Tilly's has gotten torched over the last six months - since February 2025, its stock price has dropped 50.7% to $1.79 per share. This was partly due to its softer quarterly results and might have investors contemplating their next move.
Is there a buying opportunity in Tilly's, or does it present a risk to your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.
Why Do We Think Tilly's Will Underperform?
Even with the cheaper entry price, we don't have much confidence in Tilly's. Here are three reasons we avoid TLYS and a stock we'd rather own.
1. Shrinking Same-Store Sales Indicate Waning Demand
Same-store sales is an industry measure of whether revenue is growing at existing stores, and it is driven by customer visits (often called traffic) and the average spending per customer (ticket).
Tilly’s demand has been shrinking over the last two years as its same-store sales have averaged 7% annual declines.
2. EPS Trending Down
Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.
Sadly for Tilly's, its EPS declined by 25.9% annually over the last six years, more than its revenue. This tells us the company struggled because its fixed cost base made it difficult to adjust to shrinking demand.
3. Short Cash Runway Exposes Shareholders to Potential Dilution
As long-term investors, the risk we care about most is the permanent loss of capital, which can happen when a company goes bankrupt or raises money from a disadvantaged position. This is separate from short-term stock price volatility, something we are much less bothered by.
Tilly's burned through $32.06 million of cash over the last year, and its $226.3 million of debt exceeds the $37.2 million of cash on its balance sheet. This is a deal breaker for us because indebted loss-making companies spell trouble.
Unless the Tilly’s fundamentals change quickly, it might find itself in a position where it must raise capital from investors to continue operating. Whether that would be favorable is unclear because dilution is a headwind for shareholder returns.
We remain cautious of Tilly's until it generates consistent free cash flow or any of its announced financing plans materialize on its balance sheet.
Final Judgment
We see the value of companies helping consumers, but in the case of Tilly's, we’re out. Following the recent decline, the stock trades at $1.79 per share (or a trailing 12-month price-to-sales ratio of 0.1×). The market typically values companies like Tilly's based on their anticipated profits for the next 12 months, but it expects the business to lose money. We also think the upside isn’t great compared to the potential downside here - there are more exciting stocks to buy. We’d suggest looking at a dominant Aerospace business that has perfected its M&A strategy.
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