Stock Analysis

Here's Why We Think Tilly's, Inc.'s (NYSE:TLYS) CEO Compensation Looks Fair

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Performance at Tilly's, Inc. (NYSE:TLYS) has been rather uninspiring recently and shareholders may be wondering how CEO Ed Thomas plans to fix this. They will get a chance to exercise their voting power to influence the future direction of the company in the next AGM on 09 June 2021. Setting appropriate executive remuneration to align with the interests of shareholders may also be a way to influence the company performance in the long run. In our opinion, CEO compensation does not look excessive and we discuss why.

See our latest analysis for Tilly's

How Does Total Compensation For Ed Thomas Compare With Other Companies In The Industry?

Our data indicates that Tilly's, Inc. has a market capitalization of US$432m, and total annual CEO compensation was reported as US$1.1m for the year to January 2021. That's a notable decrease of 10.0% on last year. Notably, the salary which is US$784.6k, represents most of the total compensation being paid.

In comparison with other companies in the industry with market capitalizations ranging from US$200m to US$800m, the reported median CEO total compensation was US$2.6m. Accordingly, Tilly's pays its CEO under the industry median. What's more, Ed Thomas holds US$86k worth of shares in the company in their own name.

Component20212020Proportion (2021)
Salary US$785k US$798k 70%
Other US$328k US$439k 30%
Total CompensationUS$1.1m US$1.2m100%

On an industry level, roughly 15% of total compensation represents salary and 85% is other remuneration. Tilly's pays out 70% of remuneration in the form of a salary, significantly higher than the industry average. If salary is the major component in total compensation, it suggests that the CEO receives a higher fixed proportion of the total compensation, regardless of performance.

NYSE:TLYS CEO Compensation June 3rd 2021

A Look at Tilly's, Inc.'s Growth Numbers

Over the last three years, Tilly's, Inc. has shrunk its earnings per share by 49% per year. Its revenue is down 14% over the previous year.

Few shareholders would be pleased to read that EPS have declined. And the impression is worse when you consider revenue is down year-on-year. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.

Has Tilly's, Inc. Been A Good Investment?

Tilly's, Inc. has generated a total shareholder return of 12% over three years, so most shareholders would be reasonably content. But they probably don't want to see the CEO paid more than is normal for companies around the same size.

To Conclude...

Despite the positive returns on shareholders' investments, the fact that earnings have failed to grow makes us skeptical about the stock keeping up its current momentum. Shareholders might want to question the board about these concerns, and revisit their investment thesis for the company.

While it is important to pay attention to CEO remuneration, investors should also consider other elements of the business. That's why we did some digging and identified 2 warning signs for Tilly's that investors should think about before committing capital to this stock.

Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies that have HIGH return on equity and low debt.

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