Why did Tilly's operating profit plummet in Q1 2025 despite rising sales?

Tilly's operating profit plummeted in Q1 2025 despite rising sales due to a combination of factors: 1. **Margin Pressure**: The company's operating profit margin was negative at -8.75% in Q1 2025. This indicates that the company's costs were exceeding its revenues during the period. |code|Ticker|Name|Date|Operating Profit Margin|Operating Income|market_code| |---|---|---|---|---|---|---| |TLYS|TLYS.N|Tilly's|2024 Q2|-7.033442881927303|-2685000|169| |TLYS|TLYS.N|Tilly's|2024 Q3|-4.990856835598572|-2516000|169| |TLYS|TLYS.N|Tilly's|2024 Q4|-4.972371257119837|-8520000|169| |TLYS|TLYS.N|Tilly's|2025 Q1|-17.942963679049857|-2.0788E7|169| 2. **Gross Margin Decline**: The gross margin for Tilly's was 20.99% in Q1 2025, which is relatively low. This suggests that the company is facing significant cost pressures, which are eating into its profit. |code|Ticker|Name|Date|Gross Profit Margin|Total Revenue|Net Profit Margin|market_code| |---|---|---|---|---|---|---|---| |TLYS|TLYS.N|Tilly's|2024 Q2|24.7733|1.59951E8|-4.6169|169| |TLYS|TLYS.N|Tilly's|2024 Q3|26.4347|1.66475E8|-3.0973|169| |TLYS|TLYS.N|Tilly's|2024 Q4|26.5867|1.7302E8|-5.5357|169| |TLYS|TLYS.N|Tilly's|2025 Q1|20.9855|1.15856E8|-16.9357|169| 3. **Net Margin Impact**: The net margin was negative at -16.94%, which means that not only was the company losing money on its core operations, but it was also losing money on overhead and other expenses. 4. **Earnings Guidance Miss**: Tilly's updated its first quarter 2025 earnings guidance, providing EPS guidance of -0.680--0.580, compared to the consensus estimate of -0.430. This indicates that the company's performance was below expectations. 5. **Strategic Changes**: The company has planned reduced inventory commitments for fiscal 2025 to target faster returns and improve product margins. These strategic changes may have had an impact on short-term profitability as the company navigates the transition. In conclusion, Tilly's operating profit plummeted due to a combination of negative operating and net margins, declining gross margins, and an earnings guidance miss, despite rising sales. The company's planned strategic changes may also have had an impact on short-term profitability.