Tilly’s (TLYS - Get Rating) and other retail stocks are commonly overlooked as they operate in a space that is currently being disrupted by online e-tailers.

 
However, this poor sentiment and low expectations are the perfect conditions for a turnaround. TLYS has legitimate potential to pop moving forward in spite of the fact that it is off most investors’ radar. This retailer sells items to men, women and children both online and offline.
 
Let’s delve a little deeper into TLYS to determine if it is worthy of a place in your portfolio.
 
TLYS Revenue Streams

TLYS sells clothing, accessories and shoes on the web and also in traditional brick-and-mortar stores. Convenient curbside pickup is available for those who would like to order online and pick up their selected items at a local TLYS store. This Irvine, CA-based specialty retailer specializes in the action sports space, selling everything from t-shirts to swimwear, pants, denim apparel, cologne, footwear and more.

TLYS by the Numbers

TLYS fell off a cliff in the late winter and early spring of ’20, largely due to the coronavirus. However, the stock quickly popped right back to life, steadily rising in the months that followed the start of the pandemic, moving right back to its pre-COVID trading price of $9 to $10. At the moment, TLYS is around $1.50 away from its 52-week high of $10.76. The top analysts have a rosy outlook for TLYS, setting an average price target of $11.50 for the stock. If TLYS reaches this level, it will have increased by more than 23%.

TLYS POWR Ratings

Take a look at TLYS’s POWR Ratings and you will be impressed. The stock has an “A” grade in the Trade Grade component along with “B” grades in the Industry Rank and Buy & Hold Grade components. Out of 70 publicly traded companies in the Fashion & Luxury space, TLYS is ranked 44th.

The Appeal of TLYS

TLYS was adding stores prior to the start of the pandemic. The company is still likely to follow through with its plans to expand in spite of the pandemic. The willingness to open new locations is one of the primary differences between TLYS and other retail businesses as the majority of traditional brick-and-mortar retailers are either closing stores or moving forward without considering opening new locations as business continues to transition to the web. Though TLYS stores were closed during the pandemic, its net sales declined a mere 16% on a quarterly basis as compared to the prior year.

TLYS management has gone out of its way to make it clear that the company’s sales began to rebound quite strongly in September of ’20. In fact, the company’s comparable sales were the same as those in the fall of ’19 as they were in ’20. Though the pandemic was certainly a negative for TLYS’s business, the company has more than $110 million of cash on hand. TLYS will likely continue to grow in the months and years ahead in spite of the fact that the majority of its competition in the retail space is either reducing their number of stores or going out of business. If everything goes as planned, TLYS will add an additional seven stores in ’21. This would be quite the accomplishment following a potentially crushing pandemic and customer migration to the web.

TLYS can Survive a Prolonged Pandemic

If the pandemic continues through the summer of ’21 or even all the way into ’22, TLYS will survive and possibly even thrive. Though reduced foot traffic at TLYS stores is certainly concerning, the company provides customers with the opportunity to shop online and also drive to TLYS stores for curbside pickup. TLYS has decreased its inventory to 24% below the levels of prior years, a strategy that seems concerning on the surface yet will prove quite prudent amidst declining sales.

Though the majority of TLYS stores are in Florida and California where the pandemic is particularly bad, its e-commerce is picking up the slack. TLYS digital sales are up a whopping 166% compared to the same period last year.