CURV
Torrid Holdings INC
NYSE
8-K: Torrid Holdings Reports Mixed Q3 Results with Gross Margin Expansion Amidst Sales Decline
Sentiment:
Quarterly Report
3 December 2024 4:10 PM
Torrid Holdings reported a decrease in net sales for the third quarter of fiscal year 2024, but achieved gross margin expansion and a reduced net loss compared to the same period last year.
Worse than expected
The company's net sales and comparable sales decreased, indicating worse than expected performance.
Summary
- Torrid Holdings announced its financial results for the third quarter of fiscal year 2024, which ended on November 2, 2024.
- Net sales decreased by 4.2% to $263.8 million, compared to $275.4 million in the same quarter last year.
- Comparable sales also declined by 6.5% year-over-year.
- Despite the sales decrease, the company achieved a gross profit margin of 36.1%, a 285 basis point improvement from 33.2% in the prior year.
- The net loss was $1.2 million, or ($0.01) per share, an improvement from a net loss of $2.7 million, or ($0.03) per share, in the third quarter of the previous year.
- Adjusted EBITDA was $19.6 million, or 7.4% of net sales, compared to $19.4 million, or 7.0% of net sales, in the third quarter of last year.
- The company ended the quarter with $44 million in cash and reduced inventory levels by 19% compared to last year.
- Torrid opened two new stores and closed four, bringing the total store count to 655.
- The company has updated its full year 2024 outlook, projecting net sales between $1.083 billion and $1.098 billion and adjusted EBITDA between $101.0 million and $107.0 million.
Sentiment
Score: 5
Explanation: The sentiment is neutral to slightly negative. While there are positives like gross margin expansion and reduced net loss, the overall sales decline and cautious outlook temper the positive aspects. The company is facing challenges and needs to execute its strategies effectively to improve performance.
Positives
- Gross profit margin improved significantly by 285 basis points to 36.1%, driven by reduced product costs and increased sales of regular-priced items.
- The net loss decreased from $2.7 million to $1.2 million year-over-year.
- Adjusted EBITDA saw a slight increase to $19.6 million from $19.4 million in the same quarter last year.
- Inventory levels were reduced by 19% compared to the previous year, indicating better inventory management.
- Cash flow from operations for the nine-month period increased to $65.4 million from $33.7 million in the prior year.
Negatives
- Net sales decreased by 4.2% to $263.8 million compared to the same quarter last year.
- Comparable sales decreased by 6.5% year-over-year.
- The company's third quarter results were below expectations due to a lack of newness and novelty in fall assortments and a changing environment in late September and October.
- The company is taking a prudent approach to its fourth quarter outlook due to volatility in the business.
Risks
- The company faces macroeconomic challenges in the industry, including changes in consumer spending and general economic conditions.
- There are inflationary pressures with respect to labor and raw materials, as well as global supply chain constraints.
- The company is dependent on a strong brand image and faces increased competition from other brands and retailers.
- The company relies on third parties to drive traffic to its website and for the manufacture of its merchandise.
- The company is exposed to risks related to its reliance on information systems and potential security breaches.
- The company is subject to payment-related risks and potential litigation.
- The company's outlook does not take into consideration the Consumer Financial Protection Bureau ruling which mandates decreases in credit card late fees, which could impact profitability.
- The company has substantial indebtedness and lease obligations.
Future Outlook
The company expects net sales between $255.0 million and $270.0 million and adjusted EBITDA between $9.0 million and $15.0 million for the fourth quarter of fiscal 2024. For the full year 2024, net sales are projected to be between $1.083 billion and $1.098 billion, with adjusted EBITDA between $101.0 million and $107.0 million. The company also plans to open 12 to 16 new stores and close 30 to 40 stores as part of its store fleet optimization program.
Management Comments
- Lisa Harper, CEO of Torrid, stated that the third quarter results were below expectations due to a lack of newness in fall assortments and a changing environment in late September and October.
- Ms. Harper noted that the company delivered a positive full-price comp, 285 basis points of gross profit expansion, and modest Adjusted EBITDA growth despite weaker top line sales.
- Ms. Harper expressed confidence that the company has put in place the necessary changes and strategies to position it for growth in fiscal 2025.
