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 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.

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 1, 2026, we operated 220 stores in 32 states, averaging approximately 7,130 square feet per store, compared to 232 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

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.

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 half of fiscal 2026. Our average hourly rate for store payroll in fiscal 2026 was approximately 38% 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 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 2, 2026 Compared to First Quarter (13 Weeks) Ended May 3, 2025

Current wording

Second Quarter (13 Weeks) Ended August 1, 2026 Compared to Second Quarter (13 Weeks) Ended August 2, 2025

Previous 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%.

Current wording

Total net sales were $163.5 million, an increase of 8.1%. Total comparable net sales, including both physical stores and e-com, increased by 12.1%.

Previous 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.

Current wording

•Net sales from physical stores were $129.0 million, an increase of 5.1%. The Company ended the second quarter with 220 total stores, a decrease of 12 stores or 5.2%, compared to 232 total stores at the end of the second quarter last year. Comparable net sales from physical stores increased by 10.3% relative to the comparable 13-week period ended August 2, 2025. Net sales from physical stores represented 78.9% of total net sales this year compared to 81.1% total net sales last year.

Previous 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.

Current wording

•Net sales from e-com were $34.5 million, an increase of 20.9%. E-com net sales represented 21.1% of total net sales this year compared to 18.9% of total net sales last year.

Previous 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.

Current wording

Gross profit was $58.1 million, or 35.5% of net sales, compared to $49.1 million, or 32.5% of net sales, last year. Product margins improved by 1.4% of net sales, primarily due to improved full-price selling associated with operating with inventories that were more current in terms of aging compared to last year. Buying, distribution, and occupancy costs improved by 1.6% of net sales, primarily due to carrying these costs against higher net sales this year. Lower occupancy costs largely associated with our reduced store count were partially offset by higher e-com shipping expenses associated with e-com sales growth.

Previous 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:

Current wording

SG&A expenses were $49.9 million, or 30.5% of net sales, compared to $46.4 million, or 30.7% 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 $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.

Current wording

Operating income was $8.2 million, or 5.0% of net sales, compared to $2.7 million, or 1.8% of net sales, last year primarily as a result of the combination of the factors noted above.

Previous 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.

Current wording

Income tax expense was $0.1 million, or 1.0% of pre-tax income, compared to an income tax benefit of $41 thousand, or (1.3%) of pre-tax income, 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 $8.0 million, or $0.26 net loss per share, compared to $22.2 million, or $0.74 net loss per share, last year.

Current wording

Net income was $0.4 million, or $0.01 per diluted share, compared to net loss of $(19.0) million, or ($0.63) net loss per share, last year.

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 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.

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 we are unable to continue to produce comparable net sales growth for an extended period of time, our cash position may be adversely impacted and require borrowing under our credit facility to finance our day to day operations and/or obtain additional equity or debt financing.

Previous 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:

Current wording

Working capital at August 1, 2026, was $22.2 million compared to $25.1 million at January 31, 2026, a decrease of $2.9 million. The primary changes in our working capital during the first half of fiscal 2026 were as follows:

Previous 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):

Current wording

A summary of operating, investing and financing activities for the twenty-six weeks ended August 1, 2026 compared to the twenty-six weeks ended August 2, 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, 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.

Current wording

Operating activities consist primarily of net income (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.

Previous 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.

Current wording

Net cash provided by operating activities was $18.5 million this year compared to $5.9 million last year. The $12.6 million increase in net cash provided by operating activities compared to last year was primarily due to an increase in net income of $19.4 million this year compared to last year, partially offset by 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 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.

Current wording

Net cash used in investing activities was $12.6 million this year compared to net cash provided by of $23.8 million last year. Net cash used in investing activities in the first half of fiscal 2026 consisted of purchases of marketable securities of $14.8 million, and capital expenditures totaling $2.8 million, partially offset by maturities of marketable securities of $5.0 million.

Previous wording

On April 27, 2023 (the “Closing Date”), we entered into an asset-backed credit agreement and revolving line of credit note (the "Note" and, collectively, the “Credit Agreement”) with Wells Fargo Bank, National Association, as lender (the “Bank”). The Credit Agreement provides for an asset-based, senior secured revolving credit facility (as amended, the “Revolving Facility”) of up to $65.0 million (“Revolving Commitment”) consisting of revolving loans, letters of credit and swing line loans, with a sub-limit on letters of credit outstanding at any time of $10.0 million and a sub-limit for swing line loans of $7.5 million, which replaced our previous senior secured credit agreement. The Credit Agreement also includes an uncommitted accordion feature whereby we may increase the Revolving Commitment by an aggregate amount not to exceed $12.5 million, subject to certain conditions. On March 25, 2025, we entered into an amendment of the Credit Agreement which extended the maturity date to June 25, 2027. The payment and performance in full of the secured obligations under the Revolving Facility are secured by a lien on and security interest in all of our assets.

Current wording

On April 27, 2023 (the “Closing Date”), we entered into an asset-backed credit agreement and revolving line of credit note (the "Note" and, collectively, the “Credit Agreement”) with Wells Fargo Bank, National Association, as lender (the “Bank”). The Credit Agreement provides for an asset-based, senior secured revolving credit facility (as amended, the “Revolving Facility”) of up to $65.0 million (“Revolving Commitment”) consisting of revolving loans, letters of credit and swing line loans, with a sub-limit on letters of credit outstanding at any time of $10.0 million and a sub-limit for swing line loans of $7.5 million, which replaced our previous senior secured credit agreement. The Credit Agreement also includes an uncommitted accordion feature whereby we may increase the Revolving Commitment by an aggregate amount not to exceed $12.5 million, subject to certain conditions. On June 10, 2026, we entered into the second amendment of the Credit Agreement which extended the maturity date to September 10, 2028. The payment and performance in full of the secured obligations under the Revolving Facility are secured by a lien on and security interest in all of our assets.

Previous 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.

Current wording

As of August 1, 2026, we were in compliance with all of our covenants, were eligible to borrow up to a total of $63.3 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.