Torrid (CURV) - 2025 Q1 - Quarterly Results

Company Overview and Q1 Highlights About Torrid Torrid is a North American direct-to-consumer apparel, intimates, and accessories brand, focusing on providing well-fitting, high-quality products for fashion-conscious women in sizes 10 to 30 - Torrid is a North American direct-to-consumer apparel, intimates, and accessories brand, specializing in well-fitting, high-quality products for curvy women in sizes 10 to 30, offering a comprehensive product line including tops, bottoms, denim, dresses, intimates, activewear, footwear, and accessories[1][18] First Quarter Fiscal 2024 Highlights Torrid achieved net sales in line with expectations and exceeded adjusted EBITDA guidance in Q1 FY24, driven by significant gross margin expansion and strict inventory control, with positive customer response to product assortment adjustments leading to improved traffic and sales - The company's Q1 FY24 net sales met guidance, and adjusted EBITDA exceeded guidance, primarily due to strong gross margin expansion and strict inventory control. Positive customer response to ongoing product assortment adjustments led to improved traffic and sales throughout the quarter[11] Key Financial and Operating Metrics for Q1 FY24 | Metric | Q1 FY24 (May 4, 2024) | Q1 FY23 (April 29, 2023) | | :------------------- | :-------------------- | :----------------------- | | Comparable sales | (9)% | (14)% | | Net income | $12,172 thousand | $11,808 thousand | | Adjusted EBITDA | $38,227 thousand | $38,260 thousand | - Net income increased to $12.2 million ($0.12 per share) this quarter from $11.8 million ($0.11 per share) in the prior-year period[11] First Quarter Fiscal 2024 Financial Performance Key Financial and Operating Metrics Q1 FY24 comparable sales decreased by 9%, an improvement from the 14% decline in the prior year, with net income slightly up and adjusted EBITDA remaining largely flat year-over-year Key Financial and Operating Metrics for Q1 FY24 | Metric | Q1 FY24 (May 4, 2024) | Q1 FY23 (April 29, 2023) | Change (YoY) | | :------------------- | :-------------------- | :----------------------- | :----------- | | Comparable sales | (9)% | (14)% | +5 ppts | | Net income | $12,172 thousand | $11,808 thousand | +3.08% | | Adjusted EBITDA | $38,227 thousand | $38,260 thousand | -0.09% | - Comparable sales for Q1 FY24 decreased by 9%, an improvement compared to the 14% decline in Q1 FY23[3][11] Detailed Financial Results Net sales decreased 4.8% year-over-year to $279.8 million, but gross margin significantly improved by 360 basis points to 41.3%, primarily due to renegotiated vendor costs and increased full-price sales Detailed Financial Results for Q1 FY24 | Metric | Q1 FY24 (May 4, 2024) | Q1 FY23 (April 29, 2023) | Change (YoY) | | :--------------------- | :-------------------- | :----------------------- | :----------- | | Net sales | $279.8 million | $293.9 million | -4.8% |\ | Gross profit margin | 41.3% | 37.7% | +360 bps |\ | Net income | $12.2 million | $11.8 million | +3.4% |\ | Diluted EPS | $0.12 | $0.11 | +9.1% |\ | Adjusted EBITDA | $38.2 million | $38.3 million | -0.3% |\ | Adjusted EBITDA % of sales | 13.7% | 13.0% | +70 bps | - Gross margin improved by 360 basis points, primarily driven by strategically renegotiated product costs with vendors and an increase in full-price sales[11] Store Operations Torrid opened 6 new stores and closed 3 in Q1, bringing the total store count to 658 at quarter-end, an increase from 638 in the prior-year period - During Q1, the company opened 6 new Torrid stores and closed 3 Torrid stores, resulting in a total of 658 stores at quarter-end[11] Store Count | Metric | May 4, 2024 | April 29, 2023 | Change (YoY) | | :-------------- | :---------- | :------------- | :----------- | | Number of stores| 658 | 638 | +20 | Balance Sheet and Cash Flow Balance Sheet Overview As of May 4, 2024, total assets slightly increased to $479.7 million from February 3, 2024, with cash and cash equivalents significantly rising to $20.5 million, while total liabilities decreased from $688.7 million to $678.3 million Key Balance Sheet Data (in thousands) | Metric (in thousands) | May 4, 2024 | February 3, 2024 | Change (QoQ) | | :-------------------------- | :---------- | :--------------- | :----------- | | Cash and cash equivalents | $20,465 | $11,735 | +74.4% | | Inventory | $144,808 | $142,199 | +1.8% | | Total current assets | $194,296 | $179,123 | +8.5% | | Total assets | $479,678 | $476,947 | +0.6% | | Total current liabilities | $234,323 | $232,107 | +0.9% | | Borrowings under credit facility | $0 | $7,270 | -100% | | Term loan | $284,517 | $288,553 | -1.4% | | Total liabilities | $678,318 | $688,664 | -1.5% | | Total stockholders' deficit | $(198,640) | $(211,717) | +6.2% | Cash Flow from Operations Net cash provided by operating activities significantly increased to $27.6 million for the three months ended May 4, 2024, compared to $11.2 million in the prior-year period Cash Flow from Operating Activities (in thousands) | Metric (in thousands) | Q1 FY24 (May 4, 2024) | Q1 FY23 (April 29, 2023) | Change (YoY) | | :------------------------------------ | :-------------------- | :----------------------- | :----------- | | Net cash provided by operating activities | $27,624 | $11,223 | +146.1% | Liquidity Position Total cash and cash equivalents amounted to $20.9 million at the end of Q1 FY24, with total liquidity, including available borrowings under the revolving credit facility, reaching $137.0 million Liquidity Position (in millions) | Metric (in millions) | Q1 FY24 (May 4, 2024) | | :------------------- | :-------------------- | | Cash and cash equivalents | $20.9 | | Total liquidity | $137.0 | Outlook Second Quarter Fiscal 2024 Guidance The company projects Q2 FY24 net sales to be between $280.0 million and $285.0 million, with adjusted EBITDA expected to range from $30.0 million to $34.0 million Second Quarter Fiscal 2024 Guidance (in millions) | Metric | Q2 FY24 Guidance (in millions) | | :-------------- | :----------------------------- | | Net sales | $280.0 - $285.0 | | Adjusted EBITDA | $30.0 - $34.0 | Full Year Fiscal 2024 Guidance For FY24, the company anticipates net sales between $1.135 billion and $1.155 billion, adjusted EBITDA from $109.0 million to $116.0 million, and capital expenditures of $20 million to $25 million, alongside plans to open 15-20 new stores and close 10-15 Full Year Fiscal 2024 Guidance (in millions) | Metric | FY24 Guidance (in millions) | | :--------------------- | :-------------------------- | | Net sales | $1,135 - $1,155 | | Adjusted EBITDA | $109.0 - $116.0 | | Capital expenditures | $20 - $25 | - The company plans to open 15 to 20 new Torrid stores and close 10 to 15 stores throughout the year[29] Outlook Assumptions and Considerations The outlook is based on assumptions including macroeconomic challenges and rising labor costs, but excludes the potential impact of the CFPB's recent ruling on credit card late fees, which could alter the profitability of the company's private label credit card financing agreement - The outlook is based on assumptions including industry macroeconomic challenges and rising labor costs, but does not account for the Consumer Financial Protection Bureau's recent ruling on credit card late fees, which could alter the profitability of the company's private label credit card financing agreement[15] Non-GAAP Financial Measures Definition and Purpose of Non-GAAP Measures Management uses non-GAAP metrics like Adjusted EBITDA to assess ongoing operations, for internal planning and forecasting, and as a benchmark for executive incentive payments, believing these metrics provide useful supplemental information when used with GAAP financial information - Management utilizes non-GAAP performance measures such as Adjusted EBITDA for evaluating ongoing operations, internal planning and forecasting, and as a benchmark for determining executive non-equity incentive payments[7][8][33] - Adjusted EBITDA represents GAAP net income (loss) adjusted for interest expense less interest income, other expense (income), provision for income taxes, depreciation and amortization, share-based compensation, non-cash deductions and charges, and other expenses[19] - The company believes Adjusted EBITDA facilitates period-to-period comparisons of operating performance by isolating certain period-specific items that are not indicative of the company's ongoing operating performance[33] Adjusted EBITDA Reconciliation The report provides a detailed reconciliation of net income to Adjusted EBITDA, listing adjustments for interest expense, income taxes, depreciation and amortization, share-based compensation, non-cash deductions, and other expenses Reconciliation of Net Income to Adjusted EBITDA (in thousands) | Metric (in thousands) | Q1 FY24 (May 4, 2024) | Q1 FY23 (April 29, 2023) | | :----------------------------------- | :-------------------- | :----------------------- | | Net income | $12,172 | $11,808 | | Interest expense | $9,377 | $9,468 | | Other expense, net of other income | $110 | $60 | | Provision for income taxes | $4,484 | $4,727 | | Depreciation and amortization | $9,259 | $9,238 | | Share-based compensation | $1,658 | $2,488 | | Non-cash deductions and charges | $(58) | $43 | | Other expenses | $1,225 | $428 | | Adjusted EBITDA | $38,227 | $38,260 | - Other expenses in the