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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
__________________________________________________ 
FORM 10-Q 
 __________________________________________________ 
 
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 29, 2023
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 001-35535 
__________________________________________________ 
TILLY’S, INC.
(Exact name of Registrant as specified in its charter) 
__________________________________________________ 
 
Delaware   45-2164791
(State or other jurisdiction of
incorporation or organization)		   (I.R.S. Employer
Identification No.)
10 Whatney
Irvine, CA 92618
(Address of principal executive offices)
(949) 609-5599
(Registrant’s telephone number, including area code)
 __________________________________________________ 

Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Class A Common Stock, $0.001 par value per share TLYS New York Stock Exchange
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒ No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer   ☐
    Accelerated Filer   ☒
Non-accelerated filer   ☐    Smaller reporting company   ☒
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐
Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2)    Yes  ☐    No  ☒
As of June 1, 2023, the registrant had the following shares of common stock outstanding:
Class A common stock $0.001 par value 22,573,461 
Class B common stock $0.001 par value 7,306,108 

TILLY’S, INC.
FORM 10-Q
For the Quarterly Period Ended April 29, 2023
Index
 
    Page
Item 1.
6
6
7
8
9
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2
Item 6.

3
Forward-Looking Statements
This Quarterly Report on Form 10-Q ("this "Report") contains forward-looking statements that are subject to risks and uncertainties. All statements other than statements of historical or current fact included in this Report are forward-looking statements. Forward-looking statements refer to our current expectations and projections relating to our financial condition, results of operations, plans, objectives, strategies, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “anticipate”, “estimate”, “expect”, “project”, “plan”, “intend”, “believe”, “may”, “might”, “will”, “should”, “can have”, “likely” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. For example, all statements we make relating to our estimated and projected earnings, revenues, comparable store sales, operating income, earnings per share, costs, expenditures, cash flows, growth rates and financial results, our plans and objectives for future operations, growth or initiatives, strategies or the expected outcome or impact of pending or threatened litigation are forward-looking statements. All forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that we expected, including:
•the impacts of inflation on consumer spending generally and on our expense management, operating results and financial condition;
•our ability to adapt to declines in consumer confidence and decreases in consumer spending;
•the impact of fluctuations in the price and availability of raw materials, labor, and transportation;
•our ability to generate sufficient cash flows to make significant periodic lease payments for our stores, corporate offices and distribution centers;
•our ability to compete effectively in an environment of intense competition in stores, online and on social media marketing platforms;
•our ability to adapt to downward trends in traffic for our stores and changes in our customers' purchasing patterns;
•our ability to identify and respond to new and changing customer fashion preferences and fashion-related trends;
•our ability to successfully open new stores and profitably operate our existing stores;
•our ability to secure desirable lease arrangements and other economics to support the rate of our planned store growth;
•our ability to attract customers to our e-commerce website and generate acceptable levels of return from our digital marketing efforts and other e-commerce growth initiatives;
•the success of the malls, power centers, neighborhood and lifestyle centers, outlet centers and street-front locations in which our stores are located;
•our ability to adapt to unseasonable weather impacting sales of our seasonal merchandise;
•our dependence on third-party vendors to provide us with sufficient quantities of merchandise at acceptable prices and on time;
•our ability to adapt to significant changes in sales due to the seasonality of our business;
•our dependence upon key executive management or our inability to hire or retain the talent required for our business;
•our ability to establish, maintain and enhance a strong brand image;
•most of our merchandise is made in foreign countries, making price and availability of our merchandise susceptible to international trade conditions;
•our ability to balance proprietary branded merchandise with the third-party branded merchandise we sell;
•our ability to efficiently utilize our e-commerce fulfillment center;
•effectively adapting to new challenges associated with our expansion into new geographic markets;
•our ability to attract customers in the various retail venues and geographies in which our stores are located;
•our ability to adapt to risks associated with climate change;
•our ability to respond to litigation claims we are subject to;
•failure of our vendors and their manufacturing sources to use acceptable labor or other practices;
•our ability to effectively respond to continuing disruptions in our supply chain and distribution center;
•our ability to adjust to increasing costs of mailing catalogs, paper and printing;
•failure of our information technology systems to support our current and growing business, before and after our planned upgrades;
•our ability to secure our data and comply with privacy laws and the security standards for the credit card industry;
•disruptions to our information systems in the ordinary course of business, as a result of systems upgrades or due to intentional attacks;
•our inability to protect our trademarks or other intellectual property rights;
•our potential liability if we or our vendors unknowingly infringe upon the intellectual property rights of third parties;
•natural disasters, unusually adverse weather conditions, port delays, boycotts, epidemics, pandemics, acts of war, terrorism, civil unrest and other unanticipated events;
•the potential effects of unionization and work stoppages or slowdowns by our employees;
•our ability to respond to changes in employment laws;
•our ability to generate adequate cash from our existing stores and e-commerce to support our growth;

4
•continuing costs incurred as a result of being a public company; and
•our responses to climate change, environmental, social and governance initiatives, and sustainability initiatives.
We derive many of our forward-looking statements from our operating budgets and forecasts, which are based upon detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect our actual results.
See “Risk Factors” within our most recent Annual Report on Form 10-K for a more complete discussion of the risks and uncertainties mentioned above and for discussion of other risks and uncertainties. All forward-looking statements attributable to us are expressly qualified in their entirety by these cautionary statements as well as others made in this Report and hereafter in our other SEC filings and public communications. You should evaluate all forward-looking statements made by us in the context of these risks and uncertainties.
We caution you that the risks and uncertainties identified by us may not be all of the factors that are important to you. Furthermore, the disclosures and forward-looking statements included in this Report are made only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

5
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
TILLY’S, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except par value)
(Unaudited)
April 29,
2023		 January 28,
2023		 April 30,
2022
ASSETS
Current assets:
Cash and cash equivalents $ 43,686  $ 73,526  $ 59,954 
Marketable securities 49,695  39,753  50,997 
Receivables 12,973  9,240  8,209 
Merchandise inventories 77,182  62,117  74,112 
Prepaid expenses and other current assets 9,332  17,762  14,769 
Total current assets 192,868  202,398  208,041 
Operating lease assets 216,385  212,845  218,163 
Property and equipment, net 49,438  50,635  46,606 
Deferred tax assets 12,728  8,497  11,594 
Other assets 1,765  1,377  1,253 
TOTAL ASSETS $ 473,184  $ 475,752  $ 485,657 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 24,730  $ 15,956  $ 27,193 
Accrued expenses 14,253  15,889  16,741 
Deferred revenue 14,792  16,103  15,150 
Accrued compensation and benefits 9,056  8,183  8,707 
Current portion of operating lease liabilities 49,567  48,864  51,237 
Current portion of operating lease liabilities, related party 2,908  2,839  2,483 
Other liabilities 446  470  674 
Total current liabilities 115,752  108,304  122,185 
Noncurrent portion of operating lease liabilities 169,791  167,913  174,301 
Noncurrent portion of operating lease liabilities, related party 21,633  22,388  20,364 
Other liabilities 487  349  872 
Total long-term liabilities 191,911  190,650  195,537 
Total liabilities 307,663  298,954  317,722 
Commitments and contingencies (Notes 2 and 5)
Stockholders’ equity:
Common stock (Class A), $0.001 par value; 100,000 shares authorized; 22,573, 22,562 and 22,832 shares issued and outstanding, respectively
 23  23  23 
Common stock (Class B), $0.001 par value; 35,000 shares authorized; 7,306, 7,306 and 7,306 shares issued and outstanding, respectively
 7  7  7 
Preferred stock, $0.001 par value; 10,000 shares authorized; no shares issued or outstanding
 —  —  — 
Additional paid-in capital 170,608  170,033  167,512 
(Accumulated deficit) Retained earnings (5,438) 6,530  391 
Accumulated other comprehensive income 321  205  2 
Total stockholders’ equity 165,521  176,798  167,935 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 473,184  $ 475,752  $ 485,657 
    
The accompanying notes are an integral part of these consolidated financial statements.

6
TILLY’S, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
 
  Thirteen Weeks Ended
  April 29,
2023		 April 30,
2022
Net sales $ 123,637  $ 145,775 
Cost of goods sold (includes buying, distribution, and occupancy costs) 96,768  101,100 
Rent expense, related party 931  860 
Total cost of goods sold (includes buying, distribution, and occupancy costs) 97,699  101,960 
Gross profit 25,938  43,815 
Selling, general and administrative expenses 43,066  42,574 
Rent expense, related party 133  133 
Total selling, general, and administrative expenses 43,199  42,707 
Operating (loss) income (17,261) 1,108 
Other income, net 1,064  4 
(Loss) income before income taxes (16,197) 1,112 
Income tax (benefit) expense (4,229) 299 
Net (loss) income $ (11,968) $ 813 
Basic (loss) earnings per share of Class A and Class B common stock $ (0.40) $ 0.03 
Diluted (loss) earnings per share of Class A and Class B common stock $ (0.40) $ 0.03 
Weighted average basic shares outstanding 29,798  30,762 
Weighted average diluted shares outstanding 29,798  31,046 
The accompanying notes are an integral part of these consolidated financial statements.

