Scoop on Torrid's Q3 2021 Hustle and Bustle
Retailer, Torrid, braces for escalating expenses and prolonged pandemic turmoil following a mixed Q3 performance.
Torrid, the go-to spot for curvy women, recently shared some insights from their Q3 report. Sales skyrocketed by 13%, reaching an impressive $306.2 million, and they've also experienced a 40.9% increase in gross profit. However, due to an IPO-related tax hit in the quarter, they posted a whopping $58.9 million loss.
Their comp sales (which combine online and in-store sales) jumped by 14% year over year and 18% compared to 2019. This marks their 37th positive showing in the last 39 quarters, according to CEO Liz Muñoz during a chat with analysts.
Torrid is on the hunt for a new CFO, considering both internal and external candidates. Current CFO George Wehlitz is planning his retirement at the end of Q1 next fiscal year, but he'll stick around to complete the annual financial filings and guide the team post-retirement to ensure a smooth transition.
Inside Scoop:
With the plus apparel market getting more attention from mainstream retailers, Torrid stands out as a devoted specialist. Muñoz shared that their new Curve lingerie brand has been a driving force behind sales growth and improved margins. In stores where the Curve assortment was doubled, they saw an increase in revenue, basket size, and conversion. Curve is launching in-store bra-fitting in Q4, and next year, the brand will have a dedicated online experience.
However, the company is grappling with several challenges common to all retail, such as managing inventory due to supply delays and coping with the ongoing pandemic keeping many customers away from physical stores. While more than 90% of their store base is profitable, store traffic and performance are recovering, and new stores have exceeded expectations, overall store productivity remains below pre-pandemic levels.
Despite these headwinds, Torrid managed to expand margins. According to William Blair analysts, "Torrid drove earnings growth through its more favorable gross margin structure, enhanced omnichannel network, and more efficient marketing strategy." The quarter's gross margin beat Wall Street estimates by 40 basis points, with a 550-basis-point improvement over last year, despite increased freight costs and wage inflation.
The environment - continued supply chain challenges, increasing raw material and labor costs, and ongoing COVID-19 uncertainty - led Torrid to lower their outlook for the rest of the year. While the company's leadership team seems hopeful, William Blair analysts remain cautious, acknowledging the challenges faced by Torrid and giving them the benefit of the doubt regarding negative sales impacts from supply chain issues and inventory delays.
- The growth in Torrid's sales and gross profit, despite a large loss due to an IPO-related tax hit, highlights the resilience of their business in the face of market challenges.
- The plus apparel market is attracting more attention from mainstream retailers, but Torrid stands apart as a dedicated specialist, with their new Curve lingerie brand driving sales growth and improved margins.
- Inventories are a concern for Torrid as supply delays persist, exacerbated by the ongoing pandemic keeping customers away from physical stores.
- The company's expansion, including a dedicated online experience for Curve and in-store bra-fitting, shows a commitment to staying agile in a changing landscape.
- Amidst these challenges, Torrid's leadership team is proactively addressing issues such as managing inventory and coping with the pandemic's impacts.
- The environment, including supply chain challenges, increasing raw material and labor costs, and ongoing COVID-19 uncertainty, has led Torrid to revise their outlook for the rest of the year.
- The company's success in driving earnings growth through improved gross margin structure, an enhanced omnichannel network, and a more efficient marketing strategy exemplifies smart business policy in a pandemic-stricken environment.
- Despite the lingering challenges, there's a glimmer of hope in Torrid's recovery, with store traffic and performance improving and new stores exceeding expectations.
- In the ever-evolving world of retail and fashion, Torrid's strategic moves demonstrate their adaptability, while also shining a light on the complex interplay between economic (inflation, labor costs), environmental (supply chain, COVID-19), and technological (AI, cybersecurity) factors reshaping the industry - a breaking story unfolding on business TV, sports broadcasts, and cultural discussions alike.
