TILLY'S, INC.

Previous 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 November 1, 2025, we operated 230 stores in 33 states, averaging approximately 7,140 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 May 2, 2026, we operated 220 stores in 32 states, averaging approximately 7,127 square feet per store, compared to 238 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, 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.

Current wording

We believe the combined impacts of persistent inflation related to prices of essential goods, including but not limited to fuel and grocery prices, enacted and potential tariffs, geo-political conflicts, and potential economic recession in the current economic environment could negatively impact consumer spending generally and our customer base, in particular, which could negatively impact our ability to build upon the turnaround momentum we have been generating in our business in recent quarters.

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 47% of our total selling, general and administrative expense in the first nine months 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 more broadly 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 46% of our total selling, general and administrative expense in the first quarter of fiscal 2026. Our average hourly rate for store payroll in fiscal 2026 was approximately 37% higher than in pre-pandemic fiscal 2019 and approximately 1% higher than in fiscal 2025. These and other cost increases may continue to have a material adverse impact on our results of operations and financial condition in fiscal 2026, particularly if we are unable to sustain net sales growth.

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 income (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 loss.

Previous wording

Third Quarter (13 Weeks) Ended November 1, 2025 Compared to Third Quarter (13 Weeks) Ended November 2, 2024

Current wording

First Quarter (13 Weeks) Ended May 2, 2026 Compared to First Quarter (13 Weeks) Ended May 3, 2025

Previous wording

Total net sales were $139.6 million, a decrease of 2.7%. Total comparable net sales, including both physical stores and e-commerce ("e-com"), increased by 2.0%.

Current wording

Total net sales were $124.7 million, an increase of 15.9%. Total comparable net sales, including both physical stores and e-com, increased by 22.9%.

Previous wording

•Net sales from physical stores were $110.3 million, a decrease of 0.9%. We ended the third quarter with 230 total stores, a decrease of 16 stores or 6.5%, compared to 246 total stores at the end of the third quarter last year. Comparable store net sales increased by 5.3% relative to the comparable 13-week period ended November 2, 2024. Net sales from physical stores represented 79.0% of total net sales this year compared to 77.6% total net sales last year.

Current wording

•Net sales from physical stores were $96.3 million, an increase of 12.1%. The Company ended the first quarter with 220 total stores, a decrease of 18 stores or 7.6%, compared to 238 total stores at the end of the first quarter last year. Comparable net sales from physical stores increased by 20.8% relative to the comparable 13-week period ended May 3, 2025. Net sales from physical stores represented 77.2% of total net sales this year compared to 79.8% total net sales last year.

Previous wording

•Net sales from e-com were $79.5 million, a decrease of 7.3%. This decrease was due in part to a 22.6% reduction in the amount of clearance selling compared to last year. E-com net sales represented 20.0% of total net sales this year compared to 20.3% of total net sales last year.

Current wording

•Net sales from e-com were $28.4 million, an increase of 30.9%. E-com net sales represented 22.8% of total net sales this year compared to 20.2% of total net sales last year.

Previous wording

Gross profit was $42.6 million, or 30.5% of net sales, compared to $37.2 million, or 25.9% of net sales, last year. Product margins improved by 390 basis points primarily due to the combination of higher initial markups and lower markdowns as a result of operating with reduced, more current inventory. Buying, distribution, and occupancy costs improved by 70 basis points and $2.0 million, collectively, primarily due to decreased occupancy costs associated with reduced store count.

Current wording

Gross profit was $36.1 million, or 28.9% of net sales, compared to $21.3 million, or 19.8% of net sales, last year. Product margins improved to 56.6% of net sales from 52.6% of net sales during last year's first quarter, primarily due to improved full-price selling from inventories that were more current in terms of aging compared to last year. Buying, distribution, and occupancy costs improved by 520 basis points as a percentage of net sales, or $0.9 million, collectively, primarily due to decreased occupancy costs associated with reduced store count.

Previous wording

SG&A expenses were $44.5 million, or 31.9% of net sales, compared to $51.3 million, or 35.7% 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 $44.2 million, or 35.4% of net sales, compared to $44.0 million, or 40.9% 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

Operating loss was $1.9 million, or 1.4% of net sales, compared to $14.1 million, or 9.8% of net sales, last year primarily as a result of the combination of the factors noted above.

Current wording

Operating loss was $8.1 million, or 6.5% of net sales, compared to $22.7 million, or 21.1% of net sales, last year primarily as a result of the combination of the factors noted above.

Previous wording

Income tax expense was $25 thousand, or (1.8)% of pre-tax loss, compared to income tax benefit of $5 thousand, or 0.0% of pre-tax loss, last year. Both quarters' income tax results include the continuing impact of a full, non-cash deferred tax asset valuation allowance. This quarter's income tax expense includes state net margin taxes, despite the Company's pre-tax loss position.

