- Delivered Second Quarter Net Sales of $289.1 million and Net
Income of $6.6 million
- Second Quarter Net Sales and Adjusted EBITDA(1) in line with
guidance
- Revised Full Year 2023 Guidance
Torrid Holdings Inc. (“Torrid” or the “Company”) (NYSE: CURV), a
direct-to-consumer apparel, intimates, and accessories brand in
North America for women sizes 10 to 30, today announced its
financial results for the quarter ended July 29, 2023.
Lisa Harper, Chief Executive Officer, stated, “Our second
quarter results were in line with our guidance, reflecting our
commitment to disciplined expense and inventory management even
amidst a challenging market. We maintain that fiscal 2023 is a
pivotal 'rebuild year' for us. Our laser focus is on balancing our
merchandise assortment through exceptional value and product
offerings, while expanding our customer base through a robust
omnichannel strategy. We are confident that this will set the stage
for sustainable long-term growth."
Financial Highlights for the Second Quarter of Fiscal
2023
- Net sales decreased 18.2% to $289.1 million compared to $353.5
million for the second quarter of last year. Comparable sales(2)
decreased 18% in the second quarter.
- Gross profit margin was 35.5% compared to 37.2% in the second
quarter of last year. The 168-bps decline was primarily driven by a
decrease in private label credit card funds, deleverage of store
occupancy costs as a result of lower net sales and increases in
store depreciation expense and merchandising payroll costs,
partially offset by improved pricing strategies.
- Net income was $6.6 million, or $0.06 per share, compared to
net income of $22.7 million, or $0.22 per share in the second
quarter of last year.
- Adjusted EBITDA(1) was $32.2 million, or 11.1% of net sales,
compared to $52.1 million, or 14.7% of net sales, in the second
quarter of last year.
- In the second quarter, we opened three Torrid stores and closed
two Torrid stores. The total store count at quarter end was 639
stores.
Second Quarter Fiscal 2023 Financial and Operating
Metrics
(A)
Please refer to "Non-GAAP Reconciliation " for a reconciliation
of net income to Adjusted EBITDA(1).
Balance Sheet and Cash
Flow
Cash and cash equivalents as of July 29, 2023 totaled
$18.5 million. Total liquidity at the end of the second quarter,
including available borrowing capacity under our revolving credit
agreement, was $148.8 million.
Cash flow from operations for the three months ended July
29, 2023 was $31.7 million, compared to $44.3 million for the
three-month period ended July 30, 2022.
Three Months Ended
(in thousands, except
percentages)
July 29, 2023
July 30, 2022
Comparable sales(2)
(18
)%
1
%
Net income
$
6,629
$
22,710
Adjusted EBITDA
$
32,151
$
52,088
Outlook
For the third quarter of fiscal 2023 the Company
expects:
- Net sales between $242 million and $251 million.
- Adjusted EBITDA(1) between $11 million and $15 million.
For the full year fiscal 2023 the Company expects:
- Net sales between $1.080 billion and $1.115 billion.
- Adjusted EBITDA(1) between $90 million and $100 million.
- Capital expenditures between $35 million and $40 million
reflecting infrastructure and technology investments as well as
between 30 and 40 new stores for the year.
The above outlook is based on several assumptions, including,
but not limited to, the macroeconomic challenges in the industry in
fiscal 2023 as well as higher labor costs, which are expected to be
more pronounced this year compared to 2022. See “Forward-Looking
Statements” for additional information.
Conference Call Details
A conference call to discuss the Company’s second quarter fiscal
2023 results is scheduled for September 6, 2023, at 4:30 p.m. ET.
Those who wish to participate in the call may do so by dialing
(877) 407-9208 or (201) 493-6784 for international callers. The
conference call will also be webcast live at investors.torrid.com
in the Events and Presentations section. For those unable to
participate, a replay of the conference call will be available
approximately three hours after the conclusion of the call until
September 13, 2023.
