Related story: Tilly’s Turnaround: Inside the Overhaul Driving Its Recovery
Key Takeaways:
- Tilly’s comparable net sales rose 12.1% in Q2, its third straight quarter of double-digit comp growth.
- Net income hit $8.4 million, the company’s fifth consecutive quarter of profit improvement.
- Tilly’s forecast 10% to 14% comp growth for Q3, building on a 14.6% comp in August.
Tilly’s, Inc. reported second quarter fiscal 2026 results that topped its own outlook, with comparable net sales climbing 12.1% for the 13 weeks ended August 1, its third consecutive quarter of double-digit percentage comp growth.
In early trading Thursday morning, shares of Tilly’s were up more than 13%, trading around $4.31 after closing at $3.81 the prior session.
Tilly’s Q2 Results
Total net sales reached $163.5 million, up 8.1% from a year earlier.
Net sales from physical stores rose 5.1% to $129.0 million, with comparable store sales up 10.3%. The company operated 220 stores at quarter’s end, down from 232 a year ago.
E-commerce net sales grew 20.9% to $34.5 million, representing 21.1% of total net sales compared to 18.9% last year.
The results exceeded the company’s own guidance issued in June, which called for net sales of $154 million to $160 million and comparable net sales growth of 6% to 10%.
Tilly’s had also guided to net income of $3.8 million to $6.0 million and diluted EPS of $0.13 to $0.20, both of which the actual results surpassed.
“The company is once again executed with discipline, delivering our third straight quarter of double-digit comp sales growth in the second quarter, with that momentum holding strong through back-to-school in July and August,” CEO Nate Smith said on the company’s earnings call Wednesday afternoon.
“We have now produced four consecutive quarters and 13 consecutive months of year-over-year comparable net sales growth, including our 12.1% comp sales increase in the recently completed second quarter, and our 14.6% comp sales increase in fiscal August to begin the third quarter,” Smith said.
Merchandising Strength Broad-Based
Mike Henry, Executive Vice President and Chief Financial Officer, said nearly every merchandise department posted double-digit comp gains in the quarter.
“Everything, as we mentioned, almost everything was double-digit positive in the second quarter, and that continued on through August,” Henry said. “All departments but footwear were up double digits. It was broad-based across geographies, so really doing well just about anywhere you look.”
Margins and Expenses Improve
Gross profit, including buying, distribution and occupancy costs, improved 300 basis points to 35.5% of net sales from 32.5% a year ago.
Product margins improved 140 basis points, marking the company’s seventh consecutive quarter of year-over-year product margin gains. Smith tied the improvement directly to the company’s AI price optimization tool, launched in October 2025.
“We are not only seeing stronger full-price sales overall, but we are also seeing significantly improved average unit retails on aged clearance items from the impact of the AI price optimization investment we made last year,” Smith said.
Net income was $8.4 million, or $0.27 per diluted share, up from $3.2 million, or $0.10 per diluted share, a year earlier.
“The collection of these improvements has now returned us to profitability on a trailing four quarters basis, as well as on a year-to-date basis for fiscal ‘26,” Smith said. “These are important milestones cleared in our turnaround story as we work towards producing what we currently believe will be our first profitable fiscal year since 2022.”
Inventory and Balance Sheet
Total inventory decreased 1.3% compared to the end of last year’s second quarter while running more current within 90 days of age.
“Sales were up 8% on inventory down 1% in dollars in Q2, which is a great sign,” Smith said.
Tilly’s ended the quarter with total available liquidity of $125.5 million, comprised of $62.2 million in cash, cash equivalents and marketable securities and $63.3 million in undrawn borrowing capacity under its asset-backed credit facility. The company carried no borrowings during the quarter and remains debt-free.
Third-Quarter Outlook and Early BTS Results
Comparable net sales for fiscal August, the first month of the third quarter, increased 14.6% relative to last year, extending Tilly’s streak to 13 consecutive months of comparable net sales growth.
Henry said the company’s third-quarter outlook accounts for a historical pattern of deceleration once back-to-school ends.
“Three of the last four years, our comp actually decelerated after back-to-school finished,” Henry said. “We did see three out of the last four years that September slowed by about eight comp points relative to August, and that was consistent through ’22, ’23 and ’24. Last year was the exception where September was consistent with August, and then October actually accelerated.”
For the third quarter of fiscal 2026, ending October 31, 2026, Tilly’s forecast net sales of $150 million to $155 million, representing a comparable net sales increase of 10% to 14%, and net income of $2.2 million to $3.7 million.
That compares to a net loss of $1.4 million in last year’s third quarter and would mark a sixth consecutive quarter of year-over-year profit improvement.
Tilly’s guidance calls for 220 stores at the end of the third quarter, down from 230 a year earlier. On the call, Smith laid out a further round of closures planned through the rest of the fiscal year, including one in late September, one in December, and two more at the end of January. He also announced one additional store opening in mid-November, a pipeline he said is expected to bring the total store count down to roughly 218 by fiscal year end.
Looking ahead to fiscal 2027, Smith said the company is tentatively targeting five to eight new store openings, “depending on available opportunities and our ability to achieve appropriate lease economics.”
Wall Street Reaction
The results drew a bullish response from Wall Street. In a note published Thursday, Roth Capital Partners analyst Matt Koranda wrote that the quarter was another proof point that Tilly’s turnaround is progressing, pointing to the sustained double-digit comp, more than 300 basis points of operating margin expansion, and over $20 million in free cash flow generated during the quarter.
Koranda maintained a neutral rating and $5.50 price target on the stock, noting that Roth prefers to wait for a more attractive entry point given the stock’s tendency to give back gains after large upside moves.
Related Reading
Tilly’s Turnaround: Inside the Overhaul Driving Its Recovery
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