Torrid Holdings, Inc. ((CURV)) has held its Q3 earnings call. Read on for the main highlights of the call.
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The recent earnings call for Torrid Holdings, Inc. painted a mixed picture, with the overall sentiment leaning towards the negative. The company is grappling with significant challenges, particularly in the tops and shoe categories, which have led to revenue declines and increased promotional activities. Despite these hurdles, there are bright spots, such as the successful momentum of sub-brands, cost savings from store closures, and strong performances in denim and dresses.
Successful Sub-Brand Momentum
The earnings call highlighted the success of Torrid’s sub-brands, with Festi emerging as a standout performer. Nightfall and Retro also showed promising results, while Belle Isle was noted as more of a first-half brand. The introduction of an interactive business model has further bolstered the company’s sub-brand strategy.
Store Closure Optimization
Torrid has strategically closed stores, resulting in over $18 million in cost reductions for the year. This move is expected to lead to substantial EBITDA margin expansion by 2026, improving the company’s leverage profile and financial health.
Denim and Dresses Performance
Despite challenges in other categories, denim and non-denim dresses have performed well. Innovations in leg shape and wash treatment have driven growth, showcasing the company’s ability to capitalize on trends in these segments.
Merchandising Missteps in Tops
A significant portion of the revenue miss for the quarter was attributed to merchandising missteps in the tops category. The lack of focus on core fabrications led to increased promotional activities and reduced average unit retail (AUR).
Challenges in Shoe and Jacket Categories
The shoe and jacket categories also faced difficulties, contributing to the revenue miss. Tariffs impacted shoe sales, while jackets suffered due to their seasonal importance.
Reduced Customer Engagement
The company noted a reduction in engagement from its most loyal customers, particularly in the tops department. This indicates a potential shift in customer preferences and engagement levels.
Mid-Teens Revenue Decline Guidance for Q4
Looking ahead, Torrid’s guidance for the fourth quarter suggests a mid-teens revenue decline, with no significant recovery expected in the tops or shoes categories for the remainder of the year. However, some recovery in tops is anticipated in the next fiscal year.
In summary, Torrid Holdings, Inc. is navigating a challenging landscape with mixed results. While there are positive developments in sub-brands and cost optimization, the company faces significant hurdles in key categories, leading to a cautious outlook for the near future.