The retirement of Tilly’s Inc. President and CEO Ed Thomas came abruptly Monday.
The Irvine retailer warned of no such change in leadership, nor had a successor been named when Tilly’s said Thomas’ departure was effective immediately. Installed in his place for the interim is Hezy Shaked, the chain’s co-founder and executive chair.
“On behalf of the board of directors and everyone at Tilly’s, I sincerely thank Ed for his many valuable contributions and leadership during his tenure at Tilly’s, and wish him continued success in his future endeavors,” Shaked said in a statement.
The change comes as the retailer grapples with a rugged consumer landscape in which recent misses on the merchandise have been partly to blame for its financial performance.
Tilly’s said Monday Shaked’s understanding of the business as a co-founder makes him the right fit to oversee the company’s 251 stores and online business in the interim.
Now, it’s a question of who’s next for the top spot.
The board might consider looking within, at Executive Vice President and Chief Financial Officer Mike Henry.
Downers Grove, Ill. executive search firm Crist | Kolder Associates tracks the promotions of CFOs to CEOs, and it’s been steadily rising since 2020. About 8.4 percent of the 674 companies surveyed by the firm promoted their CFO to CEO in 2023. That’s the highest percentage for the 2013 to 2023 period tracked by Crist | Kolder.
Relevant Resume
Yes, Henry’s the finance guy. However, he’s often functioned as much more than the typical CFO.
Oftentimes, he’s heard offering insights on consumer trends during the company’s earnings calls with analysts as opposed to simply being the numbers person.
Plus, much of his in-house career has focused on youth retail.
Before Tilly’s, he was the senior vice president and global controller of Quiksilver Inc. during a rough stretch for the Huntington Beach company during which it ultimately reorganized under Chapter 11.
Henry was also at Anaheim-based Pacific Sunwear of California Inc., holding several positions. He last held the senior vice president and chief financial officer role between 2008 and 2011.
The Pacsun tenure is particularly notable.
Pacsun and Tilly’s were at one time lumped into the same teen retailer bucket – they sometimes still are. Both have roots in the action sports industry. That is, both chain’s assortments at one time skewed heavily in the direction of being the Southern California purveyors of local brands in the surf and skate arena.
Pacsun later pulled away, with a more aggressive stance on diversification in response to the ever-changing teen consumer by moving into fashion. Think exclusives with Kendall and Kylie Jenner, adding Brandy Melville and – perhaps most notable – working with Fear of God’s Essentials line on exclusive drops. Interestingly, Pacsun’s former CEO Alfred Chang was tapped last year to lead Fear of God as CEO.
Pacsun became more elevated and also moved quickly to establish a digital presence through its online shop and places such as TikTok.
Moving Faster
It behooves whomever is tapped next for the top spot at Tilly’s to move quickly to implement changes.
Tilly’s, while a smaller business and chain than Pacsun, has the potential to make similar moves as its competitors with a stronger point of view – whether that’s done through private label or third-party brands with defined voices.
It’s necessary given how the Tilly’s target consumer is shopping malls today.
“The mall environment has changed quite a bit, but it’s still OK,” Thomas said at the ICR investor conference this month in Orlando, Fla. “The way the shopping patterns have changed, especially for younger adults and teens, there might be decent traffic to the mall. But historically, especially the teenage customer, they would shop the mall and visit almost every store in the mall on each visit. That’s changed quite a bit now where they go to the mall with, I call it, the grocery list and they’ll shop specific retailers because they had done a lot of research online.”
The retailer seems to be getting it right on footwear, with the category consistently doing well. That’s because the company replaced some of the Vans business, which Thomas said “started to tail off well over a year ago.” Reebok, New Balance and Nike have helped fill the void.
Those switches now need to be made at a faster clip on the apparel side with the right labels and exclusivity to distinguish Tilly’s from everyone else at the mall or off mall.
“We are at an all-time low in terms of store productivity, at about $270 per square foot. We’ve been north of $300 before the pandemic hit and earlier years, back when the company went public in 2012, we were around $350 off the top of my head,” Henry said at ICR. “There’s certainly ample room for us to get that turned around. We’ve done it before; we should be able to get back to those kinds of levels again, about $300, and the profit will fall to the bottom line very quickly.”
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