Margin improvements in Q2 helped lift the plus-size retailer.
Shares of Torrid Holdings (CURV 8.96%) climbed today after the plus-sized women’s apparel brand posted better-than-expected results in its second-quarter earnings report.
The stock finished up 9% on the news.
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Torrid impresses the market
Like other apparel retailers, Torrid is struggling with a challenging consumer environment, but the company scaled back on markdowns to lift profits in the quarter.
Comparable sales were down 0.8%, though the company said full-price comparable sales were up 6.4%, showing it successfully scaled back on inventory to drive higher prices.
Overall revenue fell 1.6% to $284.6 million, which missed estimates at $285.4 million.
However, the company cut inventory levels by 19%, which led to a 323-basis-point improvement in gross margin to 38.7%. Torrid also benefited from lower product costs due to renegotiations with vendors.
On the bottom line, the company reported earnings per share of $0.08, up from $0.06, which matched estimates.
CEO Lisa Harper said, “We believe we are at an inflection point in the business and are well-positioned to build on the success we have seen in the first half of the year.” She also said the company expected to return to low-single-digit positive comparable sales in the second half of the year.
What’s next for Torrid?
Looking ahead, the company expects revenue of $280 million-$285 million in the third quarter, which is below the consensus at $290.6 million.
For the full year, it also lowered its revenue forecast from $1.135 billion-$1.155 billion to $1.135 billion-$1.145 billion, which compared to the average estimate at $1.15 billion.
Despite the underwhelming revenue guidance, investors seem encouraged by the improving margin performance. Torrid now trades at 7 times expected earnings before interest, taxes, depreciation, and amortization (EBITDA) this year, meaning the stock looks like a value play if it can return to steady growth on the top line.
Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
