[Management View]
Key metrics: Total net sales of $107.6 million, a 7.1% YoY decline. Physical store net sales down 7.4%, e-commerce net sales down 5.8%. Comparable net sales decreased 7%, an improvement from an 11.2% decline in Q4 FY2024. Gross margin declined to 19.8% from 21% in Q1 FY2024. Net loss widened to $22.2 million, or $0.74 per share.
Strategic priorities: Focus on active marketing strategies, merchandise adjustments, and customer engagement initiatives. Launch of Tilly's TikTok shop and events featuring celebrity influencers to strengthen customer affinity.

[Outlook]
Performance guidance: Anticipates Q2 FY2025 net sales of $150 million to $158 million, comparable net sales change from down 5% to flat, SG&A of $48 million to $49 million, and net result between a $2.7 million net loss and $2 million net income (GAAP).
Future plans: Plans to operate 232 stores at the end of Q2 FY2025 after seven closures and one opening. Additional closures possible pending lease renewal outcomes. Continued focus on marketing initiatives and merchandise improvements.

[Financial Performance]
YoY/QoQ trends: Total net sales decreased by 7.1% YoY. Physical store net sales down 7.4%, e-commerce net sales down 5.8%. Comparable net sales decreased 7%, an improvement from an 11.2% decline in Q4 FY2024. Gross margin declined to 19.8% from 21% in Q1 FY2024. Net loss widened to $22.2 million, or $0.74 per share, compared to $19.6 million, or $0.65 per share, in Q1 FY2024.

[Q&A Highlights]
Question 1: Hey, guys. Thanks. Maybe just curious about the cadence of the first quarter. If you could unpack it a little bit more, between February, March, April, any discernible trends sort of coinciding with some of the macro volatility that we saw or weather events? And maybe just if you can provide, like, a transaction versus ticket breakdown of the 7% and negative 7% comp and the improvement sequentially that you saw, that'd be helpful.
Answer: Sure, Matt. So through the first quarter, fiscal February was down 5.7%, March was down 13.8%, and then April was plus 1.5%. In terms of transactions, traffic was down low single digits in the first quarter. It remains down low single digits, but slightly better than that in May. The average sale was down low single digits during the first quarter. It's actually up one so far in May. And then total transactions are down 5% to 6%.

Question 2: Okay. That's helpful. Thanks for the breakdown, Mike. And then just for the second quarter guidance, I guess, so zero percent to five percent drop. In the quarter. We've seen a negative 2% trend in May. I guess, we're kinda just at the midpoint of that guidance thus far. Anything to call out from last year in terms of calendar shift in June, July, anything we should be mindful of there? And then maybe just for Hezy, if he's on the call, anything on the assortment that's working? I know you guys called out sort of more comfort with the inventory balance and the assortment and what's working there.
Answer: Go ahead. Sorry. Go ahead. Okay. I was gonna say, your first part of your question on the cadence of Q2, each of the months were down single digits last year. So not expecting any difficulty from comparisons per se. As we go through the quarter. Just as a reminder, the bulk of the sales volume, the quarter is right at the end because we start the beginning of the back-to-school season in the back half of July. So the largest sales weeks of the quarter are actually the last two to three weeks of the quarter. So much of the business of the quarter will be done then. May is typically only about 25% of the second quarter, and I'm looking historically. But a lot of business yet to come kinda there towards the end of July. Going into back-to-school. And I'd point out that each of the last three years, even as we comped negative, the back-to-school season's been our strongest season of performance in each of those years. So that's what gives us some cautious optimism here with starting May about a minus two, and heading into what has been our strongest period of the year each of the last few years. That can lend itself to the possibility to get to flat and heaven forbid, positive, hopefully. We'll see as those come upon us. As the seller is the merchant on a chime into. As far as the merchandise, there's no doubt that it's looking better, it's selling better, and proof is that our traffic is up, now we can say consistently in the last several weeks. So and that's why you're seeing the gap closing between the negative sales. I won't be specific about brands or anything like that, but things are getting better from here. As far as the merchandise.