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TILLY’S, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(In thousands)
(Unaudited)
 
  Thirteen Weeks Ended
  April 29,
2023		 April 30,
2022
Net (loss) income $ (11,968) $ 813 
Other comprehensive income, net of tax:
Net change in unrealized gain on available-for-sale securities, net of tax 116  3 
Other comprehensive income, net of tax 116  3 
Comprehensive (loss) income $ (11,852) $ 816 
The accompanying notes are an integral part of these consolidated financial statements.

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TILLY’S, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
(In thousands)
(Unaudited)

  Number of Shares          
  Common
Stock
(Class A)		 Common
Stock
(Class B)		 Common
Stock		 Additional
Paid-in
Capital		 (Accumulated Deficit) Retained
Earnings		 Accumulated
Other
Comprehensive
Income		 Total
Stockholders’
Equity
Balance at January 28, 2023 22,562  7,306  $ 30  $ 170,033  $ 6,530  $ 205  $ 176,798 
Net loss —  —  —  —  (11,968) —  (11,968)
Share-based compensation expense —  —  —  522  —  —  522 
Employee stock option exercises 11  —  —  53  —  —  53 
Net change in unrealized gain on available-for-sale securities —  —  —  —  —  116  116 
Balance at April 29, 2023 22,573  7,306  $ 30  $ 170,608  $ (5,438) $ 321  $ 165,521 

  Number of Shares          
  Common
Stock
(Class A)		 Common
Stock
(Class B)		 Common
Stock		 Additional
Paid-in
Capital		 Retained
Earnings		 Accumulated
Other
Comprehensive
Income		 Total
Stockholders’
Equity
Balance at January 29, 2022 23,719  7,306  $ 31  $ 166,929  $ 7,754  $ (1) $ 174,713 
Net income —  —  —  —  813  —  813 
Share-based compensation expense —  —  —  563  —  —  563 
Employee stock option exercises 5  —  20  —  —  20 
Repurchase of common stock (892) —  (1) —  (8,176) —  (8,177)
Net change in unrealized gain on available-for-sale securities —  —  —  —  —  3  3 
Balance at April 30, 2022 22,832  7,306  $ 30  $ 167,512  $ 391  $ 2  $ 167,935 
The accompanying notes are an integral part of these consolidated financial statements.









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TILLY’S, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
  Thirteen Weeks Ended
  April 29,
2023		 April 30,
2022
Cash flows from operating activities:
Net (loss) income $ (11,968) $ 813 
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Depreciation and amortization 3,214  3,508 
Share-based compensation expense 522  563 
Impairment of assets 154  13 
Loss on disposal of assets 16  43 
Gain on maturities of marketable securities (295) (26)
Deferred income taxes (4,231) (150)
Changes in operating assets and liabilities:
Receivables (3,683) (356)
Merchandise inventories (15,065) (8,467)
Prepaid expenses and other current assets 8,162  1,667 
Accounts payable 8,765  (955)
Accrued expenses 441  (2,357)
Accrued compensation and benefits 873  (8,349)
Operating lease liabilities (1,616) (1,361)
Deferred revenue (1,311) (1,946)
Other liabilities (173) (193)
Net cash used in operating activities (16,195) (17,553)
Cash flows from investing activities:
Proceeds from maturities of marketable securities 15,081  51,028 
Purchases of marketable securities (24,524) (4,967)
Purchases of property and equipment (4,255) (2,598)
Net cash (used in) provided by investing activities (13,698) 43,463 
Cash flows from financing activities:
Share repurchases —  (8,177)
Proceeds from exercise of stock options 53  20 
Net cash provided by (used in) financing activities 53  (8,157)
Change in cash and cash equivalents (29,840) 17,753 
Cash and cash equivalents, beginning of period 73,526  42,201 
Cash and cash equivalents, end of period $ 43,686  $ 59,954 
Supplemental disclosures of cash flow information:
Income taxes refunded $ —  $ (58)
Supplemental disclosure of non-cash activities:
Unpaid purchases of property and equipment $ 1,224  $ 1,108 
Operating lease liabilities arising from obtaining operating lease assets $ 15,327  $ 14,818 

The accompanying notes are an integral part of these consolidated financial statements.

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TILLY’S, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1: Description of the Company and Basis of Presentation
Tillys is a leading destination specialty retailer of casual apparel, footwear, accessories and hardgoods for young men, young women, boys and girls with an extensive assortment of iconic global, emerging, and proprietary brands rooted in an active and social lifestyle. Tillys is headquartered in Irvine, California and operated 248 stores, in 33 states as of April 29, 2023. Our stores are located in malls, lifestyle centers, ‘power’ centers, community centers, outlet centers and street-front locations. Customers may also shop online, where we feature the same assortment of products as carried in our brick-and-mortar stores, supplemented by additional online-only styles. Our goal is to serve as a destination for the latest, most relevant merchandise and brands important to our customers.
The Tillys concept began in 1982, when our co-founders, Hezy Shaked and Tilly Levine, opened their first store in Orange County, California. Since 1984, the business has been conducted through World of Jeans & Tops, a California corporation, or “WOJT”, which operates under the name “Tillys”. In May 2011, Tilly’s, Inc., a Delaware corporation, was formed solely for the purpose of reorganizing the corporate structure of WOJT in preparation for an initial public offering. As part of the initial public offering in May 2012, WOJT became a wholly owned subsidiary of Tilly's, Inc.
The consolidated financial statements include the accounts of Tilly's, Inc. and WOJT. All intercompany accounts and transactions have been eliminated in consolidation.
As used in these Notes to the Consolidated Financial Statements, except where the context otherwise requires or where otherwise indicated, the terms "the Company", "we", "our", "us" and "Tillys" refer to Tilly's, Inc. and its subsidiary, WOJT.
We have prepared the accompanying unaudited consolidated financial statements in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial reporting. These unaudited consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"). Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted from this Quarterly Report on Form 10-Q as is permitted by SEC rules and regulations.
In the opinion of management, the accompanying unaudited consolidated financial statements contain all normal and recurring adjustments necessary to present fairly the financial condition, results of operations and cash flows for the interim periods presented. The results of operations for the thirteen week period ended April 29, 2023 are not necessarily indicative of results to be expected for the full fiscal year. The accompanying unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in our Annual Report on Form 10-K for the fiscal year ended January 28, 2023 ("fiscal 2022").
Fiscal Periods
Our fiscal year ends on the Saturday closest to January 31. References to fiscal 2023 refer to the fiscal year ending February 3, 2024. References to the fiscal quarters or first three months ended April 29, 2023 and April 30, 2022 refer to the thirteen week period ended as of those dates, respectively.
Note 2: Summary of Significant Accounting Policies
Information regarding our significant accounting policies is contained in Note 2, “Summary of Significant Accounting Policies”, of the consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended January 28, 2023.
Revenue Recognition
Revenue is recognized for store sales when the customer receives and pays for the merchandise at the register, net of estimated returns and taxes collected from our customers. For e-commerce sales, we recognize revenue, net of sales taxes and estimated sales returns, and the related cost of goods sold at the time the merchandise is shipped to the customer. Amounts related to shipping and handling that are billed to customers are reflected in net sales, and the related costs are reflected in cost of goods sold in the Consolidated Statements of Operations.

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The following table summarizes net sales from our retail stores and e-commerce (in thousands):
Thirteen Weeks Ended
April 29,
2023		 April 30,
2022
Retail stores $ 97,819  $ 117,482 
E-commerce 25,818  28,293 
Total net sales $ 123,637  $ 145,775 
The following table summarizes the percentage of net sales by department:
Thirteen Weeks Ended
April 29,
2023		 April 30,
2022
Mens 35  % 35  %
Womens 29  % 29  %
Accessories 14  % 15  %
Footwear 14  % 12  %
Girls 4  % 4  %
Boys 3  % 4  %
Outdoor 1  % 1  %
Total net sales 100  % 100  %
The following table summarizes the percentage of net sales by third-party and proprietary branded merchandise:
Thirteen Weeks Ended
April 29,
2023		 April 30,
2022
Third-party 68  % 68  %
Proprietary 32  % 32  %
Total net sales 100  % 100  %
We accrue for estimated sales returns by customers based on historical sales return results. As of April 29, 2023, January 28, 2023 and April 30, 2022, our reserve for sales returns was $1.8 million, $1.6 million and $2.1 million, respectively, and is included in accrued expenses on the accompanying Consolidated Balance Sheets.
We recognize revenue from gift cards as they are redeemed for merchandise. Prior to redemption, we maintain a current liability for unredeemed gift card balances. The customer liability balance was $9.9 million, $11.1 million and $9.8 million as of April 29, 2023, January 28, 2023 and April 30, 2022, respectively, and is included in deferred revenue on the accompanying Consolidated Balance Sheets. Our gift cards do not have expiration dates and in most cases there is no legal obligation to remit unredeemed gift cards to relevant jurisdictions. Based on actual historical redemption patterns, we determined that a small percentage of gift cards are unlikely to be redeemed (which we refer to as gift card "breakage"). Based on our historical gift card breakage rate, we recognize breakage revenue over the redemption period in proportion to actual gift card redemptions. Revenue recognized from gift cards was $3.4 million and $4.0 million for the thirteen weeks ended April 29, 2023 and April 30, 2022, respectively. For the thirteen weeks ended April 29, 2023 and April 30, 2022, the opening gift card balance was $11.1 million and $11.2 million, respectively, of which $2.2 million and $2.6 million, respectively, were recognized as revenue during the period.
We have a customer loyalty program where customers accumulate points based on purchase activity. Once a loyalty member achieves a certain point level, the member earns an award that may be used towards the purchase of merchandise. Unredeemed awards and accumulated partial points are accrued as deferred revenue and awards redeemed by the member for merchandise are recorded as an increase to net sales. Our loyalty program allows customers to redeem their awards instantly or build up to additional awards over time. During the first quarter of fiscal 2022, we modified our expiration policy related to unredeemed awards and accumulated partial points from expiration at 365 days after the customer's last purchase activity to expiration at 365 days after the customer's original purchase date. As a result of this modification in expiration policy, the estimated liability was reduced by $0.5 million during the first quarter of fiscal 2022. A liability is estimated based on the standalone selling price of points earned and expected future redemptions. The deferred revenue for this program was $4.9 million, $5.0 million and

