Tilly's operates a chain of specialty retail stores and a website that sells surf and skateboard apparel, footwear, skateboards, and accessories. Its stores offer Hurley, Levi's, LRG, Neff, and other brands, as well as its own brands (RSQ, Full Tilt, Blue Crown, and Infamous). The fast-growing retail chain operates more than 220 stores in more than 30 states under the Tilly's banner; most are concentrated in California, Arizona, and Florida. The company traces its roots back to 1982, when founders Hezy Shaked and Tilly Levine opened their first store in Orange Country, California.
Tilly's home state, California, is also its largest market, home to more than 90 of its stores. Arizona and Florida are runners up, each with about 20 locations. Overall, Tilly's has stores in 32 states from coast to coast and in between.
Sales and Marketing
Tilly's takes an eclectic approach to connect with its young customers and drive traffic to its stores and website. Brand partnerships, social media -- including blogs, Facebook, Instagram, Snapchat, and Twitter posts -- a loyalty program, radio, print, and email marketing, are all part of the mix.
Tilly has achieved unprecedented revenue growth over the years, with revenues jumping 6% to peak at a record-setting $551 million in 2016 (ended January). Fueling the historic revenue growth was the addition of 12 net new stores in both new and existing markets. Tilly also experienced an increase in comparable store sales of 1% in 2016.
Conversely, the company's profits have fallen each year, declining 46% to $7.5 million in 2016, its lowest total in at least 10 years. This steady erosion of profits has been due to a corresponding rise each year in the cost of goods sold, including a steady increase in shipping and handling and income tax expenses.
After increasing several straight years, the company's cash flow from operations fell from $48 million in 2015 to $37 million in 2016. This drop was attributed to a spike in cash paid for income taxes and a decrease in cash generated from working capital related to the timing of payments to vendors.
Since its founding, the company has been growing rapidly, especially in recent years, during which the number of its store locations have gone from 32 in 2004 to 195 in 2013. Tilly's future ambitions include opening new stores in an effort to establish a national presence. The company believes it can expand its store base to more than 500 locations by 2022. It's also focused on growing its online business and increasing same-store sales at physical locations. Tilly's began remodeling certain of its older, high-volume stores within its heritage markets of California, Arizona, and Nevada during fiscal 2014. It will continue remodeling a number of other high-volume stores during fiscal 2016 and beyond to continue improving its customers' in-store experience.
To keep its selection fresh and encourage more trips to its stores, merchandise is delivered to Tilly's stores several times per week. The stores stock hundreds of third-party surf, skate, and motocross brands, including Billabong, Converse, Quicksilver, Volcom, Young & Reckless, and many more, that accounted for 72% of net sales in fiscal 2014 (ended January). Proprietary brands, such as full til, blue crown, and Infamous, accounted for the remainder.