Torrid (NYSE:CURV) Beats Expectations in Strong Q3, Stock Soars

Anthony Lee /
2023/12/07 4:12 pm EST

Women’s plus-size apparel retailer Torrid Holdings (NYSE:CURV) reported Q3 FY2023 results topping analysts' expectations, with revenue down 5% year on year to $275.4 million. On top of that, next quarter's revenue guidance ($275 million at the midpoint) was surprisingly good and 3.1% above what analysts were expecting. It made a GAAP loss of $0.03 per share, down from its profit of $0.07 per share in the same quarter last year.

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Torrid (CURV) Q3 FY2023 Highlights:

  • Revenue: $275.4 million vs analyst estimates of $245.8 million (12% beat)
  • EPS: -$0.03 vs analyst expectations of -$0.03 
  • Revenue Guidance for Q4 2023 is $275 million at the midpoint, above analyst estimates of $266.8 million
  • Free Cash Flow was -$3.6 million, down from $3.97 million in the same quarter last year
  • Gross Margin (GAAP): 33.2%, up from 31.6% in the same quarter last year
  • Same-Store Sales were down 8% year on year
  • Store Locations: 643 at quarter end, increasing by 14 over the last 12 months

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. "

Promoting a message of body positivity and inclusiveness, Torrid Holdings (NYSE:CURV) is a plus-size women’s apparel and accessories retailer.

Apparel Retailer

Apparel sales are not driven so much by personal needs but by seasons, trends, and innovation, and over the last few decades, the category has shifted meaningfully online. Retailers that once only had brick-and-mortar stores are responding with omnichannel presences. The online shopping experience continues to improve and retail foot traffic in places like shopping malls continues to stall, so the evolution of clothing sellers marches on.

Sales Growth

Torrid is a small retailer, which sometimes brings disadvantages compared to larger competitors that benefit from economies of scale.

As you can see below, the company's annualized revenue growth rate of 7.8% over the last three years was decent as it opened new stores and grew sales at existing, established stores.

Torrid Total Revenue

This quarter, Torrid's revenue fell 5% year on year to $275.4 million but beat Wall Street's estimates by 12%. The company is guiding for revenue to rise 19.6% year on year to $275 million next quarter, improving from the 1.1% year-on-year decrease it recorded in the same quarter last year. Looking ahead, analysts expect revenue to decline 5.4% over the next 12 months.

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Number of Stores

When a retailer like Torrid keeps its store footprint steady, it usually means that demand is stable and it's focused on improving operational efficiency to increase profitability. Since last year, Torrid's store count increased by 14 locations, or 2.2%, to 643 total retail locations in the most recently reported quarter.

Torrid Operating Retail Locations

Taking a step back, the company has only opened a few new stores over the last eight quarters, averaging 2.1% annual growth in new locations. Although it's expanded its presence, this sluggish store growth lags other retailers. A flat store base means that revenue growth must come from increased e-commerce sales or higher foot traffic and sales per customer at existing stores.

Same-Store Sales

Same-store sales growth is a key performance indicator used to measure organic growth and demand for retailers.

Torrid's demand within its existing stores has been relatively stable over the last eight quarters but fallen behind the broader consumer retail sector. On average, the company's same-store sales have grown by 1.1% year on year. With positive same-store sales growth amid an increasing physical footprint of stores, Torrid is reaching more customers and growing sales.

Torrid Year On Year Same Store Sales Growth

In the latest quarter, Torrid's same-store sales fell 8% year on year. This decline was a reversal from the 8% year-on-year increase it posted 12 months ago. We'll be keeping a close eye on the company to see if this turns into a longer-term trend.

Key Takeaways from Torrid's Q3 Results

Sporting a market capitalization of $441.3 million, Torrid is among smaller companies, but its more than $15.96 million in cash on hand and positive free cash flow over the last 12 months puts it in an attractive position to invest in growth.

We were impressed by how significantly Torrid blew past analysts' revenue expectations this quarter. We were also glad its full-year revenue guidance came in higher than Wall Street's estimates, although the trend in same store sales was negative. Zooming out, we think this was an impressive quarter that should delight shareholders. The stock is up 9.4% after reporting and currently trades at $4.56 per share.

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