TLYS

Tillys ($TLYS) Down 80%, Hedge Funds Begin 'Scooping Up' 500K Shares at the Bottom

06/03/2025 23:35

$TLYS (Tillys Inc) has plummeted over 80% in 18 months to dollar levels, but two hedge funds have been aggressively buying at the bottom, drawing significant market attention. The California-based teen apparel retailer started at $5.72 in June 2024, crashed to $0.69 in May 2025, and is currently trading around $1.46. This dramatic decline reflects persistent poor performance and broader retail industry challenges. The company recently reported a quarterly loss of 45 cents per share with revenue declining 14.9% year-over-year to $147.29 million. However, amid this dire situation, two sophisticated investment firms have made substantial purchases. Fund 1 Investments LLC accumulated approximately 500,000 shares between late June and early July 2024 at average prices of $5.40-$5.60. This investment firm traded on behalf of Pleasant Lake Onshore Feeder Fund LP and other private investment vehicles, with total purchase amounts reaching about $2.73 million. More intriguingly, Shay Capital LLC made concentrated purchases when $TLYS hit rock bottom in late May 2025. Within just one week from May 23-30, this hedge fund bought 235,285 shares at average prices of $0.85-$1.14, spending approximately $230,000. Notably, the May 30 purchase of 90,678 shares at $1.14 likely constituted a significant portion of that day's trading volume. **Smart money bottom-fishing often signals potential reversal patterns.** Tillys, founded in 1982, is an action sports lifestyle retailer focusing on surf, skate, and snowboard culture. Operating about 230 stores nationwide, it targets the 10-20 age demographic with brands like Vans, Billabong, Quiksilver, and Volcom. However, the company has struggled with online shopping trends and COVID-19 aftermath affecting the broader offline retail sector. With a market cap of only $57.29 million, the company represents a very small-cap opportunity. Paradoxically, this makes it attractive to institutional investors who can generate substantial returns from modest industry recovery or successful restructuring. From an insider trading perspective, CFO Henry Michael's June 2024 purchase of 5,000 shares at $5.01 per share is noteworthy. Management buying typically signals confidence in fundamental prospects. While some directors sold shares during the same period, this likely reflects portfolio diversification rather than pessimism. **Simultaneous buying by management and hedge funds is rarely coincidental.** Retail industry experts classify $TLYS as a 'classic turnaround candidate.' Brand recognition remains strong with a clear target demographic, but digital transformation and cost structure improvements are urgent priorities. Opportunities exist for profitability enhancement through store lease renegotiations and online channel strengthening. Analysts maintain an average price target of $2.50, implying 70% upside potential from current levels, assuming successful restructuring. Most analysts maintain 'hold' ratings, though some suggest potential upgrades based on hedge fund accumulation. Macroeconomically, trade tensions and inflation concerns in early 2025 have pressured the retail sector. Potential apparel import tariff increases pose additional headwinds for mid-market retailers like Tillys. However, Federal Reserve rate cut expectations starting in June could boost consumer sentiment. **Rate cut expectations could provide tailwinds for the broader retail sector.** Short-term, additional hedge fund buying following May's bottom-fishing will likely determine price direction. Shay Capital appears to have substantial buying capacity remaining, making their future moves a key market focus. Q2 earnings results and holiday season preparations within six months will serve as critical inflection points. If revenue decline moderates or cost reduction benefits materialize, hedge fund positioning could prove prescient. Long-term success depends on adapting to Gen Z consumption trends and action sports market growth potential. While brand identity remains strong, innovation aligned with digital-native shopping patterns is essential. **Smart money inflows at market bottoms have historically marked the beginning of long-term recoveries.** Though high-risk, current valuation levels may offer attractive risk-adjusted returns according to industry consensus.

You can receive notifications when news is published.