Torrid (CURV) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For Q4 2024, the company reported sales of $275.6 million, a decrease from$ 293.5 million in the previous year, but an increase of 1.4% when excluding the impact of the 53rd week in fiscal 2023 [31][32] - Adjusted EBITDA increased to $16.7 million from$ 16.4 million year-over-year, with an adjusted EBITDA margin expanding by 50 basis points to 6.1% [35][36] - The company ended the quarter with $48.5 million in cash, a significant increase from$ 11.7 million a year ago, and total liquidity stands at $158 million [27][37] Business Line Data and Key Metrics Changes - Comparable sales were down 0.8% for the quarter, but there was a positive response in apparel, particularly in denim, non-denim bottoms, and dresses, which saw high demand [12][32] - The company ended the year with inventory up 4%, primarily due to higher in-transit levels, but down 18% on a two-year basis [13][38] Market Data and Key Metrics Changes - The company experienced some choppiness in business during early weeks of the quarter due to macroeconomic uncertainty and adverse weather, but saw a trend line improvement as the quarter progressed [9][10] - The new sub-brands are attracting younger customers, with new buyers averaging in their mid-30s, indicating a shift in customer demographics [20][100] Company Strategy and Development Direction - The company is focused on three strategic priorities: enhancing product assortment, driving customer growth, and executing a store optimization plan [15][25] - The strategy includes closing underperforming locations while selectively opening new stores in high-performing markets, with plans to close an additional 40 to 50 stores in fiscal 2025 [25][42] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about the business, noting improvements in traffic and core categories, while acknowledging the uncertain consumer environment [10][54] - For fiscal 2025, the company expects full-year sales to range between$ 1.080 billion and $1.100 billion, with adjusted EBITDA projected between$ 100 million and $110 million [44][45] Other Important Information - The company is reallocating marketing investments to support sub-brand launches and model search initiatives, indicating a strategic shift in marketing focus [46] - The company has a flexible sourcing structure and is expanding into new markets to mitigate tariff impacts [81][82] Q&A Session Summary Question: What are the latest thoughts on the health of the Torrid consumer? - Management noted that the fundamental strength of the Torrid customer remains intact, with positive traffic trends but more conservative conversion rates [50][54] Question: Can you quantify the impact of the 40 to 50 additional store closures this year? - The majority of closures will happen in Q4, with benefits expected to flow through financials in the following year [56][59] Question: Do you anticipate this being a prolonged campaign of closings? - Management indicated that while there will be opportunities for closures, it is not expected to be a prolonged project [62][64] Question: What is your guidance embedding on the tariff impact of the year? - The guidance includes all known tariffs, with a flexible sourcing structure to navigate potential changes [81][82] Question: How do you think about the cadence of gross margin and SG&A throughout the year? - SG&A is expected to be higher in the first half due to shifted marketing expenses, but overall should remain consistent with the prior year [111]