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Torrid’s Inventory Up 60% as Plus-Size Retailer Rethinks Lingerie Line

Torrid’s first-quarter net sales ticked up 0.8 percent to $328.4 million, with shifts in event and shipment timing negatively impacting sales growth by approximately $17 million.

The plus-size fashion brand generated net income of $24 million in the quarter.

In a Nutshell:  Torrid CEO Lisa Harper said in an earnings call that the company is reevaluating the growth approach to its Curve lingerie line, indicating that it no longer expects the label to reach $500 million in sales by 2023.

“I think that we have an opportunity to highlight our five core frames and really build franchises off of those,” Harper said. “We are a little bit overbought in basics, which isn’t a long-term issue. We’ll work out of that inventory productively.”

In particular, Harper said the company will renew its focus on product launches and building franchises such as its Studio and Lovesick assortments, with the former launching in September.

However, Torrid still plans to open up to 10 standalone Curve in 2022. The company also aims to expand the line’s assortment up to a third of its 625-store fleet and launch a separate, tabbed experience on its website.

Inventory at the end of the first quarter was $179 million, up 60 percent compared to $112 million in the prior year. Excluding goods in-transit, inventory was up 51 percent to pre-pandemic 2019 with approximately 30 percent sales growth and increased product costs over that period of time.

“We are comfortable with the position of the inventory through the remained year,” Tanner MacDiarmid, Torrid interim chief financial officer at, said. “We are going to have to be more promotional in Q2, so that we’re feeling cleaner off of our inventory heading to the post-summer time frame. But we feel like we’ve planned receipts in the back half of the year, such that we’re going to be comfortable with our inventory position [in the] Q3 to Q4 time frame.”

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Harper said second-half receipts are expected to be lower that last year’s, helping the company turn products faster on a year-on-year basis.

Having “a little bit more inventory than we would ideally like to have” gives Torrid an opportunity to test price elasticity models “with a more surgical approach to promotions,” she added.

When accounting for raw materials and freight cost increases, Torrid’s average product cost inflation year over year is close to 10 percent, MacDiarmid said.

Gross margin was 38.1 percent compared to 44.5 percent in the first quarter of last year. Approximately half of the 640-basis-point (6.4-percentage-point) decline in gross margin was due to higher discounts and promotions compared to last year, with the remainder due to increased product and transportation costs, which were partially offset by pricing actions.

Cash and cash equivalents at the end of the quarter totaled $24.8 million. Total liquidity at the end of the first quarter, including available credit was $145.2 million. Total debt at the end of the quarter was $357 million compared to $202 million in the first quarter of 2021.

For the second quarter, Torrid expects net sales between $350 million and $360 million, which would be up 5.1 percent to 8.1 percent from the 2021 first quarter’s $332.9 million in sales. Adjusted EBITDA is expected to decrease between 32.9 percent and 38.7 percent, falling from $86.5 million to within a range of $53 million and $58 million.

Torrid also offered full-year guidance for 2022, projecting net sales between $1.3 billion and $1.365 billion, which would mark an increase of 1.7 percent to 6.7 percent from the $1.28 billion taken in 2021. Adjusted EBITDA is anticipated to range between $195 million and $220 million, down from the prior year’s $245.9 million.

Capital expenditures are forecast to be between $30 million and $35 million, reflecting infrastructure and technology investments and approximately 35 new stores for the year.

Net Sales: Net sales increased 0.8 percent to $328.4 million for the three months ended April 30, 2022, from $325.7 million in the prior-year first quarter. The slight increase was primarily driven by an increase in sales transactions, partially offset by a decrease in average sales transaction value relative as a result of increased promotional activity.

Comparable sales declined 2 percent in the first quarter, following a stimulus-driven increase of 108 percent in the first quarter of last year.

Apparel sales decreased 3.1 percent to $291.7 million from the 2021 first quarter’s $301.1 million. Non-apparel sales, which include accessories, footwear and beauty products, soared 49.2 percent to $36.8 million, from the year-ago period’s $24.6 million.

Net Earnings: Net income for the quarter was $24 million or 23 cents per share, ahead of last year’s net income of $12.9 million or 12 cents per share. 

There was no adjustment to net income in the first quarter of fiscal 2022, but for comparison purposes, adjusted net income for the first quarter of last year was $44.7 million, or 41 cents per share.

Adjusted EBITDA came in above the high end of Torrid’s guidance at $51.8 million, which represented 15.8 percent of net sales. This was down from the $75.7 million in the 2021 first quarter, which comprised 23.2 percent of net sales.

CEO’s Take: “I think we have some room in particular categories [to increase prices],” Tanner said. “I won’t go category by category. I’ve seen where we have raised prices that we’ve actually had good results. So that’s under constant evaluation, but I do think we have room to take some prices up in the back half.”