Question 3: Maybe just last one for me. I guess if we think about I know it's still a fluid situation with tariff impacts and how to kind of think about them for the end of the year. But I would assume just given the inventory balance right now, that there is no impact to the second quarter on the margin front from tariffs. Could you just clarify maybe that? And then also how to just how to think about how we should be reading in the impact for the rest of the year if we were to be in, I guess, like, the current tariff posture that we're in right now.
Answer: Sure, Matt. So really not seeing a material impact over the remainder of the course of the year at this time. And obviously, the tariff discussion has been quite volatile, but at this stage, we'd expect our product margins to be consistent with last year maybe a little better than last year at the better end of our range, maybe slightly worse than last year on the bottom end of our range. And we expect to deliver improved product margins relative to at this stage with what we know about tariffs. So really not seeing a material impact in any period going forward with what we know as of today.

Question 4: Hey, guys. Congrats on the improvement. And in stores, it looks fantastic. We just talk about two things? I'm curious. The in-person events seem to be working for you guys, which is fantastic. Can we talk a little bit about your plans as we move into the prime back-to-school period? And then, also, I'm curious, Hezy, more for you. Especially in May, was the change in sales and traffic are you seeing it is it weather or is it the customer responding to product, you know, especially that first table on the junior side. I'm curious where you're seeing the improvements most.
Answer: I hope I'm not gonna jinx it. It is I'm knocking wood. Yes. Exactly. It's the merchandise and the marketing that brings the people to the stores. Right? So we still have a lot of work to do. But it's more encouraging than we have seen in the last year and a half. I think if you look at the junior side, it's becoming really spot on. The men's role was did a different job on that. As anxious to see the next six months as anybody else. But I'm much more encouraged now than it was a year ago. Alright. So I think And is across the junior spectrum that things are selling? Or is it seasonal product? I'm just curious what it looks like a little bit. Across the board. Excellent. The board.

Question 5: Hello. This is Richard Magneson for Jeff Van Sinderen. Thank you for taking our call. First off, it appears that some activist investors have been acquiring shares lately. So have you been in discussions with any activists, and have they requested board seats?
Answer: No. We haven't been in any discussion with new investors, and nobody asked for a board seat.

Question 6: Okay. Thank you. And then this is regarding the video. What do you expect going forward? Do you see any way you could start leveraging there or any improvement there? It seems like your product margin continues to leverage. I was wondering with Al, if he's on that.
Answer: The dollars are gonna continue to be lower than last year. We've obviously closed a number of stores in the past year. And as I noted, we're continuing to close stores. We've already closed four here. Just closed four in the month of May. We'll have three more this quarter, two more next quarter. With additional stores closing, some of the raw dollars of occupancy will come down. Whether we leverage or not will depend on our ability to get back to flat and then positive comps in terms of any ability to produce some kind of leverage on that bucket of cost.

[Sentiment Analysis]
Tone of analysts/management: Analysts expressed cautious optimism and sought clarity on trends and guidance. Management conveyed confidence in strategic initiatives and merchandise improvements, while acknowledging ongoing challenges.

[Quarterly Comparison]
| Metric | Q1 FY2025 | Q1 FY2024 |
|----------------------------|-----------------|-----------------|
| Total Net Sales | $107.6 million | $115.8 million |
| Physical Store Net Sales | -7.4% | - |
| E-commerce Net Sales | -5.8% | - |
| Comparable Net Sales | -7% | -11.2% |
| Gross Margin | 19.8% | 21% |
| Net Loss | $22.2 million | $19.6 million |
| Net Loss per Share | $0.74 | $0.65 |
| Store Count | 238 | 246 |
| SG&A Expenses | $44 million | $45.1 million |
| Inventory Levels | -3.8% | - |
| Liquidity | $92.6 million | - |

[Risks and Concerns]
- Gross margin decline due to deleverage in buying, distribution, and occupancy costs.
- Net loss widened to $22.2 million.
- Potential impact of tariffs on product costs remains a concern.
- Store closures and ongoing lease negotiations may further reshape the store base.

[Final Takeaway]
Tilly's Q1 FY2025 results showed a sequential improvement in comparable net sales, driven by active marketing strategies and merchandise adjustments. Despite a YoY decline in total net sales and a widened net loss, management remains optimistic about future performance, supported by strategic initiatives such as the TikTok shop launch and celebrity influencer events. The company anticipates further stabilization and potential growth in the upcoming quarters, with a focus on effective cash management and maintaining a debt-free capital position.