Notes
(1)
Adjusted EBITDA is a non-GAAP
financial measure. See “Non-GAAP Financial Measures” and “Non-GAAP
Reconciliation” for additional information on non-GAAP financial
measures and the accompanying table for a reconciliation to the
most comparable GAAP measure. The Company does not provide
reconciliations of the forward-looking non-GAAP measures of
Adjusted EBITDA to the most directly comparable forward-looking
GAAP measure because the timing and amount of excluded items are
unreasonably difficult to fully and accurately estimate. For the
same reasons, the Company is unable to address the probable
significance of the unavailable information, which could be
material to future results.
(2)
Comparable sales for any given
period are defined as the sales of Torrid’s e-Commerce operations
and stores that it has included in its comparable sales base during
that period. The Company includes a store in its comparable sales
base after it has been open for 15 full fiscal months. If a store
is closed during a fiscal year, it is only included in the
computation of comparable sales for the full fiscal months in which
it was open. Partial fiscal months are excluded from the
computation of comparable sales. Comparable sales allow the Company
to evaluate how its unified commerce business is performing
exclusive of the effects of new store openings. The Company applies
current year foreign currency exchange rates to both current year
and prior year comparable sales to remove the impact of foreign
currency fluctuation and achieve a consistent basis for
comparison.
About Torrid
TORRID is a direct-to-consumer brand of apparel, intimates and
accessories in North America aimed at fashionable women who are
curvy and wear sizes 10 to 30. TORRID is focused on fit and offers
high quality products across a broad assortment that includes tops,
bottoms, denim, dresses, intimates, activewear, footwear and
accessories.
Non-GAAP Financial Measures
In addition to results determined in accordance with accounting
principles generally accepted in the United States of America
(“GAAP”), management utilizes certain non-GAAP performance
measures, such as Adjusted EBITDA, for purposes of evaluating
ongoing operations and for internal planning and forecasting
purposes. We believe that these non-GAAP operating measures, when
reviewed collectively with our GAAP financial information, provide
useful supplemental information to investors in assessing our
operating performance.
Adjusted EBITDA is a supplemental measure of our operating
performance that is neither required by, nor presented in
accordance with, GAAP and our calculations thereof may not be
comparable to similarly titled measures reported by other
companies. Adjusted EBITDA represents GAAP net income (loss) plus
interest expense less interest income, net of other expense
(income), plus provision for income taxes, depreciation and
amortization (“EBITDA”), and share-based compensation, non-cash
deductions and charges, and other expenses
We believe Adjusted EBITDA facilitates operating performance
comparisons from period to period by isolating the effects of
certain items that vary from period to period without any
correlation to ongoing operating performance. We also use Adjusted
EBITDA as one of the primary methods for planning and forecasting
the overall expected performance of our business and for evaluating
on a quarterly and annual basis, actual results against such
expectations.
Further, we recognize Adjusted EBITDA as a commonly used measure
in determining business value and, as such, use it internally to
report and analyze our results and as a benchmark to determine
certain non-equity incentive payments made to executives.
Adjusted EBITDA has limitations as an analytical tool. This
measure is not a measurement of our financial performance under
GAAP and should not be considered in isolation or as an alternative
to or substitute for net income (loss), income (loss) from
operations, earnings (loss) per share or any other performance
measures determined in accordance with GAAP or as an alternative to
cash flows from operating activities as a measure of our liquidity.
Our presentation of Adjusted EBITDA should not be construed as an
inference that our future results will be unaffected by unusual or
non-recurring items.
Forward-Looking Statements
Certain statements made in this release are “forward-looking
statements” within the meaning of Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act
of 1934, as amended, and are subject to the “safe harbor”
provisions of the Private Securities Litigation Reform Act of 1995.