reconciliation table include severance for certain key management positions, certain litigation fees, and certain management fees (primarily travel expenses) incurred by Sycamore on behalf of the company[51] Forward-Looking Statements and Risk Factors Nature of Forward-Looking Statements This earnings release contains forward-looking statements regarding estimated costs, financial performance, future operations, and strategies, which are subject to risks and uncertainties that could cause actual results to differ materially from expectations - This earnings release contains "forward-looking statements" regarding estimated and projected costs, expenditures, cash flows, growth rates and financial performance, future operating plans and objectives, growth or initiatives, strategies, or the anticipated results or impact of pending or threatened litigation[22][35] - All forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from expectations[22][38] Identified Risk Factors Key risk factors include changes in consumer spending and macroeconomic conditions, inflationary pressures, reliance on brand image, dependence on third parties, supply chain disruptions, and potential impacts from the CFPB's ruling on credit card late fees - Risks include changes in consumer spending and general economic conditions; inflationary pressures on labor and raw materials and global supply chain constraints that may increase the company's expenses; and reliance on a strong brand image[22] - Adverse impacts on the company's revenue streams, profitability, and operating results from changes in rulemaking implemented by the Consumer Financial Protection Bureau[36] - Other risks include reliance on third parties (e.g., for website traffic, product manufacturing, and shipping); the ability to adapt to consumer shopping preferences and maintain an omnichannel experience; system security risks; compliance with laws and regulations; significant debt and lease obligations; and the potential for impairment of long-lived assets[22][23][36][37][44] Condensed Consolidated Financial Statements Condensed Consolidated Statements of Operations and Comprehensive Income This statement details revenue, cost of goods sold, gross profit, operating expenses, and net income for the three months ended May 4, 2024, and April 29, 2023 Condensed Consolidated Statements of Operations and Comprehensive Income (in thousands) | Metric (in thousands) | Three Months Ended May 4, 2024 | Three Months Ended April 29, 2023 | | :----------------------------------- | :----------------------------- | :-------------------------------- | | Net sales | $279,771 | $293,854 | | Cost of goods sold | $164,350 | $183,212 | | Gross profit | $115,421 | $110,642 | | Selling, general and administrative expenses | $76,466 | $71,228 | | Marketing expenses | $12,812 | $13,351 | | Income from operations | $26,143 | $26,063 | | Net income | $12,172 | $11,808 | | Basic EPS | $0.12 | $0.11 | | Diluted EPS | $0.12 | $0.11 | Condensed Consolidated Balance Sheets The balance sheet presents assets, liabilities, and stockholders' deficit as of May 4, 2024, and February 3, 2024, highlighting changes in cash, inventory, and debt Condensed Consolidated Balance Sheets (in thousands) | Metric (in thousands) | May 4, 2024 | February 3, 2024 | | :---------------------------------- | :---------- | :--------------- | | Cash and cash equivalents | $20,465 | $11,735 | | Inventory | $144,808 | $142,199 | | Total current assets | $194,296 | $179,123 | | Property and equipment, net | $98,455 | $103,516 | | Total assets | $479,678 | $476,947 | | Accounts payable | $58,850 | $46,183 | | Total current liabilities | $234,323 | $232,107 | | Term loan | $284,517 | $288,553 | | Total liabilities | $678,318 | $688,664 | | Total stockholders' deficit | $(198,640) | $(211,717) | Condensed Consolidated Statements of Cash Flows The cash flow statement details cash flows from operating, investing, and financing activities for the three months ended May 4, 2024, and April 29, 2023, emphasizing a significant increase in operating cash flow Condensed Consolidated Statements of Cash Flows (in thousands) | Metric (in thousands) | Three Months Ended May 4, 2024 | Three Months Ended April 29, 2023 | | :------------------------------------ | :----------------------------- | :-------------------------------- | | Net cash provided by operating activities | $27,624 | $11,223 | | Net cash used in investing activities | $(7,008) | $(5,660) | | Net cash used in financing activities | $(11,859) | $(800) | | Increase in cash, cash equivalents and restricted cash | $8,730 | $4,691 | | Cash, cash equivalents and restricted cash at end of period | $20,864 | $18,626 |