Torrid (CURV) - 2022 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Net sales for Q3 2022 were $290 million, down 5% from$ 306 million in Q3 2021, with comparable sales declining 8% compared to a 14% increase in the same quarter last year [24][25] - Gross profit was $92 million, representing 31.6% of net sales, a decline from$ 125 million or 40.9% of net sales in Q3 2021, primarily due to increased discounts and inflationary pressures [26] - Net income for the quarter was $7 million or$ 0.07 per share, compared to a net loss of $59 million or a loss of$ 0.54 per share in the same period last year [30] - Adjusted EBITDA was $32 million, or 11.1% of net sales, at the low end of guidance [31] Business Line Data and Key Metrics Changes - The Studio collection launch positively impacted customer response, driving a 30 percentage point improvement in workwear sales growth compared to the prior quarter [16] - The Festi collection saw strong engagement from loyal customers, with VIP customer penetration more than double that of other categories [17] Market Data and Key Metrics Changes - Approximately 30% of customers shopping in new stores were new to the Torrid brand, spending 25% more in their first year compared to those acquired online [13] - The company experienced a slowdown in consumer demand during October, coinciding with the Torrid Cash event, which negatively impacted sales [8] Company Strategy and Development Direction - The company is focused on enhancing promotional and marketing strategies to balance margin and sales growth, with plans to implement margin-enhancing promotions in 2023 [10][11] - Store acquisition remains a critical growth strategy, with a focus on reengaging lapsed customers and improving retention [12][14] - The company plans to open approximately 27 new stores in 2022, including eight Curve stores, while closing 13 stores [34] Management Comments on Operating Environment and Future Outlook - Management acknowledged the challenging macroeconomic environment and the need to maintain clean inventory levels, projecting net sales for Q4 2022 to be between$ 285 million and $300 million [35] - The company is optimistic about product development for 2023, with a focus on maintaining flexibility in inventory investments to align with demand trends [71] Other Important Information - Total liquidity at the end of Q3 was$ 159.4 million, with total debt at $327 million, down from$ 341 million in Q3 2021 [32] - Inventory at the end of the quarter was $200 million, an increase of 25% compared to$ 159 million in the prior year, but a significant improvement from 64% growth at the end of Q2 [33] Q&A Session Summary Question: Inventory strategies and consumer environment - Management indicated that inventory aging is positive, with a focus on managing basics and ensuring timely receipt of spring products [41][42] - The company is confident in moderating promotions moving forward, with a clean inventory expected [43] Question: Customer base and retention - Retention numbers are strong, with plans for multiple product launches to drive frequency among core customers [54] Question: Inflation impact on customers - Inflation has begun to impact all income levels, with management noting that lower-income customers were affected first [59][76] Question: Black Friday performance and holiday season outlook - The company experienced a better-than-expected response in-store during Black Friday, despite being highly promotional [68] Question: Operational planning for 2023 - Management is maintaining flexibility in inventory investments to react to demand trends as they approach 2023 [71]