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$5.4 million as of April 29, 2023, January 28, 2023 and April 30, 2022, respectively. The value of points redeemed through our loyalty program was $1.6 million and $2.1 million for the thirteen weeks ended April 29, 2023 and April 30, 2022, respectively. For the thirteen weeks ended April 29, 2023 and April 30, 2022, the opening loyalty program balance was $5.0 million and $5.9 million, respectively, of which $1.3 million and $2.0 million, respectively, was recognized as revenue during these periods.
Leases
We conduct all of our retail sales and corporate operations in leased facilities. Lease terms generally range up to ten years in duration (subject to elective extensions) and provide for escalations in base rents. Many of our store leases contain one or more options to renew the lease at our sole discretion. Generally, we do not consider any additional renewal periods to be reasonably certain of being exercised.
Most store leases include tenant allowances from landlords, rent escalation clauses and/or contingent rent provisions. Certain leases provide for additional rent based on a percentage of sales and annual rent increases generally based upon the Consumer Price Index. In addition, most of our store leases are net leases, which typically require us to be responsible for certain property operating expenses, including property taxes, insurance, common area maintenance, in addition to base rent. Many of our store leases contain certain co-tenancy provisions that permit us to pay rent based on a pre-determined percentage of sales when the occupancy of the retail center falls below minimums established in the lease. For non-cancelable operating lease agreements, operating lease assets and operating lease liabilities are established for leases with an expected term greater than one year, and we recognize lease expense on a straight-line basis. Contingent rent, determined based on a percentage of net sales in excess of specified levels, is recognized as rent expense when the achievement of those specified net sales is probable.
We lease approximately 172,000 square feet of office and warehouse space (10 and 12 Whatney, Irvine, California) from a company that is owned by the co-founders of Tillys. During each of the thirteen week periods ended April 29, 2023 and April 30, 2022 we incurred rent expense of $0.5 million related to this lease. The lease began on January 1, 2003 and terminates on December 31, 2027.
We lease approximately 26,000 square feet of office and warehouse space (11 Whatney, Irvine, California) from a company that is owned by one of the co-founders of Tillys. During the thirteen week periods ended April 29, 2023 and April 30, 2022, we incurred rent expense of $0.2 million and $0.1 million, respectively, related to this lease. Pursuant to the lease agreement, the lease payment adjusts annually based upon the Los Angeles/Anaheim/Riverside Urban Consumer Price Index, not to exceed 7%, but a minimum of 3%, in any one annual increase. The lease began on June 29, 2012 and was set to terminate on June 30, 2022. During June 2022, this lease was amended to, among other things, extend the term for an additional 10-year term and adjust the annual payment increases. Pursuant to the amended lease agreement, the lease payments adjust annually based upon the greater of 5% or the Consumer Price Index, and the lease now terminates on June 30, 2032.
We lease approximately 81,000 square feet of office and warehouse space (17 Pasteur, Irvine, California) from a company that is owned by one of the co-founders of Tillys. We use this property as our e-commerce distribution center. During each of the thirteen week periods ended April 29, 2023, and April 30, 2022 we incurred rent expense of $0.4 million related to this lease. The lease payment adjusts annually based upon the greater of 5% or the Consumer Price Index. The lease began on November 1, 2011 and terminates on October 31, 2031.
We sublease a portion of our office space, approximately 5,887 square feet, in the 17 Pasteur Irvine, California facility to Tilly's Life Center, ("TLC"), a related party and a charitable organization. The lease term is for five years and terminates on January 31, 2027. Sublease income is recognized on a straight-line basis over the sublease agreement and is recorded as an offset within the selling, general and administrative section in the Consolidated Statements of Operations.


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The maturity of operating lease liabilities and sublease income as of April 29, 2023 were as follows (in thousands):
Fiscal Year Related Party Other Total Sublease Income
2023 $ 2,961  $ 48,194  $ 51,155  $ 68 
2024 4,085  55,005  59,090  95 
2025 4,245  45,335  49,580  99 
2026 4,411  34,170  38,581  104 
2027 4,167  26,738  30,905  — 
Thereafter 9,324  53,718  63,042  — 
Total minimum lease payments 29,193  263,160  292,353  366 
Less: Amount representing interest 4,652  43,802  48,454  — 
Present value of operating lease liabilities $ 24,541  $ 219,358  $ 243,899  $ 366 

As of April 29, 2023, additional operating lease contracts that have not yet commenced are approximately $4.3 million. Further, additional operating lease contracts and modifications executed subsequent to the balance sheet date, but prior to the report date, are approximately $8.3 million.

Lease expense for the thirteen week period ended April 29, 2023 and April 30, 2022 was as follows (in thousands):
Thirteen Weeks Ended
April 29, 2023 April 30, 2022
Cost of goods sold SG&A Total Cost of goods sold SG&A Total
Fixed operating lease expense $ 15,425  $ 328  $ 15,753  $ 15,275  $ 322  $ 15,597 
Variable lease expense 5,749 28 5,777 3,786  14  3,800 
Total lease expense $ 21,174  $ 356  $ 21,530  $ 19,061  $ 336  $ 19,397 
Supplemental lease information for the thirteen weeks ended April 29, 2023 and April 30, 2022 was as follows:
Thirteen Weeks Ended
April 29, 2023 April 30, 2022
Cash paid for amounts included in the measurement of operating lease liabilities (in thousands) $17,300 $17,166
Weighted average remaining lease term (in years) 5.7 years 5.7 years
Weighted average interest rate (1)
 6.47% 6.08%
(1) Since our leases do not provide an implicit rate, we use our incremental borrowing rate ("IBR") on date of adoption, at lease inception, or lease modification in determining the present value of future minimum payments.
Income Taxes
Our income tax benefit was $(4.2) million, or 26.1% of pre-tax loss, compared to an income tax expense of $0.3 million, or 26.9% of pre-tax income, for the thirteen weeks ended April 29, 2023 and April 30, 2022, respectively. The decrease in the effective income tax rate was primarily attributable to a decrease in pre-tax income.
New Accounting Standards Adopted
In November 2019, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2019-11, Codification Improvements to Topic 326, Financial Instruments-Credit Losses which amends ("ASU") No. 2016-13 Measurement of Credit Losses on Financial Instruments ("ASU 2016-13") and modifies or replaces existing models for impairment of trade and other receivables, debt securities, loans, beneficial interests held as assets, purchased-credit impaired financial assets and other instruments. The new standard requires entities to measure expected losses over the life of the asset and recognize an allowance for estimated credit losses upon recognition of the financial instrument. We adopted ASU 2019-11 in the first quarter of fiscal 2023, which applied to our fixed income securities recorded at amortized cost and classified as held-to-maturity and our trade receivables. The adoption of this accounting standard did not have a material effect on our consolidated financial statements and related disclosures.

