Hello, and welcome to Tilly's Q2 2023 results earnings results conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the Star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press Star, then one on your telephone keypad. To withdraw from the question queue, you may press Star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Gar Jackson, Investor Relations. Please go ahead. Good afternoon, and welcome to the Tilly's fiscal 2023 Q2 earnings call. Ed Thomas, President and CEO, and Michael Henry, Executive Vice President and CFO, will discuss the company's results and then host a Q&A session. For a copy of Tilly's earnings release, please visit the Investor Relations section of the company's website at tillys.com. From this same section, shortly after the conclusion of the call, you will also be able to find a recorded replay of this call for the next 30 days. Certain forward-looking statements will be made during this call that reflect Tilly's judgment and analysis only as of today, 31 August 2023, and actual results may differ materially from current expectations based on various factors affecting Tilly's business. Accordingly, you should not place undue reliance on these forward-looking statements. For a more thorough discussion of the risks and uncertainties associated with any forward-looking statements, please see the disclaimer regarding forward-looking statements that is included in our fiscal 2023 Q2 earnings release, which is furnished to the SEC today on Form 8-K, as well as our other filings with the SEC referenced in that disclaimer. Today's call will be limited to one hour, and I will include a Q&A session after our prepared remarks. I now turn the call over to Ed. Thanks, Gar. Good afternoon, everyone, and thank you for joining us today. Our Q2 results exceeded our previously announced estimated outlook ranges for both net sales and earnings per share. The trend of our comp sales results improved to negative high single digits for each of June and July, following a negative 11.3% start in fiscal May. This improved sequential comp sales performance, coupled with diligent expense management, produced better bottom-line results than we anticipated for the quarter. Our spring/summer product categories performed better during the Q2 than in the Q1 of this fiscal year, resulting in improved relative performance across all geographic markets, with the most significant improvement coming from our home state of California, where 40% of our stores reside. For the quarter, on a percentage basis, comps were positive in the Northwest, single-digit negative in eight of our geographic markets, including both Southern and Northern California, and double-digit negative in the remaining five markets. In terms of store transaction metrics, on a percentage basis, total transactions were down low double digits, while the average transaction value increased by low single digits compared to last year. From a merchandising perspective, for the Q2, girls and footwear comped positive. Women's and boys were single-digit negative, while men's and accessories were each double-digit negative on a percentage basis. All departments improved sequentially from their Q1 performance, and most have then improved further from the Q2 performance during August. We are optimistic that our new Chief Merchandising Officer and new Vice President of Merchandise Planning, both of who joined us in May, will help us continue to improve our performance going forward. In terms of store real estate, we expect to open three new stores in each of the third and Q4s, bringing our total new store count to seven for the year. We closed two stores during the Q2. We continue to believe that we have ample opportunities to grow our total store count over the next several years. However, as we've said in the past, we will be very selective in our approach to new store openings and will only open new stores that reflect what we believe to be appropriate lease economics to drive acceptable profitability relative to the sales environment we expect. Turning to the Q3 of fiscal 2023, which includes the peak of the back-to-school season, total comparable net sales through August 29th, including both physical stores and e-com, decreased by 3.9% versus the comparable period of last year, continuing the sequential improvement in our comp sales trends in recent months. We have seen back-to-school shopping patterns this year that seem to indicate that our customers have been shopping later than in prior years, even seeing stronger results following what we anticipated to be the peak back-to-school shopping weeks for certain stores before then seeing results start to soften in the post back-to-school period. Given this backdrop, amid the broader economic environment, we are anticipating that our comp sales results may likely revert to pre-back-to-school levels, following what was a need-based purchasing period during August. Overall, we feel good about our back-to-school and holiday merchandise