Tillys has price target chopped at Roth

Roth Capital Markets analyst Matt Koranda maintained a “Neutral” rating on Tillys (Tillys Stock Quote, Chart, News, Analysts, Financials NYSE:TLYS) and lowered his 12-month price target to $1.30 in a June 9 earnings note, citing mixed first-quarter results and ongoing uncertainty around the company’s return to profitability despite some encouraging trends in comps and cash flow.

Koranda said Tillys delivered mixed Q1 results, with sales and gross margin in line but earnings slightly below due to higher operating costs. Recent comp trends were choppy but showed signs of improvement, with a 1.5% gain in April and a 2.2% drop in May. The Q2 outlook assumes flat to a 5% decline in comps and hinges on back-to-school demand. Koranda maintained a Neutral rating and lowered the price target to $1.30, noting progress on cost control and signs of a path back to profitability.

Tillys is a youth-focused retailer of apparel, footwear, and accessories, selling both third-party and in-house brands. It operates 241 stores across 33 states, as well as an e-commerce platform. Founded in 1982, it went public in 2012.

“In our view, the two most encouraging items from 1FQ results were the improving sequential comp trend in 4FQA/1FQA/2FQE of -8.0%/-7.0%/-2.5% and the expectation of positive FCF in 2FQ,” Koranda said. “Margins implied in the 2FQ outlook are also encouraging and suggest some stabilization despite the still-negative comp expectation. Working capital efficiency also appears to be improving, with inventory metrics showing some signs of improvement (EOP inventory per store -1% YoY after multiple quarters of double-digit increases), with more apparently coming in 2FQ, given cash balance guidance. We think Tilly’s could attract more deep-value and turnaround-oriented investors if it can sustain the improving comp trend while showing profit margin and B/S improvements. We’re encouraged, but look for more sustained improvement in demand trends and profitability before coming off the sidelines.”

Koranda expects Tillys to post an Adjusted EBITDA loss of $34.1-million on $550.3-million in revenue for fiscal 2025, down from prior estimates of a $33.1-million loss on $555.6-million. For fiscal 2026, he sees a reduced loss of $29.9-million on $553.9-million in revenue, also below earlier forecasts of a $23.1-million loss on $575.2-million.

Koranda said Tillys operates in a highly competitive retail space and faces pressure from a wide range of rivals, including mall-based chains, department stores, and online sellers.

“Increased competition within the space could lead to higher marketing expenses and the loss of or inability to capture market share,” he said, adding that success also hinges on the company’s ability to anticipate consumer trends and maintain stable store operations, especially during key shopping seasons.

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