Industry Context
The results reflect a challenging environment for retail, with decreased sales and the need for strategic adjustments. The company's focus on gross margin improvement and inventory management aligns with industry trends of optimizing profitability in a competitive market. The store optimization program also reflects a broader trend of retailers adapting to changing consumer preferences and the shift towards online shopping.
Comparison to Industry Standards
- Torrid's comparable sales decline of 6.5% is worse than some of its peers in the apparel retail sector, which have seen more modest declines or even growth in some cases.
- Companies like American Eagle Outfitters and Abercrombie & Fitch have shown more resilience in their comparable sales figures, indicating that Torrid may need to further refine its strategies.
- The gross margin improvement of 285 basis points is a positive sign, but it needs to be sustained and improved upon to match the performance of industry leaders.
- The adjusted EBITDA growth is modest, and the company needs to focus on improving profitability to align with industry benchmarks.
- The store optimization program is similar to what other retailers are doing to adapt to changing consumer preferences, but the pace and scale of the program will be critical to its success.
Stakeholder Impact
- Shareholders may be concerned about the sales decline but encouraged by the gross margin improvement and reduced net loss.
- Employees may be affected by the store closures as part of the optimization program.
- Customers may see changes in store locations and product assortments.
- Suppliers may need to adjust to changes in the company's inventory management and sourcing strategies.
- Creditors will be monitoring the company's financial performance and debt levels.
Next Steps
- The company will continue to implement its store fleet optimization program, opening 12 to 16 new stores and closing 30 to 40 stores.
- The company will focus on improving its assortments and strategies to drive growth in fiscal 2025.
- The company will monitor the impact of the Consumer Financial Protection Bureau ruling on its profitability.
- The company will host a conference call to discuss the results on December 3, 2024.
Key Dates
- October 28, 2023: Date of the end of the third quarter of fiscal year 2023 for comparison purposes.
- November 2, 2024: End of the third quarter of fiscal year 2024.
- December 3, 2024: Date of the earnings release and conference call to discuss Q3 2024 results.
- December 10, 2024: End date for the replay of the conference call.
Keywords
Torrid, Retail, Apparel, EBITDA, Gross Margin, Net Sales, Comparable Sales, Financial Results, Inventory, Fashion
CURV
Torrid Holdings INC
NYSE
Sector: TBD
Filings with Classifications
Worse than expected
3 July 2025 2:37 PM
Insider Trading Report
- Significant sales by a 10% owner and director could signal a lack of confidence or a strategic portfolio rebalancing, which is generally perceived as a negative indicator for the stock.
Better than expected
1 July 2025 12:15 PM
Insider Trading Report
- The acquisition of additional common shares and new swap agreements by a 10% owner and director is generally viewed as a positive signal, indicating confidence in the company's prospects.
- Insider buying suggests that those with intimate knowledge of the company believe the stock is undervalued or has significant upside potential.
Worse than expected
30 June 2025 6:16 PM
Insider Transaction Report
- The sale of a significant number of shares (350,000) by the Chief Executive Officer and Director is generally perceived as a negative signal by investors.
- The transaction was not indicated as being part of a pre-planned Rule 10b5-1 program, which might suggest the sale was more discretionary.
Worse than expected
30 June 2025 4:13 PM
Insider Transaction Report
- Sycamore Partners, a significant insider and 10% owner, sold a substantial block of 15,680,908 shares, indicating a reduction in their stake and potentially their confidence in the company's future performance.
Capital raise
30 June 2025 4:13 PM
Insider Transaction Report
- A registered public offering (Secondary Offering) of 9,650,000 shares was conducted by Sycamore Partners Torrid, L.L.C., which generated proceeds for the selling shareholder.
- Torrid Holdings Inc. concurrently repurchased 6,030,908 shares from Sycamore, which represents a use of the company's cash for share buybacks.
Better than expected
26 June 2025 4:06 PM
Secondary Offering and Stock Repurchase Announcement
- The company's decision to repurchase $20 million of its own stock concurrently with a large secondary offering by selling shareholders indicates management's confidence in the company's valuation and a strategic effort to mitigate potential downward pressure on the stock price from the selling shareholders' divestment.
- The company did not sell any shares in the secondary offering, meaning no direct dilution of existing shareholder value from this specific transaction.