assortments, and despite ongoing macroeconomic challenges, we are cautiously optimistic that we can produce a better comp store sales trend over the back half of the year than what we produced in the H1. We will continue to manage our business diligently relative to the environment, with the goal of improving performance over time. I will now turn the call over to Mike to discuss our Q2 operating results in more detail and to introduce our Q3 outlook. Mike? Thanks, Ed. Our Q2 operating results compared to last year were as follows: Net sales were $160 million, a decrease of 5%. Net sales from physical stores decreased by 5.3% and represented 81.1% of total net sales, net sales, compared to 81.5% last year, while e-commerce net sales decreased by 3.4% and represented 18.9% of total net sales, compared to 18.5% last year. Comparable net sales, including both physical stores and e-commerce, decreased by 8.5%. We ended the Q2 with 246 total stores, compared to 242 total stores last year. Gross margin, including buying, distribution, and occupancy expenses, was 27.7% of net sales, compared to 30.9% of net sales last year. Buying, distribution, and occupancy costs deleveraged by 170 basis points and increased by $0.9 million collectively, predominantly from occupancy costs as a result of operating additional stores and carrying these costs against a lower level of net sales this year. Product margins declined by 150 basis points compared to last year's Q2, primarily as a result of higher markdowns and estimated inventory valuation reserves, but improved by 90 basis points sequentially from this year's Q1. Total SG&A expenses were $47 million, or 29.4% of net sales, compared to $46.8 million or 27.8% of net sales last year. SG&A deleveraged as a percentage of net sales due to carrying these costs against lower total net sales. The largest SG&A increases were from non-cash store impairment charges of $0.8 million and increased corporate payroll and benefits of $0.4 million, primarily due to the impact of wage increases for employee retention. Partially offsetting these increases were a variety of smaller savings across several expense line items. Operating loss was $2.7 million, or 1.7% of net sales, compared to operating income of $5.2 million or 3.1% of net sales last year. Other income was $1.2 million, compared to $0.2 million last year, primarily due to earning higher rates of return on our marketable securities this year. Income tax benefit was $0.3 million, or 23.2% of pre-tax loss, compared to income tax expense of $1.5 million or 28.4% of pre-tax income last year. The decrease in income tax rate was primarily attributable to the low level of pre-tax loss and certain discrete tax impacts associated with stock-based compensation. Net loss was $1.1 million, or $0.04 per share, compared to net income of $3.8 million or $0.13 per diluted share last year, and an improvement of $0.36 per share sequentially from our Q1 results. Weighted average shares were $29.8 million this year, compared to $30.2 million diluted shares last year. Turning to our balance sheet, we ended the Q2 with total cash and marketable securities of $104 million and no debt outstanding, compared to $116 million and no debt at the end of the Q2 last year. We ended the Q2 with inventories at cost up less than 1% per sq ft and down 3% per sq ft in units. Total capital expenditures for the H1 were $6.3 million, compared to $6.9 million last year. We currently expect our total capital expenditures for fiscal 2023 to be in the range of approximately $15 million-$17 million, primarily for new store construction and information technology and distribution systems enhancements. Turning to the Q3 of fiscal 2023, based on our quarter to date net sales results and current and historical trends, including August typically representing just over half of Q3 net sales volume, we currently expect our total net sales for the Q3 of fiscal 2023 to be in the range of approximately $166 million-$171 million, SG&A to be approximately $50 million, pre-tax loss to be in the range of approximately $1.8 million-$4.3 million. Our estimated income tax rate to be approximately 26%, and loss per share to be in the range of $0.05-$0.11, based on estimated weighted average shares of approximately 29.8 million. We expect to have 249 total stores open at the end of the Q3, a net increase of 2 from 247 total stores at the end of last year's Q3. Operator, we'll now go to our Q&A session. Thank you very much. We will now begin the question-and-answer session. To ask a question, you may press Star, then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press Star, then two. At this time, we will pause momentarily to assemble our roster. Today's first question comes from Matt Koranda with Roth MKM. Please go ahead. Hey, guys. Good afternoon. Thanks for the questions. Just wanted to see if I could get a bit more color on why the expected drop-off in comps for the rest of the quarter. It just looks like, I know