Shares of Tilly’s Inc. sunk to 57 cents each in May, the lowest price ever in the company’s 13 years on Wall Street.
The retailer with about 232 stores that caters to teenagers appeared to be in a death spiral as shares had fallen more than 95% in the past three years. Its long-time chief executive had left a year ago; co-founder and Chairman Hezy Shaked couldn’t find a replacement, so the 70-year-old took over as CEO.
Then a strange twist occurred in the past two months—a new investor appeared, and shares have almost tripled to $1.45 and a $43M market cap at press time (NYSE: TLYS).
B. Riley Securities analyst Richard Magneson thinks the Irvine-based company still has life in it, setting a price target of $2.
“We believe that TLYS’ retains potential to drive longer-term annual operating metric improvement, especially in a normalized environment (non-recessionary with more modest inflation), assuming improved strategy and execution thereof,” he wrote in a note to investors.
The turnaround in fortunes appears to validate the strategy of Shaked, who founded the company in 1982 with his then wife, Tilly. The company is well known in Orange County; Chief Financial Officer Michael Henry won a Business Journal CFO of the Year Award in 2021 for public companies. It employs 5,619, including 717 in Orange County.
Executives declined to comment due to the current fiscal second quarter ending soon.
While it’s not highly valued on Wall Street, the company doesn’t appear to have any danger of going belly up. It has no debt and it has $37.2 million in cash and marketable securities, which is almost as much as its market cap.
A Pleasant Lake Investment
Shares of the company, which went public in 2012, reached an all-time high, around $25 each in 2018. In fiscal 2022, sales also reached an all-time high of $776 million.
The retailer started losing its footing in the youth apparel industry when sales fell 13% to $672.3 million for fiscal 2023, which ended Jan. 31 of that year. The stock, which topped $17 in 2022, began a long decline as the company attempted several efforts to restart sales.
Ed Thomas, who had served as CEO since 2015, tried two years of turnaround efforts before retiring at the start of 2024. By this time, shares had fallen in half.
Co-founder and chairman Shaked re-entered as interim CEO and initially planned to step down once a successor was found.
In the following weeks, investment firm Pleasant Lake Partners LLC revealed a 31% stake in Tilly’s. The stake has since grown to 35.8% as of April, and the firm has yet to reveal plans to engage in talks with Tilly’s executives.
By September, Shaked was appointed CEO full-time and told analysts he saw a long road ahead to achieving consistent sales based on recent financials.
“We still have a long way to go to return to generating consistent sales growth and profitability,” Shaked said in December.
In March, Tilly’s reported fourth quarter sales fell 15% to $147.3 million.
“Our fourth quarter results were a disappointment,” Shaked said in that quarterly statement.
Shaked said the company must mark down a lot of inventory “because it was just the wrong direction.”
“We’ve simply been buying too much in recent years,” Shaked told analysts on a conference call. Tilly’s management “worked hard with the teams to realign our inventory plans from a bottoms-up perspective, by product category, and feel confident that we have a good plan in place to have inventory very well managed as we go throughout the year.”
In the subsequent trading session, shares of Tilly’s declined as much as 31% to $2.25.
The decline continued until May.
Seeing the Potential
Shay Capital LLC, a New York-based firm known for high velocity trading, began buying shares in February with almost 2.3 million to start.
Shay Capital manages a portfolio of 309 holdings worth more than $687 million as of March, according to its latest quarterly report. It was founded by Samuel Ginzburg in 2017.
Headquartered in New York, the firm has also invested in OnKure Therapeutics Inc., Citi Trends Inc. and Nevro Corp. in 2025 with stakes ranging from 4% to 6%.
Tilly’s is currently its largest stake by number of shares; Shay Capital’s most valuable holding is PureCycle Technologies Inc. with 2.2 million shares currently worth $35 million, according to Nasdaq.
In May when Tilly’s stock hit its lowest price ever, Shay began buying again. It led to B. Riley analyst Magneson asking Shaked on June 4 if the investor had struck up any conversations.
“We haven’t been in any discussion with new investors, and nobody asked for a board seat,” Shaked responded.
A day later, Shay Capital grabbed even more of the stock, and by June 30, the firm disclosed ownership of 3.2 million shares for a 14% stake.
Betting on Sequential Improvement
Tilly’s on June 4 reported net sales of $108 million for its fiscal first quarter, a 7.2% decrease compared to a year ago. Comparable store sales decreased by 2.2%.
Shaked pointed to “a sequential improvement” compared to the fourth quarter and said he was encouraged by improvements in Tilly’s merchandise assortment. The retailer is also tightening its store footprint with more than 15 potential closures in the works for this year “depending on the outcome of lease renewal negotiations with landlords.”
Tilly’s is forecasting net sales in the range of approximately $150 million to $158 million for the next quarter, landing between a 5% drop and flat sales.
Wall Street liked what it heard, sending the shares up another 12% to $1.46 in the subsequent trading session.
Matt Koranda, managing director and senior research analyst at Roth Capital Partners, agrees that the sequential growth in comparable sales between the fourth quarter and the upcoming second quarter looks promising.
“Margins implied in the 2FQ outlook are also encouraging and suggest some stabilization, despite the still-negative comp expectation,” Koranda said. “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.”
For the current fiscal year, analysts are expecting Tilly’s to generate annual revenue of $551.6 million, a 3.1% decrease from the year before. The two analysts who cover the stock are predicting that sales will start climbing again, forecasting a 3.5% increase to $571 million in fiscal 2027.
“We’re encouraged but look for more sustained improvement in demand trends and profitability before coming off the sidelines,” Koranda added.