Capital raise
24 June 2025 4:26 PM
Secondary Offering and Share Repurchase Announcement
- An underwritten public offering of 10,000,000 shares of common stock is being launched by certain existing stockholders of Torrid Holdings Inc.
- The selling stockholders intend to grant the underwriters a 30-day option to buy an additional 1,500,000 shares of common stock.
- Torrid Holdings Inc. will not receive any proceeds from the sale of shares by the selling stockholders in this offering.
Worse than expected
9 June 2025 4:05 PM
Quarterly Report
- Net sales decreased by 4.9%, indicating a decline in market demand or competitive pressure.
- Gross profit decreased by 12.1%, and the gross margin percentage contracted by 3.2 percentage points, suggesting pricing pressures, higher costs, or increased promotional activity.
- Net income fell by 51.2%, reflecting a significant reduction in overall profitability.
- Adjusted EBITDA decreased by 40.4%, indicating a substantial deterioration in operational earnings.
- The shift from positive cash flow from operations ($27.6 million) to negative cash flow from operations ($(18.0) million) is a significant adverse change in liquidity generation from core business activities.
Delay expected
5 June 2025 4:16 PM
Quarterly Earnings Report
- The company has paused its China-sourced shoe category, which is expected to result in a revenue reduction of $40 million to $45 million in 2025, as they explore a more profitable re-entry strategy.
Worse than expected
1 April 2025 4:11 PM
Annual Results
- Net sales decreased by 4.2% year-over-year, indicating a decline in overall revenue generation.
Worse than expected
11 December 2024 4:38 PM
Quarterly Report
- Net sales decreased by 4.2% in the third quarter of 2024, indicating a potential slowdown in customer spending.
- Comparable sales decreased by 7% in the third quarter of 2024, suggesting a decline in sales at existing locations.
Worse than expected
3 December 2024 4:10 PM
Quarterly Report
- The company's net sales and comparable sales decreased, indicating worse than expected performance.
Capital raise
11 September 2024 9:34 AM
Secondary Offering Announcement
- Torrid Holdings Inc. is conducting an underwritten public offering of 8,000,000 shares of common stock.
- The shares are being sold by certain stockholders of the company.
- The company will not receive any proceeds from the sale of these shares.
- The underwriters have a 30-day option to purchase an additional 1,200,000 shares.
Better than expected
11 September 2024 9:34 AM
Secondary Offering Announcement
- The company's NPS score is significantly higher than the industry average.
- The company's return rate is lower than the industry average.
- The company's LTV:CAC ratio is strong, indicating efficient customer acquisition.
- The company has successfully reduced inventory levels and improved distribution throughput.
Worse than expected
9 September 2024 4:26 PM
Quarterly Report
- The company's comparable sales decreased by 18% for the three months and 16% for the six months ended August 3, 2024, indicating a significant decline in sales performance compared to the previous year.
Better than expected
4 September 2024 7:10 AM
Quarterly Report
- The company's adjusted EBITDA exceeded guidance, indicating better than expected profitability.
- The company's net sales came in at the high end of guidance, indicating better than expected revenue performance.
- The company's gross margin improved by 323 basis points, indicating better than expected cost management and pricing strategies.
Worse than expected
12 June 2024 4:22 PM
Quarterly Report
- The company's net sales decreased by 4.8% and comparable sales decreased by 9%, indicating weaker performance than expected.
Better than expected
12 June 2024 4:17 PM
Quarterly Report
- The company exceeded its adjusted EBITDA guidance for the first quarter, indicating better than expected profitability.
Worse than expected
2 April 2024 4:06 PM
Annual Results
- The company's net sales, net income, and adjusted EBITDA all decreased year-over-year, indicating worse than expected financial performance.
- Comparable sales declined by 12%, which is a significant drop and worse than industry averages.
- The company's active customer base and sales per active customer also decreased, suggesting a decline in customer engagement and spending.
Better than expected
28 March 2024 4:11 PM
Quarterly Report
- The company's fourth-quarter results exceeded its own guidance, indicating better-than-expected performance.
Disclaimer: This summary was generated by artificial intelligence and its accuracy is not guaranteed. The information provided here is for general informational purposes only and does not constitute financial advice, recommendation, or endorsement of any kind. It may contain errors or omissions. You should not rely on this information to make financial decisions. Always seek the advice of a qualified financial professional before making any investment or financial decisions. Use of this information is at your own risk.