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Note 3: Marketable Securities
Marketable securities as of April 29, 2023 consisted of commercial paper, classified as available-for-sale, and fixed income securities, classified as held-to-maturity, as we have the intent and ability to hold them to maturity. Our investments in commercial paper and fixed income securities are recorded at fair value and amortized cost, respectively, which approximates fair value. All of our marketable securities are less than one year from maturity.
The following table summarizes our investments in marketable securities at April 29, 2023, January 28, 2023 and April 30, 2022 (in thousands):
  April 29, 2023
  Cost or
Amortized Cost		 Gross Unrealized
Holding Gains		 Gross
Unrealized
Holding
Losses		 Estimated
Fair Value
Commercial paper $ 39,266  $ 385  $ —  $ 39,651 
Fixed income securities 10,044  —  —  10,044 
Total marketable securities $ 49,310  $ 385  $ —  $ 49,695 
  January 28, 2023
  Cost or
Amortized Cost		 Gross Unrealized
Holding Gains		 Gross
Unrealized
Holding
Losses		 Estimated
Fair Value
Commercial paper $ 29,570  $ 180  $ —  $ 29,750 
Fixed income securities 10,003  —  —  10,003 
Total marketable securities $ 39,573  $ 180  $ —  $ 39,753 
  April 30, 2022
  Cost or
Amortized Cost		 Gross Unrealized
Holding Gains		 Gross
Unrealized
Holding
Losses		 Estimated
Fair Value
Commercial paper $ 39,921  $ 19  $ (19) $ 39,921 
Fixed income securities 11,076  —  —  11,076 
Total marketable securities $ 50,997  $ 19  $ (19) $ 50,997 
We recognized gains on investments for commercial paper that matured during the thirteen week periods ended April 29, 2023 and April 30, 2022. Upon recognition of the gains, we reclassified these amounts out of "Accumulated Other Comprehensive Income" and into “Other income, net” on the Consolidated Statements of Operations.
The following table summarizes our gains on investments for commercial paper (in thousands):
Thirteen Weeks Ended
April 29,
2023		 April 30,
2022
Gains on investments $ 172  $ 25 
Note 4: Asset-Backed Credit Facility
New Credit Agreement
On April 27, 2023 (the “Closing Date”), we entered into a credit agreement and revolving line of credit note (the "Note" and, collectively, the “Credit Agreement”) with Wells Fargo Bank, National Association, as lender (the “Bank”). The Credit Agreement provides for an asset-based, senior secured revolving credit facility (“Revolving Facility”) of up to $65.0 million (“Revolving Commitment”) consisting of revolving loans, letters of credit and swing line loans, with a sub-limit on letters of credit outstanding at any time of $10.0 million and a sub-limit for swing line loans of $7.5 million. The Credit Agreement also includes an uncommitted accordion feature whereby we may increase the Revolving Commitment by an aggregate amount not to exceed $12.5 million, subject to certain conditions. The Revolving Facility matures on April 27, 2026. The payment and performance in full of the secured obligations under the Revolving Facility are secured by a lien on and security interest in all of our assets.

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The maximum borrowings permitted under the Revolving Facility is equal to the lesser of (x) the Revolving Commitment and (y) the applicable borrowing base, which is equal to (i) 90% of our eligible credit card receivables, plus (ii) 90% of the cost of certain adjusted eligible inventory, less certain inventory reserves , plus (iii) 90% of the cost of certain adjusted eligible in-transit inventory, less certain inventory reserves, less (iv) certain other reserves established by the Bank. As of the Closing Date, our borrowing base was deemed to be equal to $25.0 million until the Banks’ receipt of reasonably satisfactory due diligence materials (provided that if such materials are not received within 60 days (or such longer period as agreed by the Bank) after the Closing Date, the deemed borrowing base will be reduced to $0. As of the Closing Date, we had no outstanding borrowings under the Credit Agreement and the only utilization of the letters of credit sub-limit under the Credit Agreement was a $2.025 million irrevocable standby letter of credit, which was previously issued under the Prior Credit Agreement and was transferred on the Closing Date to the Credit Agreement.
The unused portion of the Revolving Commitment accrues a commitment fee of 0.375% per annum. Borrowings under the Revolving Facility bear interest at a rate per annum that ranges from the Secured Overnight Financing Rate (“SOFR”) plus a credit spread adjustment (equal to 10 basis points for one- and three-month term SOFR) plus 1.50% to 2.00%, or a base rate (as calculated in accordance with the Credit Agreement) (the “Base Rate”) plus 0.50% to 1.00%, based on the average daily borrowing capacity under the Revolving Facility over the applicable fiscal quarter. We are allowed to elect to apply either SOFR or Base Rate interest to borrowings at its discretion, other than in the case of swing line loans, to which the Base Rate shall apply.
Under the Credit Agreement, we are subject to a variety of affirmative and negative covenants customary in an asset-based lending facility, including a financial covenant relating to availability (which is required to remain above the greater of: (i) ten percent (10%) of the Loan Cap (as defined in the Credit Agreement) and (ii) $6,000,000.00). Prior to the first anniversary of the Closing Date, we are prohibited from declaring or paying any cash dividends to our stockholders or repurchasing our common stock, and thereafter, is permitted, provided, among other things, no default or event of default exists as of the date of any such payment and after giving effect thereto and certain minimum availability and minimum projected availability tests are satisfied.
Events of default under the Credit Agreement include, among other things, failure to pay principal, interest, fees or other amounts; covenant defaults; material inaccuracy of representations and warranties; bankruptcy events; actual or asserted invalidity of any the Credit Agreement or related loan documents; or a change of control.
In connection with the entry into the Credit Agreement, on April 27, 2023, we entered into certain ancillary agreements, including (i) a security agreement in favor of the Bank (the “Security Agreement”), and (ii) a guaranty by us in favor of the Bank (the “Guaranty”). The Security Agreement and the Guaranty replaced (i) the third party pledge agreement, dated as of January 20, 2022, by us in favor of the Bank), (ii) the continuing guaranty by us in favor of the Banks, dated January 20, 2022, and (iii) the security agreement: business assets, dated as of January 20, 2022, by us in favor of the Bank (collectively, the “Prior Security Agreements”), which were all terminated concurrently with the termination of the Prior Credit Agreement (as defined below).
As of April 29, 2023, we were in compliance with all of our covenants and had no outstanding borrowings under the Credit Agreement.
Prior Credit Agreement
The Credit Agreement replaced our previously existing senior secured credit agreement ( as amended, the "Prior Credit Agreement") and revolving line of credit note dated as of January 20, 2022 with the Bank, which had revolving commitments of up to $25.0 million consisting of revolving loans, letters of credit and swing line loans, with a sub-limit on letters of credit outstanding at any time of $15.0 million. In connection with the entry into the Prior Credit Agreement, on January 20, 2022, we also entered into the Prior Security Agreements.
Borrowings under the Prior Credit Agreement bore interest at a rate per annum equal to SOFR plus 0.75%. Amounts available to be drawn under outstanding letters of credit accrued fees in an amount equal to 1.00% per annum. The unused portion of the Prior Credit Agreement was not subject to a commitment fee. As of the Closing Date, we had no outstanding borrowings under the Credit Agreement, and the only utilization of the letters of credit sub-limit under the Credit Agreement was a $2.025 million irrevocable standby letter of credit, which was previously issued under the Prior Credit Agreement and was transferred on the Closing Date.
Under the Prior Credit Agreement, we were subject to a variety of affirmative and negative covenants of types customary in a cash-flow-based lending facility, including financial covenants that required maintenance of (1) a ratio of total funded debt to earnings before interest, taxes, depreciation, amortization and annual rent expenses no greater than 4.75 to 1.00 and (2) a fixed charge coverage ratio of not less than 1.25 to 1.00 (calculation of which took into account dividends, distributions, redemptions and repurchases of our equity interests only if our cash on hand, net of any amounts outstanding under the Prior Credit Agreement, was less than $50.0 million after giving effect to such dividends, distributions, redemptions or repurchases).

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Events of default under the Prior Credit Agreement included, among other things, failure to pay principal, interest, fees or other amounts; covenant defaults; material inaccuracy of representations and warranties; bankruptcy events; actual or asserted invalidity of any of the loan documents; or a change of control.
Note 5: Commitments and Contingencies
Indemnifications, Commitments, and Guarantees
During the normal course of business, we have made certain indemnifications, commitments, and guarantees under which we may be required to make payments for certain transactions. These indemnifications include, but are not limited to, those given to various lessors in connection with facility leases for certain claims arising from such facility or lease and indemnifications to our directors and officers to the maximum extent permitted under the laws of the state of Delaware. The majority of these indemnifications, commitments, and guarantees do not provide for any limitation of the maximum potential future payments we could be obligated to make, and their duration may be indefinite. We have not recorded any liability for these indemnifications, commitments, and guarantees in the accompanying Consolidated Balance Sheets.
Legal Proceedings
From time to time, we may become involved in lawsuits and other claims arising from our ordinary course of business. We establish loss provisions for matters in which losses are probable and can be reasonably estimated. For some matters, we are currently unable to predict the ultimate outcome, determine whether a liability has been incurred or make an estimate of the reasonably possible liability that could result from an unfavorable outcome because of the uncertainties related to the occurrence, amount and range of loss on any pending litigation or claim. Because of the unpredictable nature of these matters, we cannot provide any assurances regarding the outcome of any litigation or claim to which we are a party or that the ultimate outcome of any of the matters threatened or pending against us will not have a material adverse effect on our financial condition, results of operations or cash flows. As of the date of these consolidated financial statements, we were not engaged in any legal proceedings that are expected, individually or in the aggregate, to have a material adverse effect on our consolidated results of operations or financial position.
Note 6: Fair Value Measurements
We determine fair value based on a three-level valuation hierarchy as described below. Fair value is defined as the exit price associated with the sale of an asset or transfer of a liability in an orderly transaction between market participants at the measurement date. The three-level hierarchy of inputs used to determine fair value is as follows:
•Level 1 – Quoted prices in active markets for identical assets and liabilities.
•Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets and liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
•Level 3 – Unobservable inputs (i.e. projections, estimates, interpretations, etc.) that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
We measure certain financial assets at fair value on a recurring basis, including our marketable securities which are classified as available-for-sale securities, and certain cash equivalents, specifically money market securities, commercial paper, municipal bonds and certificates of deposits. The money market accounts are valued based on quoted market prices in active markets. The available-for-sale marketable securities are valued based on other observable inputs for those securities (including market corroborated pricing or other models that utilize observable inputs such as interest rates and yield curves) based on information provided by independent third party entities.
From time to time, we measure certain assets at fair value on a non-recurring basis, including evaluation of long-lived assets for impairments using Company-specific assumptions which would fall within Level 3 of the fair-value hierarchy.
Fair value calculations contain significant judgments and estimates, which may differ from actual results due to, among other things, economic conditions, changes to the business model or changes in operating performance.
During the thirteen week period ended April 29, 2023 and April 30, 2022, we did not make any transfers between Level 1 and Level 2 financial assets. Furthermore, as of April 29, 2023, January 28, 2023 and April 30, 2022, we did not have any Level 3 financial assets. We conduct reviews on a quarterly basis to verify pricing, assess liquidity and determine if significant inputs have changed that would impact the fair value hierarchy disclosure.