All statements other than statements of historical or current fact
included in this press release are forward-looking statements. When
used in this press release, the words “estimates,” “projected,”
“expects,” “anticipates,” “forecasts,” “plans,” “intends,”
“believes,” “seeks,” “may,” “will,” “should,” “future,” “propose”
and variations of these words or similar expressions (or the
negative versions of such words or expressions) are intended to
identify forward-looking statements. You can identify
forward-looking statements by the fact that they do not relate
strictly to historical or current facts. For example, all
statements we make relating to our expected third quarter of fiscal
2023, our full year fiscal 2023 performance and our plans and
objectives for future operations, growth or initiatives are
forward-looking statements. These forward-looking statements are
not guarantees of future performance, conditions or results, and
involve a number of known and unknown risks, uncertainties,
assumptions and other important factors, many of which are outside
Torrid’s control, that could cause actual results or outcomes to
differ materially from those discussed in the forward-looking
statements, including: changes in consumer spending and general
economic conditions, including as a result of rising interest
rates; inflationary pressures with respect to labor and raw
materials and global supply chain constraints that could increase
our expenses; our ability to identify and respond to new and
changing product trends, customer preferences and other related
factors; our dependence on a strong brand image; increased
competition from other brands and retailers; our reliance on third
parties to drive traffic to our website; the success of the
shopping centers in which our stores are located; our ability to
adapt to consumer shopping preferences and develop and maintain a
relevant and reliable omni-channel experience for our customers;
our dependence upon independent third parties for the manufacture
of all of our merchandise; availability constraints and price
volatility in the raw materials used to manufacture our products;
interruptions of the flow of our merchandise from international
manufacturers causing disruptions in our supply chain; our sourcing
a significant amount of our products from China; shortages of
inventory, delayed shipments to our e-Commerce customers and harm
to our reputation due to difficulties or shut-down of our
distribution facility (including as a result of COVID-19); our
reliance upon independent third-party transportation providers for
substantially all of our product shipments; our growth strategy;
our failure to attract and retain employees that reflect our brand
image, embody our culture and possess the appropriate skill set;
damage to our reputation arising from our use of social media,
email and text messages; our reliance on third-parties for the
provision of certain services, including real estate management;
our dependence upon key members of our executive management team;
our reliance on information systems; system security risk issues
that could disrupt our internal operations or information
technology services; unauthorized disclosure of sensitive or
confidential information, whether through a breach of our computer
system or otherwise; our failure to comply with federal and state
laws and regulations and industry standards relating to privacy,
data protection, advertising and consumer protection;
payment-related risks that could increase our operating costs or
subject us to potential liability; claims made against us resulting
in litigation; changes in laws and regulations applicable to our
business; regulatory actions or recalls arising from issues with
product safety; our inability to protect our trademarks or other
intellectual property rights; our substantial indebtedness and
lease obligations; restrictions imposed by our indebtedness on our
current and future operations; changes in tax laws or regulations
or in our operations that may impact our effective tax rate; the
possibility that we may recognize impairments of long-lived assets;
our failure to maintain adequate internal control over financial
reporting; and the threat of war, terrorism or other catastrophes
that could negatively impact our business.
The outcome of the events described in any of our
forward-looking statements are also subject to risks, uncertainties
and other factors described in the sections entitled “Risk Factors”
and “Management’s Discussion and Analysis of Financial Condition
and Results of Operations” in our Annual Report on Form 10-K filed
with the Securities and Exchange Commission (“SEC”) on March 28,
2023 and in our other filings with the SEC and public
communications. You should evaluate all forward-looking statements
made in this communication in the context of these risks and
uncertainties. We derive many of our forward-looking statements
from our operating budgets and forecasts, which are based upon many
detailed assumptions. While we believe that our assumptions are
reasonable, we caution that it is very difficult to predict the
effect of known factors, and it is impossible for us to anticipate
all factors that could affect our actual results. We caution you
that the important factors referenced above may not include all of
the factors that are important to you. In addition, we cannot
assure you that we will realize the results or developments we
expect or anticipate or, even if substantially realized, that they
will result in the outcomes or affect us or our operations in the
way we expect.
The forward-looking statements included in this press release
are made only as of the date hereof. We undertake no obligation to
publicly update or revise any forward-looking statement as a result
of new information, future events or otherwise except to the extent
required by law. Our forward-looking statements do not reflect the
potential impact of any future acquisitions, mergers, dispositions,
joint ventures or investments.
