flows for each of the three years in the period ended February 3, 2024, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at February 3, 2024 and January 28, 2023, and the results of its operations and its cash flows for each of the three years in the period ended February 3, 2024, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's internal control over financial reporting as of February 3, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated April 11, 2024 expressed an unqualified opinion thereon.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Realizability of Deferred Tax Assets

As indicated in Note 14 to the Company’s consolidated financial statements, the Company has recorded gross deferred tax assets and gross deferred tax liabilities of $74.6 million and $59.2 million, respectively, as of February 3, 2024. The Company has recorded a valuation allowance on the entire balance of $15.4 million of net deferred income tax assets. In evaluating the realizability of deferred tax assets, the Company considers whether it is more-likely-than-not that the deferred tax assets will be realized.

We identified the Company’s evaluation of the realizability of deferred tax assets as a critical audit matter. Significant management judgments were required in evaluating and weighing the collective positive and negative evidence that were used to assess the realizability of deferred tax assets which included estimating future sources of taxable income. Auditing these elements involved subjective and complex auditor judgment due to the nature of audit evidence and extent of audit effort required to address these matters, including the use of personnel with specialized knowledge and skill.

The primary procedures we performed to address this critical audit matter included:

•Testing the design and operating effectiveness of internal controls related to management’s assessment of the realizability of deferred tax assets.

•Utilizing personnel with specialized knowledge and skill in accounting for income taxes to assist in the evaluation of the Company’s assessment of positive and negative evidence, and whether the estimated future sources of taxable income were sufficient to utilize the deferred tax assets in the relevant time period.

Impairment of Long-Lived Assets Related to Individual Stores

As indicated in Notes 2, 6, 9 and 11 to the Company’s consolidated financial statements, the Company’s long-lived assets consist of property and equipment, net, and operating lease right-of-use (ROU) assets with carrying values of $48.1 million and $203.8 million, respectively, as of February 3, 2024. The Company records impairment of long-lived assets used in operations whenever events or changes in circumstances indicate that the net carrying amounts of long-lived assets may not be recoverable. For the year ended February 3, 2024, the Company recorded an impairment charge of $3.4 million to write-down the carrying value of certain long-lived assets related to individual stores to their estimated fair values.

The Company’s evaluation of long-lived assets for impairment involves estimating the undiscounted future cash flows and fair value of long-lived assets. The calculation of the undiscounted future cash flows for individual stores requires management to make significant estimates and assumptions related to the forecasted revenue growth rates. The calculation of the fair value of long-lived assets for individual stores requires management to make significant estimates and assumptions related to the forecasted revenue growth rates, discount rates, and comparable market rents.

We identified the long-lived asset impairment assessment related to individual stores as a critical audit matter due to significant management judgment involved in the determination of the: (i) forecasted revenue growth rates, (ii) discount rates, and (iii) comparable market rents. Auditing these elements involved especially challenging auditor judgment due to the nature of audit evidence and extent of audit effort required, including the use of personnel with specialized knowledge and skill.

The primary procedures we performed to address this critical audit matter included:

•Testing the design and operating effectiveness of internal controls related to: (i) management’s forecasted revenue growth rates used in the calculation of the undiscounted future cash flows and fair value of long-lived assets for individual stores, (ii) review of the discount rates used in the calculation of the fair value of long-lived assets for individual stores, and (iii) the determination of the comparable market rents used in the calculation of the fair value of operating lease ROU assets for individual stores.

•Evaluating the reasonableness of management’s forecasted revenue growth rates by: (a) comparing current performance to historical results and prior period projections, and (b) comparing forecasted revenue growth rates to external market and industry data.

•Utilizing personnel with specialized knowledge and skill to assist in evaluating the reasonableness of: (i) discount rates used in the calculation of the fair value of long-lived assets for individual stores and (ii) comparable market rents used in the calculation of the fair value of operating lease ROU assets for individual stores.

/s/BDO USA, P.C.

We have served as the Company's auditor since 2015.

Costa Mesa, California

April 11, 2024