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Financial Assets
In accordance with the provisions of ASC 820, Fair Value Measurement, we categorized our financial assets based on the priority of the inputs to the valuation technique for the instruments as follows (in thousands): 
  April 29, 2023 January 28, 2023 April 30, 2022
Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3
Cash equivalents (1):
  Money market securities $ 37,503  $ —  $ —  $51,756 $ —  $ —  $51,843 $ —  $ — 
  Commercial paper —  4,997  —  —  19,871  —  —  4,995  — 
Marketable securities:
  Commercial paper $ —  $ 39,651  $ —  $ —  $ 29,750  $ —  $ —  $ 39,921  $ — 
(1) Excluding cash.

Impairment of Long-Lived Assets
On at least a quarterly basis, we assess whether events or changes in circumstances have occurred that potentially indicate the carrying value of long-lived assets may not be recoverable. Based on Level 3 inputs of historical operating performance, including sales trends, gross margin rates, current cash flows from operations and the projected outlook for each our stores, we determined that certain stores would not be able to generate sufficient cash flows over the remaining term of the related leases to recover our investment in the respective stores. As a result, we recorded non-recurring, non-cash impairment charges of $0.2 million and approximately $13.4 thousand in the thirteen weeks ended April 29, 2023 and April 30, 2022, respectively, to write-down the carrying value of certain long-lived store assets to their estimated fair values.

Thirteen Weeks Ended
April 29,
2023		 April 30,
2022
($ in thousands)
Carrying value of assets with impairment $ 356  $ 13 
Fair value of assets impaired $ 201  $ — 
Number of stores tested for impairment 24  2 
Number of stores with impairment 6  1 
Note 7: Share-Based Compensation
The Tilly's, Inc. 2012 Second Amended and Restated Equity and Incentive Plan, as amended in June 2020 (the "2012 Plan"), authorizes up to 6,613,900 shares for issuance of options, shares or rights to acquire our Class A common stock and allows for, among other things, operating income and comparable store sales growth targets as additional performance goals that may be used in connection with performance-based awards granted under the 2012 Plan. As of April 29, 2023, there were 1,899,720 shares available for future issuance under the 2012 Plan.
Stock Options
We grant stock options to certain employees that give them the right to acquire our Class A common stock under the 2012 Plan. The exercise price of options granted is equal to the closing price per share of our stock at the date of grant. The non-qualified options vest at a rate of 25% on each of the first four anniversaries of the grant date provided that the award recipient continues to be employed by us through each of those vesting dates and expire ten years from the date of grant.

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The following table summarizes stock option activity for the thirteen weeks ended April 29, 2023 (aggregate intrinsic value in thousands):
Stock
Options		 Grant Date
Weighted
Average
Exercise Price		 Weighted
Average
Remaining
Contractual
Life (in Years)		 Aggregate
Intrinsic
Value (1)
Outstanding at January 28, 2023 (2)
 1,868,243  $ 8.99 
Granted 2,500  $ 7.18 
Exercised (11,000) $ 4.86 
Forfeited (12,125) $ 8.89 
Expired (19,000) $ 11.45 
Outstanding at April 29, 2023 1,828,618  $ 8.98  7.0 $ 1,403 
Exercisable at April 29, 2023 1,136,768  $ 9.23  6.1 $ 930 
(1)Intrinsic value for stock options is defined as the difference between the market price of our Class A common stock on the last business day of the fiscal period and the weighted average exercise price of in-the-money stock options outstanding at the end of the fiscal period. The market value per share was $7.51 at April 29, 2023.
(2)Reflects the removal of 5,000 stock options held by a former employee that expired during fiscal 2022, which we identified during the first quarter of fiscal 2023.
The stock option awards were measured at fair value on the grant date using the Black-Scholes option valuation model. Key input assumptions used to estimate the fair value of stock options include the exercise price of the award, the expected option term, expected volatility of our stock over the option’s expected term, the risk-free interest rate over the option’s expected term and our expected annual dividend yield, if any. We account for forfeitures as they occur. We issue shares of Class A common stock when stock option awards are exercised.
The fair values of stock options granted during the thirteen weeks ended April 29, 2023 and April 30, 2022 were estimated on the grant date using the following assumptions:
Thirteen Weeks Ended
  April 29,
2023		 April 30,
2022
Weighted average grant-date fair value per option granted $3.90 $4.98
Expected option term (1)
 5.2 years 5.2 years
Weighted average expected volatility factor (2)
 58.6% 58.6%
Weighted average risk-free interest rate (3)
 3.6% 2.3%
Expected annual dividend yield (4)
 —% —%
(1)The expected option term of the awards represents the estimated time that options are expected to be outstanding based upon historical option data.
(2)Stock volatility for each grant is measured using the historical daily price changes of our common stock over the most recent period equal to the expected option term of the awards.
(3)The risk-free interest rate is determined using the rate on treasury securities with the same term as the expected life of the stock option as of the grant date.
(4)We do not currently have a dividend policy and we do not anticipate paying any additional cash dividends on our common stock. In compliance with our new Credit Agreement, we are prohibited from declaring or paying any cash dividends prior to April 27, 2024.
Restricted Stock Awards
Restricted stock awards ("RSAs") represent restricted shares issued upon the date of grant in which the recipient's rights in the stock are restricted until the shares are vested, whereas restricted stock units ("RSUs") represent shares issuable in the future upon vesting. Under the 2012 Plan, we grant RSAs to independent members of our Board of Directors and RSUs to certain employees. RSAs granted to Board members vest at a rate of 50% on each of the first two anniversaries of the grant date provided that the respective award recipient continues to serve on our Board of Directors through each of those vesting dates. The RSUs granted to certain employees vest at a rate of 25% on each of the first four anniversaries of the grant date provided that the respective recipient continues to be employed by us through each of those vesting dates. We determine the fair value of restricted stock underlying the RSAs and RSUs based upon the closing price of our Class A common stock on the date of grant.

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The following table summarizes the status of non-vested restricted stock as of April 29, 2023, and the changes since January 28, 2023:
Restricted
Stock		 Weighted
Average
Grant-Date
Fair Value
Nonvested at January 28, 2023 73,484  $ 8.71 
Granted —  — 
Vested —  — 
Nonvested at April 29, 2023 73,484  $ 8.71 
Share-based compensation expense associated with stock options and restricted stock is recognized on a straight-line basis over the requisite service period. The following table summarizes share-based compensation expense recorded in the Consolidated Statements of Operations (in thousands):
  Thirteen Weeks Ended
  April 29,
2023		 April 30,
2022
Cost of goods sold $ 57  $ 89 
Selling, general, and administrative 465  474 
Total share-based compensation $ 522  $ 563 
At April 29, 2023, there was $3.4 million of total unrecognized share-based compensation expense related to unvested stock options and restricted stock. This cost has a weighted average remaining recognition period of 2.3 years.
Note 8: (Loss) Earnings Per Share
Earnings per share is computed under the provisions of ASC 260, Earnings Per Share. Basic earnings per share is computed based on the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is computed based on the weighted average number of shares of common stock plus the effect of dilutive potential shares of common stock (i.e., in-the-money outstanding stock options as well as RSAs) outstanding during the period using the treasury stock method, whereby proceeds from such exercise, unamortized compensation and hypothetical excess tax benefits, if any, on share-based awards are assumed to be used by us to purchase shares of common stock at the average market price during the period.
The components of basic and diluted (loss) earnings per share were as follows (in thousands, except per share amounts):
  Thirteen Weeks Ended
  April 29,
2023		 April 30,
2022
Net (loss) income $ (11,968) $ 813 
Weighted average basic shares outstanding 29,798  30,762 
Dilutive effect of in-the-money stock options and RSAs —  284 
Weighted average shares for diluted earnings per share 29,798  31,046 
Basic (loss) earnings per share of Class A and Class B common stock $ (0.40) $ 0.03 
Diluted (loss) earnings per share of Class A and Class B common stock $ (0.40) $ 0.03 

The following stock options have been excluded from the calculation of diluted (loss) earnings per share as the effect of including these stock options would have been anti-dilutive (in thousands):
Thirteen Weeks Ended
April 29,
2023		 April 30,
2022
Stock options —  1,445 

