- Net Sales of $275.4 million, above expectations
- Net Loss of $2.7 million
- Adjusted EBITDA(1) beat guidance
- Raises Full Year 2023 Revenue and EBITDA Outlook
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 October 28, 2023.
Lisa Harper, Chief Executive Officer, stated, “Our third quarter
results came in ahead of our expectations on both the top and
bottom lines. Our customers responded to our new collections, as
well as to our new marketing initiatives, which drove improvements
in our traffic trends in our stores and online, leading to
sequential improvement in our comparable store sales. While we know
we have more work to do, we are encouraged by the trends in our
business. However, given the current environment, which is
promotional and dynamic, we are planning our business accordingly.
We will remain focused on controlling expenses and inventory to
position us to continue to deliver improvement in our results."
In a separate release, the Company announced the promotion of
Paula Dempsey to the role of Chief Financial Officer (CFO). Ms.
Dempsey served as the interim CFO until her promotion on December
4, 2023.
Financial Highlights for the Third Quarter of Fiscal
2023
- Net sales decreased 8.3% to $275.4 million compared to $300.2
million for the third quarter of last year. Comparable sales(2)
decreased 8% in the third quarter.
- Gross profit margin was 33.2% compared to 34.0% in the third
quarter of last year. The 80-bps decline was primarily driven by a
decrease in PLCC Funds and deleverage of store occupancy costs as a
result of lower net sales.
- Net loss of $2.7 million, or ($0.03) per share, compared to net
income of $7.3 million, or $0.07 per share in the third quarter of
last year.
- Adjusted EBITDA(1) was $19.4 million, or 7.0% of net sales,
compared to $32.1 million, or 10.7% of net sales, in the third
quarter of last year.
- In the third quarter, we opened five Torrid stores and closed
one Torrid store. The total store count at quarter end was 643
stores.
Third Quarter Fiscal 2023 Financial and Operating
Metrics
(A)
Please refer to "Non-GAAP
Reconciliation" for a reconciliation of net (loss) income to
Adjusted EBITDA(1).
Balance Sheet and Cash
Flow
Cash and cash equivalents for the three months ended
October 28, 2023 totaled $16.0 million. Total liquidity at the end
of the third quarter, including available borrowing capacity under
our revolving credit agreement, was $153.5 million.
Cash flow from operations for the nine-month period ended
October 28, 2023 was $33.7 million, compared to $53.9 million for
the nine-month period ended October 29, 2022.
Three Months Ended
(in thousands, except
percentages)
October 28, 2023
October 29, 2022
Comparable sales
(8
)%
(8
)%
Net (loss) income
$
(2,748
)
$
7,277
Adjusted EBITDA(A)
$
19,379
$
32,110
Outlook
For the fourth quarter of fiscal 2023 the Company
expects:
- Net sales between $267 million and $283 million.
- Adjusted EBITDA(1) between $9 million and $13 million.
For the full year fiscal 2023 the Company expects:
- Net sales between $1.125 billion and $1.140 billion.
- Adjusted EBITDA(1) between $99 million and $103 million.
- Capital expenditures between $25 million and $30 million
reflecting infrastructure and technology investments as well as
between 34 and 36 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 third quarter fiscal
2023 results is scheduled for December 7, 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
https://investors.torrid.com. For those unable to participate, a
replay of the conference call will be available approximately three
hours after the conclusion of the call until December 14, 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 (LOSS)
INCOME
(UNAUDITED)
(In thousands, except per
share data)
Three Months Ended
October 28, 2023
October 29, 2022
Net sales
$
275,408
$
300,201
Cost of goods sold
183,906
198,263
Gross profit
91,502
101,938
Selling, general and administrative
expenses
71,881
69,347
Marketing expenses
12,739
12,638
Income from operations
6,882
19,953
Interest expense
9,757
8,390
Interest income, net of other expense
267
147
(Loss) income before (benefit from)
provision for income taxes
(3,142
)
11,416
(Benefit from) provision for income
taxes
(394
)
4,139
Net (loss) income
$
(2,748
)
$
7,277
Net (loss) earnings per share:
Basic
$
(0.03
)
$
0.07
Diluted
$
(0.03
)
$
0.07
Weighted average number of
shares:
Basic
104,081
103,623
Diluted
104,081
103,805
Comprehensive (loss) income:
Net (loss) income
$
(2,748
)
$
7,277
Other comprehensive loss:
Foreign currency translation
adjustment
(271
)
(465
)
Total other comprehensive loss
(271
)
(465
)
Comprehensive (loss) income
$
(3,019
)
$
6,812
TORRID HOLDINGS INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(UNAUDITED)
(In thousands, except share
and per share data)
October 28, 2023
January 28, 2023
Assets
Current assets:
Cash and cash equivalents
$
15,596
$
13,569
Restricted cash
366
366
Inventory
171,034
180,055
Prepaid expenses and other current
assets
24,628