Current wording

Income tax expense was $0.1 million, or (1.7%) of pre-tax loss, compared to an income tax benefit of $0.1 million, or 0.6% 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.

Previous wording

Net loss was $1.4 million, or $0.05 per share, compared to $12.9 million, or $0.43 per share, last year.

Current wording

Net loss was $8.0 million, or $0.26 net loss per share, compared to $22.2 million, or $0.74 net loss per share, last year.

Previous 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.

Current 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.

Previous wording

In addition to cash and cash equivalents and marketable securities, the most significant components of our working capital are merchandise inventories, accounts payable and accrued expenses. We believe that cash flows from operating activities, our cash on hand, and credit facility availability will be sufficient to cover our working capital requirements and anticipated capital expenditures for the next 12 months from the filing of this Report. If cash flows from operations are not sufficient or available to meet our capital requirements, then we will be required to obtain additional equity or debt financing in the future. There can be no assurance that equity or debt financing will be available to us when we need it or, if available, that the terms will be satisfactory to us and not dilutive to our stockholders.

Current wording

In addition to cash and cash equivalents and marketable securities, the most significant components of our working capital are merchandise inventories, accounts payable and accrued expenses. We believe that cash flows from operating activities, our cash and marketable securities on hand, and credit facility availability will be sufficient to cover our working capital requirements and anticipated capital expenditures for the next 12 months from the filing of this Report. If cash flows from operations are not sufficient or available to meet our capital requirements, then we will be required to obtain additional equity or debt financing in the future. There can be no assurance that equity or debt financing will be available to us when we need it or, if available, that the terms will be satisfactory to us and not dilutive to our stockholders.

Previous wording

Working capital at November 1, 2025, was $20.7 million compared to $31.6 million at February 1, 2025, a decrease of $10.9 million. The primary changes in our working capital during the first three quarters of fiscal 2025 were as follows:

Current wording

Working capital at May 2, 2026, was $13.5 million compared to $25.1 million at January 31, 2026, a decrease of $11.6 million. The primary changes in our working capital during the first quarter of fiscal 2026 were as follows:

Previous wording

A summary of operating, investing and financing activities for the thirty-nine weeks ended November 1, 2025 compared to the thirty-nine weeks ended November 2, 2024 is shown in the following table (in thousands):

Current wording

A summary of operating, investing and financing activities for the thirteen weeks ended May 2, 2026 compared to the thirteen weeks ended May 3, 2025 is shown in the following table (in thousands):

Previous wording

Operating activities consist primarily of net loss adjusted for non-cash items that include depreciation and amortization, asset impairment charges, gains on maturities of marketable securities and share-based compensation expense, plus the effect on cash of changes during the year in our assets and liabilities.

Current wording

Operating activities consist primarily of net loss adjusted for non-cash items that include depreciation and amortization, asset impairment charges, deferred income taxes, gains on maturities of marketable securities and share-based compensation expense, plus the effect on cash of changes during the year in our assets and liabilities.

Previous wording

Net cash used in operating activities was $4.5 million this year compared to net cash used of $38.2 million last year. The $33.7 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 used in operating activities was $3.9 million this year compared to $8.1 million last year. The $4.2 million decrease in net cash used in operating activities compared to last year was primarily due to a decrease in net loss of $14.2 million this year compared to last year, partially offset by accounts payable balances and a decrease in related merchandise inventories as a result of efficient management of merchandise inventories and timing of payments, respectively.

Previous wording

Net Cash Provided by Investing Activities

Current wording

Net Cash (Used in) Provided By Investing Activities

Previous wording

Net cash provided by investing activities was $22.5 million this year compared to $17.3 million last year. Net cash provided by investing activities in the first three quarters of fiscal 2025 consisted of maturities of marketable securities of $25.8 million, partially offset by capital expenditures totaling $3.4 million. Net cash provided by investing activities in the first three quarters of fiscal 2024 consisted of maturities of marketable securities of $83.5 million, partially offset by purchases of marketable securities of $59.6 million and capital expenditures totaling $6.7 million.

Current wording

Net cash used in investing activities was $11.2 million this year compared to net cash provided by of $14.3 million last year. Net cash used in investing activities in the first quarter of fiscal 2026 consisted of purchases of marketable securities of $9.9 million, and capital expenditures totaling $1.4 million. 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.

Previous wording

As of November 1, 2025, we were in compliance with all of our covenants, were eligible to borrow up to a total of $61.6 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, which was reduced to $1.7 million in November 2025.

Current wording

As of May 2, 2026, we were in compliance with all of our covenants, were eligible to borrow up to a total of $50.7 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 $1.7 million irrevocable standby letter of credit.