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Note 9: Share Repurchase Program
On March 14, 2022, our Board of Directors authorized a share repurchase program, pursuant to which we were authorized to repurchase up to 2,000,000 shares of our Class A common stock through March 14, 2023, in open market transactions through a broker-dealer at prevailing market prices, in block trades or by any other means in accordance with federal securities laws. During the fiscal year ended January 28, 2023, we repurchased 1,258,330 shares of our Class A common stock at a weighted average price of $8.63 per share for a total of $10.9 million under the program. At January 28, 2023, the remaining repurchase authorization totaled 741,670 shares, which remained unpurchased upon expiration of the program on March 14, 2023.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of the financial condition and results of our operations should be read together with the financial statements and related notes of Tilly’s, Inc. included in Part I Item 1 of this Quarterly Report on Form 10-Q (this "Report") and with our audited consolidated financial statements and the related notes included in our Annual Report on Form 10-K for the fiscal year ended January 28, 2023. As used in this Report, except where the context otherwise requires or where otherwise indicated, the terms “the Company”, “World of Jeans & Tops”, “we”, “our”, “us”, "Tillys" and “Tilly’s” refer to Tilly’s, Inc. and its subsidiary.
Overview
Tillys is a destination specialty retailer of casual apparel, footwear, accessories and hardgoods for men, women, boys and girls. We believe we bring together an unparalleled selection of iconic global, emerging, and proprietary brands rooted in an active and outdoor lifestyle. The Tillys concept began in 1982, when our co-founders, Hezy Shaked and Tilly Levine, opened our first store in Orange County, California. As of April 29, 2023, we operated 248 stores in 33 states, averaging approximately 7,293 square feet per store, compared to 241 total stores at the same time last year. We also sell our products through our e-commerce website, www.tillys.com.
Known or Anticipated Trends
Economic Trends
We believe the uncertain and inflationary economic environment has had, and is likely to continue to have, a significant, adverse impact on our consumers and, by extension, our operating results. Persistent inflation and recent regional bank failures have had a negative impact on consumer confidence and consumer spending. These economic pressures have also resulted in increased costs for many products and services that are necessary for the operation of our business, such as product costs, labor costs, shipping costs, and digital marketing costs, among others. For example, store payroll represents approximately 40% of our total selling, general and administrative expenses. Our average hourly rate for store payroll in the first quarter of fiscal 2023 was 25% higher than in the pre-pandemic first quarter of fiscal 2019 and 8% higher than in the first quarter of last year. Minimum wage increases are estimated to cost us an additional $3 million during fiscal 2023 compared to fiscal 2022. These and other cost increases may continue to have a material adverse impact on our results of operations and financial condition in fiscal 2023, particularly if the broader economy is negatively impacted by recessionary impacts for an extended period of time.
Fiscal 2023 New Store Openings and Capital Expenditure Plans
During fiscal 2023, we currently expect to open 7 new stores within existing markets. We expect our total capital expenditures for fiscal 2023 to be approximately $15 million, inclusive of our new store plans and upgrades to certain distribution and information technology infrastructure systems.
How We Assess the Performance of Our Business
In assessing the performance of our business, we consider a variety of performance and financial measures. The key indicators of the financial condition and operating performance of our business are net sales, comparable store sales, gross profit, selling, general and administrative ("SG&A") expenses and operating income.
Net Sales
Net sales reflect revenue from the sale of our merchandise at store locations and through e-commerce, net of sales taxes. Store sales are reflected in sales when the merchandise is received by the customer. For e-commerce sales, we recognize revenue, and the related cost of goods sold at the time the merchandise is shipped to the customer. Net sales also include shipping and handling fees for e-commerce shipments that have been shipped to the customer. Net sales are net of returns on sales during the period as well as an estimate of returns expected in the future stemming from current period sales. We recognize revenue from gift cards as they are redeemed for merchandise. Prior to redemption, we maintain a current liability for unredeemed gift card balances. Our gift cards do not have expiration dates and in most cases there is no legal obligation to remit unredeemed gift cards to relevant jurisdictions. Based on actual historical redemption patterns, we determined that a small percentage of gift cards are unlikely to be redeemed (which we refer to as gift card “breakage”). Based on our historical gift card breakage rate, we recognize breakage revenue over the redemption period in proportion to actual gift card redemptions.
Our business is seasonal and as a result our revenues fluctuate from quarter to quarter. In addition, our revenues in any given quarter can be affected by a number of factors including the timing of holidays and weather patterns. The third and fourth quarters of the fiscal year, which include the back-to-school and holiday sales seasons, have historically produced stronger sales and disproportionately stronger operating results than have the first two quarters of the fiscal year.

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Comparable Store Net Sales
Comparable store net sales is a measure that indicates the change in year-over-year comparable store net sales, which allows us to evaluate how our store base is performing. Numerous factors affect our comparable store net sales, including: 
•overall economic trends;
•our ability to attract traffic to our stores and online platform;
•our ability to identify and respond effectively to consumer preferences and fashion trends;
•competition;
•the timing of our releases of new and seasonal styles;
•changes in our product mix;
•pricing;
•the level of customer service that we provide in stores;
•our ability to source and distribute products efficiently;
•calendar shifts of holiday or seasonal periods;
•the number and timing of store openings and the relative proportion of new stores to mature stores; and
•the timing and success of promotional and advertising efforts.
Our comparable store net sales are defined as sales from our e-commerce platform and stores open on a daily basis compared to the same respective fiscal dates of the prior year. A remodeled, relocated or refreshed store is included in comparable store net sales, both during and after construction, if the square footage of the store used to sell merchandise was not changed by more than 20% in any fiscal month. We include sales from our e-commerce platform as part of comparable store net sales as we manage and analyze our business on a single omni-channel basis and have substantially integrated our investments and operations for our stores and e-commerce platform to give our customers seamless access and increased ease of shopping. Comparable store net sales exclude gift card breakage income and e-commerce shipping and handling fee revenue. Some of our competitors and other retailers may calculate comparable or “same store” net sales differently than we do. As a result, data in this Report regarding our comparable store net sales may not be comparable to similar data made available by other retailers.
Gross Profit
Gross profit is equal to our net sales less our cost of goods sold. Cost of goods sold reflects the direct cost of purchased merchandise as well as buying, distribution and occupancy costs. Buying costs include compensation and benefit expense for our internal buying organization. Distribution costs include costs for receiving, processing and warehousing our store merchandise, and shipping of merchandise to or from our distribution and e-commerce fulfillment centers and to our e-commerce customers and between store locations. Occupancy costs include the rent, common area maintenance, utilities, property taxes, security and depreciation costs of all store locations. These costs are significant and can be expected to continue to increase as our company grows. The components of our reported cost of goods sold may not be comparable to those of other retail companies.
We regularly analyze the components of gross profit as well as gross profit as a percentage of net sales. Specifically we look at the initial markup on purchases, markdowns and reserves, shrinkage, buying costs, distribution costs and occupancy costs. Any inability to obtain acceptable levels of initial markups, a significant increase in our use of markdowns or a significant increase in inventory shrinkage or inability to generate sufficient sales leverage on the buying, distribution and occupancy components of cost of goods sold could have an adverse impact on our gross profit and results of operations.
Gross profit is also impacted by shifts in the proportion of sales of proprietary branded products compared to third-party branded products, as well as by sales mix shifts within and between brands and between major product departments such as young men's and women's apparel, footwear or accessories. A substantial shift in the mix of products could have a material impact on our results of operations. In addition, gross profit and gross profit as a percent of sales have historically been higher in the third and fourth quarters of the fiscal year, as these periods include the back-to-school and winter holiday selling seasons. This reflects that various costs, including occupancy costs, generally do not increase in proportion to the seasonal sales increase.
Selling, General and Administrative Expenses
Our selling, general and administrative, or SG&A, expenses are comprised of store selling expenses and corporate-level general and administrative expenses. Store selling expenses include store and regional support costs, including personnel, advertising and debit and credit card processing costs, e-commerce receiving and processing costs and store supplies costs. General and administrative expenses include the payroll and support costs of corporate functions such as executive management, legal, accounting, information systems, human resources, impairment charges and other centralized services. Store selling expenses generally vary proportionately with net sales and store growth. In contrast, general and administrative expenses are generally not directly proportional to net sales and store growth, but will be expected to increase over time to support the needs of our growing company. SG&A expenses as a percentage of net sales are usually higher in lower volume periods and lower in higher volume periods.

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Operating (Loss) Income
Operating (loss) income equals gross profit less SG&A expenses. Operating (loss) income excludes interest income, interest expense and income taxes. Operating (loss) income percentage measures operating income as a percentage of our net sales.






































