Tilly's (TLYS) risk factors, FY2026 10-K

Risks Related to our Business

1. 01Our net sales could be adversely impacted by decreases in consumer spending
2. 02A rise in the cost of products and services that are necessary for the operation of our business could increase our cost of sales and cause our results of operations and margins to decline26% rewritten
3. 03We have a recent history of operating losses, and if we are unable to improve our performance or profitability, we may need to begin borrowing under our credit facility to finance operations and/or find additional sources of liquidity to meet our cash requirements
4. 04We face intense competition in our industry and we may not be able to compete effectively
5. 05We purchase merchandise in advance of the season in which it will be sold and if we purchase too much inventory or do not manage our inventory levels effectively, we may need to reduce prices in order to sell it or face other negative impacts, which may adversely affect our overall profitability
6. 06We may continue to experience comparable store sales or sales per square foot declines, which could cause our results of operations to decline
7. 07Our business depends upon identifying and responding to changing customer fashion preferences and fashion-related trends. If we cannot identify trends in advance or we select the wrong fashion trends, our sales could be adversely affected
8. 08We may not be able to implement our business strategies on the timelines we anticipate, in a cost-effective manner, or at all
9. 09There can be no assurance that we will be able to open new stores that are profitable or improve the performance of our existing stores sufficiently to achieve profitability
10. 10Our business depends upon our ability to grow and improve the online portion of our business, which is subject to a variety of risks and uncertainties
11. 11Our ability to attract customers to our stores depends significantly on the success of the retail centers where our stores are located
12. 12We are required to make significant lease payments for our store leases, corporate offices, and distribution centers, which may strain our cash flow
13. 13We buy and stock merchandise based upon seasonal weather patterns and therefore unseasonable weather could negatively impact our sales41% rewritten
14. 14Our sales can significantly fluctuate based upon shopping seasons, which may cause our operating results to fluctuate disproportionately on a quarterly basis
15. 15If we fail to maintain good relationships with our suppliers or if our suppliers are unable or unwilling to provide us with sufficient quantities of merchandise at acceptable prices, our business and operations may be adversely affected
16. 16If we cannot retain or find qualified employees to meet our staffing needs in our stores, our distribution and e-com fulfillment centers, or our corporate offices, our business could be adversely affected
17. 17Our business largely depends on a strong brand image, and if we are not able to maintain and enhance our brand, particularly in new markets where we have limited brand recognition, we may be unable to increase or maintain our level of sales
18. 18Any inability to balance merchandise bearing our proprietary brands with the third-party branded merchandise we sell may have an adverse effect on our sales and gross margin
19. 19Most of our merchandise is produced in foreign countries, making the price and availability of our merchandise susceptible to international trade and other international conditions51% rewritten
20. 20Our stores are mostly located in the southwestern and northeastern United States and in Florida, with a significant number of stores located in California, putting us at risk of concentration issues and other region-specific disruptions
21. 21Litigation costs and the outcome of litigation could have a material adverse effect on our business
22. 22If our vendors and manufacturing sources fail to use acceptable labor or other practices our reputation may be harmed, which could negatively impact our business
23. 23If we lose key management personnel our operations could be negatively impacted23% rewritten
24. 24We rely on third parties to deliver merchandise to our stores located outside of southern California and to our customers and, therefore, our business could be negatively impacted by disruptions in the operations of these third-party providers

Risks Related to Information Technology, Data Privacy and Intellectual Property

1. 25If our information technology fails to operate or is unable to support our business, our operations could be disrupted
2. 26Our business is subject to a variety of laws, rules, and other obligations regarding data protection and privacy, which could result in additional compliance costs, subject us to enforcement actions, or cause us to change our platform or business practices
3. 27If we are unable to protect our intellectual property rights, our financial results may be negatively impacted
4. 28We may be subject to liability if we, or our vendors, infringe upon the intellectual property rights of third parties

Risks Related to Our Ownership Structure and Ownership of Our Common Stock

1. 29We are a controlled company within the meaning of the NYSE rules, and, as a result, we may rely on exemptions from certain corporate governance requirements that provide protection to stockholders of other companies
2. 30If securities or industry analysts publish inaccurate or unfavorable research about our business, the price and trading volume of our Class A common stock could decline
3. 31Financial forecasting by us and financial analysts who may publish estimates of our performance may differ materially from actual results
4. 32We have a small public float compared to other larger publicly-traded companies, which may result in price swings in our Class A common stock or make it difficult to acquire or dispose of our Class A common stock
5. 33The price of our Class A common stock has been, and may continue to be, volatile and may decline in value
6. 34Future sales of our common stock by us or by existing stockholders could cause the price of our Class A common stock to decline
7. 35While we have paid special cash dividends in the past, there can be no assurance that we will pay dividends in the future, which may make our Class A common stock less desirable to investors and decrease its value40% rewritten
8. 36Our corporate organizational documents and Delaware law have anti-takeover provisions that may inhibit or prohibit a takeover of us and the replacement or removal of our management
9. 37These provisions may prevent a merger or acquisition of us which could limit the price investors would pay for our common stock in the future

General Risks

1. 38We depend on cash generated from our operations to support our business, which could strain our cash flow
2. 39Epidemics, pandemics, war, terrorism, civil unrest or other public disruptions could negatively affect our business
3. 40We may be subject to unionization and work stoppages, or slowdowns
4. 41Violations of and/or changes in laws, including employment laws and laws related to our merchandise and our e-commerce platform, could make conducting our business more expensive or change the way we do business
5. 42We may experience fluctuations in our tax obligations and effective tax rate81% rewritten
6. 43affected by changes in the mix and level of earnings, or changes in tax laws in any relevant jurisdiction. We currently expect our effective tax rate to be near zero on an annual basis due to maintaining a full valuation allowance on all deferred tax assets as a result of our recent operating lossesNew