Tilly’s (NYSE:TLYS) is headquartered in Irvine, CA. Like many other non-essential companies, it was devastated during the pandemic when it had to close its doors to in-person shopping.
That being said, Tilly’s is rebounding from the pandemic stronger than ever, reporting record profits and sales. Management thinks that momentum will continue throughout this year. Here is why Tilly’s could be a surprising growth stock in 2022.
Tilly’s is thriving
In the nine months ended October 30, Tilly’s net sales were 22.5% higher than they were during the same time in 2019. That is impressive, considering the Covid pandemic is still spiking today. Tilly’s is a brick-and-mortar accessories and apparel retailer with 243 stores open throughout the U.S. but mainly concentrated in Texas, Florida and California. Its products are made for young adults and pre-teens.
Management should be commended for the excellent job they did managing the company during the pandemic and ensuing supply chain shortages that have followed. Companies worldwide are reporting difficulty securing enough supplies to meet existing consumer demands. Those like Tilly’s that have secured the inventory they need reap the benefits of supply troubles at competitors. For instance, if the industry is short on supply, there will be less promotional activities like discounting.
Indeed, in its most recent quarter ended October 30, Tilly’s announced a gross profit margin of 37.2%, the highest since becoming a public company. The highest gross profit margin it had reached in the last decade was 32.2% in 2012.
Another benefit of having enough inventory when your competitors have fallen short is attracting disappointed customers. That might have played a big advantage for Tilly’s during the holidays. While Tilly’s holiday quarter figures haven’t been released yet, there is reason to believe their sales were robust. As of October 30, Tilly’s had inventories of $87 million, which is up from the $66 million it had during the same time last year. What’s more, the management team gave an update on its comparable net sales through November 30, saying it grew by 19.6% when compared to the year prior.
Tilly’s is in expansion mode
Tilly’s plans to open 15 to 20 new stores this year. That is an accelerated pace of new stores opening from 2021 when the business opened just five new stores. Tilly’s most certainly has the balance sheet to fund this expansion, with $155.6 million in securities and cash with no debt to its name. All in all, Tilly’s might be a surprise growth stock for 2022.