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Results of Operations
The following tables summarize key components of our unaudited results of operations for the periods indicated, both in dollars (in thousands) and as a percentage of our net sales:
  Thirteen Weeks Ended
  April 29,
2023		 April 30,
2022
Statements of Operations Data:
Net sales $ 123,637  $ 145,775 
Cost of goods sold 96,768  101,100 
Rent expense, related party 931  860 
Total cost of goods sold 97,699  101,960 
Gross profit 25,938  43,815 
Selling, general and administrative expenses 43,066 42,574 
Rent expense, related party 133 133
Total selling, general and administrative expenses 43,199  42,707 
Operating (loss) income (17,261) 1,108 
Other income, net 1,064  4 
(Loss) income before income taxes (16,197) 1,112 
Income tax (benefit) expense (4,229) 299 
Net (loss) income $ (11,968) $ 813 
Percentage of Net Sales:
Net sales 100.0  % 100.0  %
Cost of goods sold 78.3  % 69.4  %
Rent expense, related party 0.8  % 0.6  %
Total cost of goods sold 79.0  % 69.9  %
Gross profit 21.0  % 30.1  %
Selling, general and administrative expenses 34.8  % 29.2  %
Rent expense, related party 0.1  % 0.1  %
Total selling, general and administrative expenses 34.9  % 29.3  %
Operating (loss) income (14.0) % 0.8  %
Other income, net 0.9  % 0.0  %
(Loss) income before income taxes (13.1) % 0.8  %
Income tax (benefit) expense (3.4) % 0.2  %
Net (loss) income (9.7) % 0.6  %
The following table presents store operating data for the periods indicated:
  Thirteen Weeks Ended
  April 29,
2023		 April 30,
2022
Operating Data:
Stores operating at end of period 248  241 
Comparable store net sales change (1)
 (17.5) % (13.0) %
Total square feet at end of period (in '000s) 1,809  1,764 
Average net sales per physical store (in '000s) (2)
 $ 393  $ 487 
Average net sales per square foot (2)
 $ 54  $ 66 
E-commerce net sales (in '000s) (3)
 $ 25,818  $ 28,293 
E-commerce net sales as a percentage of net sales 20.9  % 19.4  %
(1)Our comparable store net sales are defined as sales from our e-commerce platform and stores open on a daily basis compared to the same respective fiscal dates of the prior year. A remodeled or relocated store is included in comparable store net sales, both during and after construction, if the square footage of the store used to sell merchandise was not changed by more than 20% in any fiscal month. We include sales from our e-commerce platform as part of our comparable store net sales as we manage and analyze our business on an omni-channel basis and have substantially integrated our investments and

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operations for our stores and e-commerce platform to give our customers seamless access and increased ease of shopping. Comparable store net sales exclude gift card breakage income, and e-commerce shipping and handling fee revenue.
(2)The number of stores and the amount of square footage reflect the number of days during the period that stores were open. E-commerce sales, e-commerce shipping and handling fee revenue and gift card breakage income are excluded from net sales in deriving average net sales per retail store and average net sales per square foot.
(3)E-commerce net sales include e-commerce sales and e-commerce shipping and handling fee revenue.
First Quarter (13 Weeks) Ended April 29, 2023 Compared to First Quarter (13 Weeks) Ended April 30, 2022
Net Sales
Total net sales were $123.6 million, a decrease of $22.1 million, or 15.2%, compared to $145.8 million last year. The extended period of unseasonably cold and wet weather during February and March 2023, particularly in California wherein 40% of our total stores reside, coupled with the impact of inflation on our young customer demographic, had a negative effect on our net sales results during the first quarter ended April 29, 2023. All geographic markets and all merchandising departments, other than Footwear, produced negative double-digit comparable net sales results on a percentage basis compared to last year.
•Net sales from physical stores were $97.8 million, a decrease of $19.7 million or 16.7%, compared to $117.5 million last year with a comparable store net sales decrease of 19.7%. Net sales from physical stores represented 79.1% of total net sales compared to 80.6% of total net sales last year. We ended the first quarter with 248 total stores compared to 241 total stores at the end of the first quarter last year.
•Net sales from e-commerce were $25.8 million, a decrease of $2.5 million or 8.7%, compared to $28.3 million last year. E-commerce net sales represented 20.9% of total net sales compared to 19.4% of total net sales last year.
Gross Profit
Gross profit was $25.9 million, or 21.0% of net sales, compared to $43.8 million, or 30.1% of net sales, last year. Buying, distribution, and occupancy costs deleveraged by 620 basis points and increased by $2.4 million collectively, predominantly from occupancy costs, as a result of operating 7 net additional stores. Product margins declined by 290 basis points primarily due to higher level of markdowns utilized to manage inventory levels.
Selling, General and Administrative Expenses
SG&A expenses were $43.2 million or 34.9% of net sales, compared to $42.7 million, or 29.3% of net sales, last year. The primary components of the SG&A variances, both in terms of percentage of net sales and total dollars, were as follows:
% $ millions Primarily Attributable to
1.2% $0.7 Increase in corporate payroll primarily due to wage inflation.
0.5% 0.4 Increase in software as a service expense.
0.2% 0.3 Increase in outside recruiting services, primarily associated with the hiring of our new Chief Merchandising Officer.
1.9% (0.8) Decrease in store payroll and related benefits due to better management of store payroll hours.
1.8% (0.1) Net change in all other SG&A expenses.
5.6% $0.5 Total
Operating (Loss) Income
Operating loss was $(17.3) million, or (14.0)% of net sales, compared to operating income of $1.1 million, or 0.8% of net sales, last year as a result of the combination of factors noted above.
Other Income, net
Other income was $1.1 million compared to $0 last year, primarily attributable to earning higher rates of return on our marketable securities.
Income Tax (Benefit) Expense
Income tax benefit was $(4.2) million, or 26.1% of pre-tax loss, compared to income tax expense of $0.3 million, or 26.9% of pre-tax income, last year. The decrease in the effective income tax rate was primarily attributable to a decrease in pre-tax income.
Net (Loss) Income and (Loss) Income Per Diluted Share
Net loss was $(12.0) million, or $(0.40) per share, compared to net income of $0.8 million, or $0.03 per diluted share, last year as a result of the combination of factors noted above.

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Liquidity and Capital Resources
Our business relies on cash flows from operating activities as well as cash on hand as our primary sources of liquidity. We currently expect to finance company operations, store growth and remodels and all of our planned capital expenditures with existing cash on hand, marketable securities and cash flows from operations.
In addition to cash and cash equivalents and marketable securities, the most significant components of our working capital are merchandise inventories, accounts payable and accrued expenses. We believe that cash flows from operating activities, our cash and marketable securities on hand, and credit facility availability will be sufficient to cover our working capital requirements and anticipated capital expenditures for the next 12 months from the filing of this Report. If cash flows from operations are not sufficient or available to meet our capital requirements, then we will be required to obtain additional equity or debt financing in the future. There can be no assurance that equity or debt financing will be available to us when we need it or, if available, that the terms will be satisfactory to us and not dilutive to our stockholders.
Working Capital
Working capital at April 29, 2023, was $77.1 million compared to $94.1 million at January 28, 2023, a decrease of $17.0 million. The primary changes in our working capital during the first quarter of fiscal 2023 were as follows:
$ millions Description
$94.1 Working capital at January 28, 2023
(19.9) Decrease in cash, cash equivalents, and marketable securities primarily due to lower net income.
(8.4) Decrease in prepaid expenses and other current assets, primarily due to a decrease in prepaid income taxes.
6.3 Increase in merchandise inventories, net of accounts payable.
3.7 Increase in receivables, primarily due to a pending income tax refund.
1.3 Net increase from all other changes in current assets and current liabilities.
$77.1 Working capital at April 29, 2023
Cash Flow Analysis
A summary of operating, investing and financing activities for the thirteen weeks ended April 29, 2023 compared to the thirteen weeks ended April 30, 2022 is shown in the following table (in thousands):
  Thirteen Weeks Ended
  April 29,
2023		 April 30,
2022
Net cash used in operating activities $ (16,195) $ (17,553)
Net cash (used in) provided by investing activities (13,698) 43,463 
Net cash provided by (used in) financing activities 53  (8,157)
Net change in cash and cash equivalents $ (29,840) $ 17,753 
Net Cash Used in Operating Activities
Operating activities consist primarily of net (loss) income adjusted for non-cash items that include depreciation, asset impairment write-downs, deferred income taxes and share-based compensation expense, plus the effect on cash of changes during the year in our assets and liabilities.
Net cash used in operating activities was $16.2 million this year compared to $17.6 million last year. The $1.4 million reduction in net cash used in operating activities compared to last year was primarily due to an increase in accrued compensation and benefits and a decrease in prepaid expenses and other assets being largely offset by lower net sales and an increase in merchandise inventories, net of accounts payable.
Net Cash (Used in) Provided by Investing Activities
Cash flows from investing activities consist primarily of capital expenditures and maturities and purchases of marketable securities.
Net cash used in investing activities was $13.7 million this year compared to net cash provided of $43.5 million last year. Net cash used in investing activities in the first quarter of fiscal 2023 consisted of purchases of marketable securities of $24.5 million and capital expenditures totaling $4.3 million, partially offset by maturities of marketable securities of $15.1 million. Net cash provided by investing activities in the first quarter of fiscal 2022 consisted of maturities of marketable securities of $51.0 million, partially offset by the purchases of marketable securities of $5.0 million and capital expenditures totaling $2.6 million.