TORRID HOLDINGS INC.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
AND COMPREHENSIVE
INCOME
(UNAUDITED)
(In thousands, except per
share data)
Three Months Ended
July 29, 2023
July 30, 2022
Net sales
$
289,144
$
353,522
Cost of goods sold
186,467
222,030
Gross profit
102,677
131,492
Selling, general and administrative
expenses
69,591
78,574
Marketing expenses
12,898
13,502
Income from operations
20,188
39,416
Interest expense
9,606
6,697
Interest income, net of other (income)
expense
(89
)
48
Income before provision for income
taxes
10,671
32,671
Provision for income taxes
4,042
9,961
Net income
$
6,629
$
22,710
Comprehensive income:
Net income
$
6,629
$
22,710
Other comprehensive income (loss):
Foreign currency translation
adjustment
227
25
Total other comprehensive income
(loss)
227
25
Comprehensive income
$
6,856
$
22,735
Net earnings per share:
Basic
$
0.06
$
0.22
Diluted
$
0.06
$
0.22
Weighted average number of
shares:
Basic
103,930
103,836
Diluted
104,172
103,953
TORRID HOLDINGS INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(UNAUDITED)
(In thousands, except share
and per share data)
July 29, 2023
January 28, 2023
Assets
Current assets:
Cash and cash equivalents
$
18,544
$
13,569
Restricted cash
366
366
Inventory
157,819
180,055
Prepaid expenses and other current
assets
23,958
20,050
Prepaid income taxes
4,082
2,081
Total current assets
204,769
216,121
Property and equipment, net
102,605
113,613
Operating lease right-of-use assets
160,353
177,179
Deposits and other noncurrent assets
12,956
8,650
Deferred tax assets
3,301
3,301
Intangible asset
8,400
8,400
Total assets
$
492,384
$
527,264
Liabilities and stockholders'
deficit
Current liabilities:
Accounts payable
$
62,339
$
76,207
Accrued and other current liabilities
106,721
108,847
Operating lease liabilities
40,651
45,008
Borrowings under credit facility
—
8,380
Current portion of term loan
16,144
16,144
Due to related parties
10,522
12,741
Income taxes payable
—
—
Total current liabilities
236,377
267,327
Noncurrent operating lease liabilities
153,733
172,103
Term loan
296,625
304,697
Deferred compensation
4,854
4,246
Other noncurrent liabilities
8,452
9,115
Total liabilities
700,041
757,488
Commitments and contingencies (Note
15)
Stockholders' deficit
Common shares: $0.01 par value;
1,000,000,000 shares authorized; 104,044,344 shares issued and
outstanding at July 29, 2023; 103,827,701 shares issued and
outstanding at January 28, 2023
1,041
1,038
Additional paid-in capital
132,275
128,205
Accumulated deficit
(340,769
)
(359,206
)
Accumulated other comprehensive loss
(204
)
(261
)
Total stockholders' deficit
(207,657
)
(230,224
)
Total liabilities and stockholders'
deficit
$
492,384
$
527,264
TORRID HOLDINGS INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS(UNAUDITED)
(In thousands)
Six Months Ended July 29,
2023
Six Months Ended July 30,
2022
OPERATING ACTIVITIES
Net income
$
18,437
$
46,776
Adjustments to reconcile net income to net
cash provided by operating
Write down of inventory
1,523
1,363
Operating right-of-use assets
amortization
20,119
20,672
Depreciation and other amortization
19,077
18,891
Share-based compensation
4,396
4,655
Other
(1,437
)
82
Changes in operating assets and
liabilities:
Inventory
20,738
(11,585
)
Prepaid expenses and other current
assets
(3,908
)
(2,863
)
Prepaid income taxes
(2,001
)
4,661
Deposits and other noncurrent assets
(4,386
)
(1,539
)
Accounts payable
(13,291
)
883
Accrued and other current liabilities
(389
)
(27,116
)
Operating lease liabilities
(25,278
)
(20,628
)
Other noncurrent liabilities
(294
)
4,156
Deferred compensation
608
(1,031
)
Due to related parties
(2,219
)
5,646
Income taxes payable
—
1,270
Net cash provided by operating
activities
31,695
44,293
INVESTING ACTIVITIES
Purchases of property and equipment
(9,593
)
(11,444
)
Net cash used in investing activities
(9,593
)
(11,444
)
FINANCING ACTIVITIES
Proceeds from revolving credit
facility
346,280
423,900
Principal payments on revolving credit
facility
(354,660
)
(417,950
)
Repurchase of common stock
—
(31,700
)
Principal payments on term loan
(8,750
)
(13,125
)
Proceeds from issuances under share-based
compensation plans