you said maybe we're expecting when need-based buying goes away, that we expect a bit of a drop-off. But correct me if I'm wrong, I think comps got a bit easier last year, when we think about September, October. Could you maybe just speak to the dynamic there? Sure, Matt, we're already seeing it. So, we've been tracking performance before, during, and after the back-to-school peaks, depending on when various schools went back. And we've seen a consistent pattern that as soon as the peak of the back-to-school period is over, we are seeing the business slow down. You are right, the compares are easier in the final two months of the quarter, but we're still seeing that same deterioration, regardless of the fact that we're going up against easier compares. August was actually the toughest compare, and we had our best month, so it's kinda counterintuitive from a purely comparable basis standpoint, but that is the pattern that we're seeing. So, we were barely negative in the second week of August, after having a minus 10 in the first week of August. Then we were +3 in the third week of August, and then -5 in the final week of August, and we're down high single digits this week. So we're seeing it in the performance of the stores. And as we've heard other companies mention as well, it does appear to us that the back-to-school shopping patterns were much closer in to need, kind of a tighter peak. And then once that need period has concluded, and at this stage, over 90% of back to school is done. There's less than 20 stores that are currently in peak. The rest have already completed their key back-to-school peak period. So that's just the dynamic that we're seeing in the results, and we're contemplating that in our outlook. Okay, fair enough. And then maybe just, c ould you talk about the, what's contemplated in the ticket versus transaction within the comp outlook? I mean, any changes there, maybe just less benefit from ticket on a year-over-year basis, or anything to call out on that front relative to kinda what you experienced in Q2? Our comp dynamics have been pretty consistent most of the year. It's been a decline in traffic and a decline in transactions, period. The average transaction value has actually been slightly up, interestingly. So there's just fewer transactions occurring, but they are occurring at a similar or even slightly higher rate. Got it. And that's coming from AUR, or is that coming from bigger basket? It's a low single-digit change, so there's nothing dramatic to call out on either item. Okay, got it. And then just one other one for me on the gross margins. I know you don't explicitly put out a gross margin outlook, but you can back into it on an applied basis, and it just seems to look relatively flat in the Q3 versus the second, and I just noted that despite kind of the uptick in revenue. So just wondered if you could maybe speak to the dynamics on the A&O costs, maybe, Mike, or just more pressure on merch margin. What's the dynamic there? Sure. So it's, as it has been in recent quarters, it continues to be occupancy is the major part of deleverage within the non-product cost of goods sold. We're starting the quarter with four more stores than last year's Q3, so dollars are added. We're gonna end the Q3 with two more stores than last year and, you know, carrying those costs against what we're expecting to be a negative comp for the quarter. So it's gonna deleverage. So it's occupancy that causes most of it. We are anticipating, product margins to be somewhat lower than last year's Q3, but again, sequentially improved in Q3 versus Q2, and Q2 was improved sequentially from Q1. So on the worse end of our outlook, it might be 100 basis points of product margin decline. It'll be less than 100 basis points on the better end. Okay. Gotcha. I'll leave it there. Thanks. The next question comes from Mitch Kummetz with Seaport. Please go ahead. Yes, thanks for taking my question. Hey, could you just talk a little bit about what was working for back to school for you guys? Sure. There was no single brand or category that was dominant, for sure. We saw improvement from Q1 to Q2, pretty much across all categories, being apparel, footwear, accessories. We saw improvement there. I would say the improvement continued into August in the boys and girls category. But, I can't call out anything, any single category or brand that drove it. It was across the board. Did I hear you correctly, did you say that girls and footwear were positive comp in the quarter? For the Q2, yes. Yes. Girls, girls and footwear. That's correct. Can you just elaborate on that? Where, I mean, that's pretty good strength compared to the rest of the business. What are you seeing within those segments? The girls assortment was definitely improved over last year, so that drove that part of the business. Footwear has been pretty decent for us all year, and it's multiple brands that are driving that. You know, some Nike, some Converse, that's driving that business. Okay. And