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Net Cash Provided by (Used in) Financing Activities
Financing activities primarily consist of share repurchases and proceeds from employee exercises of stock options.
Net cash provided by financing activities was $0.1 million this year resulting from the proceeds of employee exercises of stock options. Net cash used in financing activities of $8.2 million last year was attributable to the repurchase of shares of our common stock.
Asset-Backed Credit Facility
New Credit Agreement
On April 27, 2023 (the “Closing Date”), we entered into a credit agreement and revolving line of credit note (the "Note" and, collectively, the “Credit Agreement”) with Wells Fargo Bank, National Association, as lender (the “Bank”). The Credit Agreement provides for an asset-based, senior secured revolving credit facility (“Revolving Facility”) of up to $65.0 million (“Revolving Commitment”) consisting of revolving loans, letters of credit and swing line loans, with a sub-limit on letters of credit outstanding at any time of $10.0 million and a sub-limit for swing line loans of $7.5 million. The Credit Agreement also includes an uncommitted accordion feature whereby we may increase the Revolving Commitment by an aggregate amount not to exceed $12.5 million, subject to certain conditions. The Revolving Facility matures on April 27, 2026. The payment and performance in full of the secured obligations under the Revolving Facility are secured by a lien on and security interest in all of our assets.
The maximum borrowings permitted under the Revolving Facility is equal to the lesser of (x) the Revolving Commitment and (y) the applicable borrowing base, which is equal to (i) 90% of our eligible credit card receivables, plus (ii) 90% of the cost of certain adjusted eligible inventory, less certain inventory reserves , plus (iii) 90% of the cost of certain adjusted eligible in-transit inventory, less certain inventory reserves, less (iv) certain other reserves established by the Bank. As of the Closing Date, our borrowing base was deemed to be equal to $25.0 million until the Banks’ receipt of reasonably satisfactory due diligence materials (provided that if such materials are not received within 60 days (or such longer period as agreed by the Bank) after the Closing Date, the deemed borrowing base will be reduced to $0. As of the Closing Date, we had no outstanding borrowings under the Credit Agreement and the only utilization of the letters of credit sub-limit under the Credit Agreement was a $2.025 million irrevocable standby letter of credit, which was previously issued under the Prior Credit Agreement and was transferred on the Closing Date to the Credit Agreement.
The unused portion of the Revolving Commitment accrues a commitment fee of 0.375% per annum. Borrowings under the Revolving Facility bear interest at a rate per annum that ranges from the Secured Overnight Financing Rate (“SOFR”) plus a credit spread adjustment (equal to 10 basis points for one- and three-month term SOFR) plus 1.50% to 2.00%, or a base rate (as calculated in accordance with the Credit Agreement) (the “Base Rate”) plus 0.50% to 1.00%, based on the average daily borrowing capacity under the Revolving Facility over the applicable fiscal quarter. We are allowed to elect to apply either SOFR or Base Rate interest to borrowings at its discretion, other than in the case of swing line loans, to which the Base Rate shall apply.
Under the Credit Agreement, we are subject to a variety of affirmative and negative covenants customary in an asset-based lending facility, including a financial covenant relating to availability (which is required to remain above the greater of: (i) ten percent (10%) of the Loan Cap (as defined in the Credit Agreement) and (ii) $6,000,000.00). Prior to the first anniversary of the Closing Date, we are prohibited from declaring or paying any cash dividends to our stockholders or repurchasing our common stock, and thereafter, is permitted, provided, among other things, no default or event of default exists as of the date of any such payment and after giving effect thereto and certain minimum availability and minimum projected availability tests are satisfied.
Events of default under the Credit Agreement include, among other things, failure to pay principal, interest, fees or other amounts; covenant defaults; material inaccuracy of representations and warranties; bankruptcy events; actual or asserted invalidity of any the Credit Agreement or related loan documents; or a change of control.
In connection with the entry into the Credit Agreement, on April 27, 2023, we entered into certain ancillary agreements, including (i) a security agreement in favor of the Bank (the “Security Agreement”), and (ii) a guaranty by us in favor of the Bank (the “Guaranty”). The Security Agreement and the Guaranty replaced (i) the third party pledge agreement, dated as of January 20, 2022, by us in favor of the Bank), (ii) the continuing guaranty by us in favor of the Banks, dated January 20, 2022, and (iii) the security agreement: business assets, dated as of January 20, 2022, by us in favor of the Bank (collectively, the “Prior Security Agreements”), which were all terminated concurrently with the termination of the Prior Credit Agreement (as defined below).
As of April 29, 2023, we were in compliance with all of our covenants and had no outstanding borrowings under the Credit Agreement.


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Prior Credit Agreement
The Credit Agreement replaced our previously existing senior secured credit agreement ( as amended, the "Prior Credit Agreement") and revolving line of credit note dated as of January 20, 2022 with the Bank, which had revolving commitments of up to $25.0 million consisting of revolving loans, letters of credit and swing line loans, with a sub-limit on letters of credit outstanding at any time of $15.0 million. In connection with the entry into the Prior Credit Agreement, on January 20, 2022, we also entered into the Prior Security Agreements.
Borrowings under the Prior Credit Agreement bore interest at a rate per annum equal to SOFR plus 0.75%. Amounts available to be drawn under outstanding letters of credit accrued fees in an amount equal to 1.00% per annum. The unused portion of the Prior Credit Agreement was not subject to a commitment fee. As of the Closing Date, we had no outstanding borrowings under the Credit Agreement, and the only utilization of the letters of credit sub-limit under the Credit Agreement was a $2.025 million irrevocable standby letter of credit, which was previously issued under the Prior Credit Agreement and was transferred on the Closing Date.
Under the Prior Credit Agreement, we were subject to a variety of affirmative and negative covenants of types customary in a cash-flow-based lending facility, including financial covenants that required maintenance of (1) a ratio of total funded debt to earnings before interest, taxes, depreciation, amortization and annual rent expenses no greater than 4.75 to 1.00 and (2) a fixed charge coverage ratio of not less than 1.25 to 1.00 (calculation of which took into account dividends, distributions, redemptions and repurchases of our equity interests only if our cash on hand, net of any amounts outstanding under the Prior Credit Agreement, was less than $50.0 million after giving effect to such dividends, distributions, redemptions or repurchases).
Events of default under the Prior Credit Agreement included, among other things, failure to pay principal, interest, fees or other amounts; covenant defaults; material inaccuracy of representations and warranties; bankruptcy events; actual or asserted invalidity of any of the loan documents; or a change of control.
Contractual Obligations
As of April 29, 2023, there were no material changes to our contractual obligations as described in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our Annual Report on Form 10-K for the fiscal year ended January 28, 2023.
Critical Accounting Policies and Estimates
The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires the appropriate application of certain accounting policies, some of which require us to make estimates and assumptions about future events and their impact on amounts reported in our consolidated financial statements. Since future events and their impact cannot be determined with absolute certainty, the actual results will inevitably differ from our estimates. A summary of our significant accounting policies is included in Note 2 to the consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended January 28, 2023.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As of April 29, 2023, there were no material changes in the market risks described in the “Quantitative and Qualitative Disclosure About Market Risks” section of our Annual Report on Form 10-K for the fiscal year ended January 28, 2023.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, including our Chief Executive Officer and our Chief Financial Officer, with the participation of our Disclosure Committee, evaluated the effectiveness of our disclosure controls and procedures as of April 29, 2023. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Based on the evaluation of our disclosure controls and procedures as of April 29, 2023, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

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Changes in Internal Control Over Financial Reporting
There was no change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the thirteen weeks ended April 29, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls
Our management, including our Chief Executive Officer and Chief Financial Officer, believes that our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives and are effective at the reasonable assurance level. However, our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.
These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Part II. Other Information
Item 1. Legal Proceedings
The information contained in “Note 5: Commitments and Contingencies” to our consolidated financial statements included in this Report is incorporated by reference into this Item.
Item 1A. Risk Factors
We operate in a rapidly changing environment that involves a number of risks that could materially and adversely affect our business, financial condition, prospects, operating results or cash flows. In addition to the other information set forth in this Report, please refer to the section titled “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended January 28, 2023 for a detailed discussion of the risks that affect our business.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Not applicable.

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Item 6. Exhibits
Exhibit
No.		    Description of Exhibit
  
  
  
101    Interactive data files from Tilly’s, Inc.’s Quarterly Report on Form 10-Q for the quarter ended April 29, 2023, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets; (ii) the Consolidated Statements of Operations; (iii) the Consolidated Statements of Comprehensive (Loss) Income; (iv) the Consolidated Statement of Stockholders’ Equity; (v) the Consolidated Statements of Cash Flows and (vi) Notes to the Consolidated Financial Statements.
104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
* Filed herewith.
** Furnished herewith and not “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
# Management contract or compensatory plan.


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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
Tilly’s, Inc.
Date: June 5, 2023
/s/ Edmond Thomas
Edmond Thomas
President, Chief Executive Officer and Director
(Principal Executive Officer)
Date: June 5, 2023
/s/ Michael Henry
Michael Henry
Executive Vice President, Chief Financial Officer
(Principal Financial Officer)


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