200
463
Withholding tax payments related to
vesting of restricted stock units and
(188
)
(414
)
Net cash used in financing activities
(17,118
)
(38,826
)
Effect of foreign currency exchange rate
changes on cash, cash equivalents and restricted cash
(9
)
(7
)
Increase (decrease) in cash, cash
equivalents and restricted cash
4,975
(5,984
)
Cash, cash equivalents and restricted cash
at beginning of period
13,935
29,287
Cash, cash equivalents and restricted cash
at end of period
$
18,910
$
23,303
SUPPLEMENTAL INFORMATION
Cash paid during the period for interest
related to the revolving credit facility and term loan
$
15,469
$
13,637
Cash paid during the period for income
taxes
$
10,759
$
13,413
SUPPLEMENTAL DISCLOSURE OF NONCASH
INVESTING AND FINANCING ACTIVITIES
Property and equipment purchases included
in accounts payable and
$
1,722
$
3,578
Reclassification of Certain Statements of Operations and
Comprehensive Income Items
In the fourth quarter of fiscal year 2022, we made a voluntary
change in our accounting policy regarding the classification of
royalties, profit-sharing and marketing and promotional funds
("PLCC Funds") we receive pursuant to our private label credit card
agreement. Historically, we recorded PLCC Funds as a reduction to
selling, general and administrative expenses in the consolidated
statements of operations and comprehensive income. Under the new
policy, we record PLCC Funds in net sales in the consolidated
statements of operations and comprehensive income. This
reclassification does not have any impact on income from
operations, income before provision for income taxes, net income or
earnings per share and there was no cumulative effect to
stockholders’ deficit or net assets. This reclassification has been
retrospectively applied to all prior periods presented.
The recognition of PLCC Funds in net sales is preferable because
it enhances the comparability of our financial statements with
those of many of our industry peers and provide greater
transparency into performance metrics relevant to our industry by
showing the gross impact of the funds received as net sales instead
of as a reduction to selling, general and administrative
expenses.
The impact of this change in accounting principle is reflected
in the table below (in thousands):
Three Months Ended July 30,
2022
As Previously Reported
Change in
Accounting Principle
As Adjusted
Net sales
$
340,876
$
12,646
$
353,522
Cost of goods sold
222,030
—
222,030
Gross profit
118,846
12,646
131,492
Selling, general and administrative
expenses
65,928
12,646
78,574
Marketing expenses
13,502
—
13,502
Income from operations
$
39,416
$
—
$
39,416
Non-GAAP Reconciliation
The following table provides a reconciliation of Net income
to Adjusted EBITDA for the periods presented (dollars in
thousands):
Three Months Ended
July 29, 2023
July 30, 2022
Net income
$
6,629
$
22,710
Interest expense
9,606
6,697
Interest income, net of other (income)
expense
(89
)
48
Provision for income taxes
4,042
9,961
Depreciation and amortization(A)
9,081
8,871
Share-based compensation(B)
1,908
2,175
Non-cash deductions and charges(C)
(101
)
1,626
Other expenses(D)
1,075
—
Adjusted EBITDA
$
32,151
$
52,088
_____________________________
(A)
Depreciation and amortization
excludes amortization of debt issuance costs and original issue
discount that are reflected in interest expense.
(B)
During the three months ended
July 29, 2023, share-based compensation includes $0.2 million for
awards that will be settled in cash as they are accounted for as
share-based compensation in accordance with ASC 718,
Compensation—Stock Compensation, similar to awards settled in
shares.
(C)
Non-cash deductions and charges
includes non-cash losses on property and equipment disposals and
the net impact of non-cash rent expense.
(D)
Other expenses include severance
costs for certain key management positions and certain litigation
fees.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230906399155/en/
Investors Lyn Walther IR@torrid.com
Media Joele Frank, Wilkinson Brimmer Katcher Michael
Freitag / Arielle Rothstein / Lyle Weston Media@torrid.com
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