when you think about, like, the product pipeline going into holiday, how are you feeling about that? I feel really good about it. I mean, obviously, with the new merchandising leadership coming in just a short while ago, they've made, they're making whatever changes they have been able to make. I think they've done a really good job of editing the go-forward assortment based on what they feel is the right trends, but also opportunities that they've identified in looking at our business. So I think we're gonna be in really, we'll have a really good assortment for holidays, for sure. Okay. And then lastly, I know that on the last earnings call, you were anticipating some pretty heavy promotional activity in kind of seasonal categories, shorts, swim, sandals. I'm wondering how that played out, how much of a drag that was on the product margin, and how were you situated with your seasonal inventory coming out of the quarter? I don't think it had a dramatic impact one way or the other. The seasonal categories improved their performance in the Q2 sequentially from Q1 and continued to be better in August, generally speaking, than they were in the Q2. You know, you'll remember how just terrible the start to the Q1 was, especially here in California, with all the just torrential rain that we had repetitively through February and March. So we did have a really slow start to the spring season, and we do have a little bit more spring/summer merchandise right now than we did a year ago. But again, we're expecting Q3 product margins to be sequentially improved versus Q2, and for the decline versus last year to narrow in the Q3 than what it was in the Q2 and what it was in the Q1. So we've contemplated everything that we think we need to contemplate to deal with anything that we need to deal with as we close out the spring/summer season and get deeper into fall as the Q3 moves on. Yeah. We'll be just to add to that, we'll be in pretty good shape in terms of the quantity of inventory that we have in shorts and swim and so on and so forth, 'cause it helps that most of the country has been 100 degrees the last two weeks. But those negative trends in the seasonal categories really continued into August, which we anticipated early on, when we made adjustments to inventory flow wherever we could. Okay, great. Thanks, guys. Thank you. The next question comes from Jeff Van Sinderen with B. Riley. Please go ahead. Hi, everyone. Let me say congratulations on the improving trend. Maybe you can circle back to the CMO situation. Just wondering how much of the holiday assortment is actually gonna be owned, so to speak, by the new CMO? I don't know how to put a percentage to it, Jeff, but honestly, there's a lot of things that she felt good about that was on order that we've already taken action on. And making adjustments, really, I would say, diving in deeper into some of the brands that are stronger for us than what we had on order, that would be one area that I would say we think it's gonna be. There are some trends that we were on, but again, adjusting the forecast going forward to maybe doing heavier receipts in areas where we think are gonna be, where she thinks that we're gonna be stronger. Okay, fair enough. And then just wanted to circle back to inventory for a second. If we assume kinda the midpoint of your Q3 guidance, where do you think that we would see inventory per foot be, roughly, at the end of Q3? I think per sq ft, per sq ft, it will be down to some extent. You know, as always, we do everything we can to try to manage inventory as tightly to the sales trends as possible. Q2 sales were down five. Our unit inventory per sq ft was down three, so pretty close there, and we're gonna aim to keep that relationship as tight as we can. Okay, good. And then just as far as the lease decisions, how far are we through those decisions for this year? And then, I guess, what are you seeing on renewals? We're done for this year, pretty much, unless we see something unusual that's opportunistic. We have a pretty significant pipeline that we've been working on. And when we decide to accelerate the number of stores as part of our expansion, we're gonna be in really good shape to be able to turn that, flip that switch pretty quickly. As far as renewals go, we're, you know, so far, so good. You know, the economics have been where we're, you know, we're happy with the economics we're seeing on renewals. And, you know, we'll continue to really scrutinize every lease renewal to make sure that the economics are what we think is gonna happen in the future. Okay, makes sense. Thanks very much. I'll take the rest offline. All right. Thanks, Jeff. This concludes the question and answer session. I would like to turn the conference back over to Ed Thomas for any closing remarks. Thank you all for joining us on the call today. We look forward to sharing our Q3 results with you at the end of November. Have a great evening. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your line.