20,050
Prepaid income taxes
4,645
2,081
Total current assets
216,269
216,121
Property and equipment, net
100,746
113,613
Operating lease right-of-use assets
165,789
177,179
Deposits and other noncurrent assets
14,950
8,650
Deferred tax assets
3,301
3,301
Intangible asset
8,400
8,400
Total assets
$
509,455
$
527,264
Liabilities and stockholders'
deficit
Current liabilities:
Accounts payable
$
79,031
$
76,207
Accrued and other current liabilities
102,411
108,847
Operating lease liabilities
42,954
45,008
Borrowings under credit facility
5,100
8,380
Current portion of term loan
16,144
16,144
Due to related parties
6,766
12,741
Total current liabilities
252,406
267,327
Noncurrent operating lease liabilities
160,580
172,103
Term loan
292,589
304,697
Deferred compensation
4,753
4,246
Other noncurrent liabilities
8,363
9,115
Total liabilities
718,691
757,488
Commitments and contingencies (Note
15)
Stockholders' deficit
Common shares: $0.01 par value;
1,000,000,000 shares authorized; 104,102,356 shares issued and
outstanding at October 28, 2023; 103,774,813 shares issued and
outstanding at January 28, 2023
1,042
1,038
Additional paid-in capital
133,714
128,205
Accumulated deficit
(343,517
)
(359,206
)
Accumulated other comprehensive loss
(475
)
(261
)
Total stockholders' deficit
(209,236
)
(230,224
)
Total liabilities and stockholders'
deficit
$
509,455
$
527,264
TORRID HOLDINGS INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
Nine Months Ended
October 28, 2023
Nine Months Ended
October 29, 2022
OPERATING ACTIVITIES
Net income
$
15,689
$
54,053
Adjustments to reconcile net income to net
cash provided by operating activities:
Write down of inventory
3,767
1,750
Operating right-of-use assets
amortization
30,494
31,209
Depreciation and other amortization
28,242
28,120
Share-based compensation
5,981
7,568
Other
(1,351
)
(603
)
Changes in operating assets and
liabilities:
Inventory
4,969
(31,341
)
Prepaid expenses and other current
assets
(4,578
)
(8,778
)
Prepaid income taxes
(2,564
)
5,192
Deposits and other noncurrent assets
(6,433
)
(3,255
)
Accounts payable
2,969
31,447
Accrued and other current liabilities
(5,954
)
(35,824
)
Operating lease liabilities
(31,565
)
(31,230
)
Other noncurrent liabilities
(468
)
4,345
Deferred compensation
507
(2,701
)
Due to related parties
(5,975
)
864
Income taxes payable
—
3,093
Net cash provided by operating
activities
33,730
53,909
INVESTING ACTIVITIES
Purchases of property and equipment
(15,228
)
(17,087
)
Net cash used in investing activities
(15,228
)
(17,087
)
FINANCING ACTIVITIES
Proceeds from revolving credit
facility
455,110
632,125
Principal payments on revolving credit
facility
(458,390
)
(629,975
)
Repurchase of common stock
—
(31,700
)
Principal payments on term loan
(13,125
)
(17,500
)
Proceeds from issuances under share-based
compensation plans
320
613
Withholding tax payments related to
vesting of restricted stock units and awards
(249
)
(558
)
Net cash used in financing activities
(16,334
)
(46,995
)
Effect of foreign currency exchange rate
changes on cash, cash equivalents and restricted cash
(141
)
(237
)
Increase (decrease) in cash, cash
equivalents and restricted cash
2,027
(10,410
)
Cash, cash equivalents and restricted cash
at beginning of period
13,935
29,287
Cash, cash equivalents and restricted cash
at end of period
$
15,962
$
18,877
SUPPLEMENTAL INFORMATION
Cash paid during the period for interest
related to the revolving credit facility and term loan
$
24,852
$
14,158
Cash paid during the period for income
taxes
$
10,976
$
15,219
SUPPLEMENTAL DISCLOSURE OF NONCASH
INVESTING AND FINANCING ACTIVITIES
Property and equipment purchases included
in accounts payable and accrued liabilities
$
3,360
$
3,355
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 October 29,
2022
As Previously Reported
Change in
Accounting Principle
As Adjusted
Net sales
$
290,034
$
10,167
$
300,201
Cost of goods sold
198,263
—
198,263
Gross profit
91,771
10,167
101,938
Selling, general and administrative
expenses
59,180
10,167
69,347
Marketing expenses
12,638
—
12,638
Income from operations
$
19,953
$
—
$
19,953
Non-GAAP
Reconciliation
The following table provides a
reconciliation of Net (loss) income to Adjusted EBITDA for the
periods presented (dollars in thousands):
Three Months Ended
October 28, 2023
October 29, 2022
Net (loss) income
$
(2,748
)
$
7,277
Interest expense
9,757
8,390
Interest income, net of other expense
267
147
(Benefit from) provision for income
taxes
(394
)
4,139
Depreciation and amortization(A)
8,785
8,849
Share-based compensation(B)
1,585
2,913
Non-cash deductions and charges(C)
409
375
Other expenses(D)
1,718
20
Adjusted EBITDA
$
19,379
$
32,110
__________________________________________ (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 October 28,
2023, share-based compensation includes $0.1 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/20231207172609/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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