Torrid Reports Second Quarter Fiscal 2024 Results

Torrid Holdings Inc. (“Torrid” or the “Company”) (NYSE: CURV), a direct-to-consumer apparel, intimates, and accessories brand in North America for women sizes 10 to 30, today announced its financial results for the quarter ended August 3, 2024.

Lisa Harper, Chief Executive Officer, stated, “We are very pleased with our second quarter performance, which came in at the high end of sales guidance and exceeded our adjusted EBITDA expectations. Customers are responding to our new product offerings, resulting in regular price comparable sales⁽²⁾ growth of 6.4%, and gross margin expansion of 323 basis points. We ended the quarter with $54 million in cash and cash equivalents as we continue to tightly manage our inventory levels, which were down 19% to last year, driving a $35 million increase in total cash. 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. We expect to generate low single digit positive comparable store sales in the back half of the year driven by higher full-price sales as our markdown levels normalize.”

Lisa Harper continued, “We are also thrilled to announce the winner of our Casting Call event and the face of Torrid for 2025 later today, which will be featured on our website (torrid.com) and various social channels. It was a highly competitive process as we received over 11,000 applications from amazing women across the country. This campaign has been incredibly successful for us, resulting in an 8% increase in reactivations and a 7% increase in new customers over the course of the campaign. We look forward to introducing our winner very soon, who will proudly represent our brand in 2025.”

Financial Highlights for the Second Quarter of Fiscal 2024

• Net sales decreased 1.6% to $284.6 million compared to $289.1 million for the second quarter of last year. Comparable sales⁽²⁾ decreased 0.8% in the second quarter, which was comprised of regular price comparable sales⁽²⁾ growth of 6.4%, offset by an approximate 50% decrease in our markdown comparable sales ⁽²⁾.
• Gross profit margin was 38.7% compared to 35.5% in the second quarter of last year. The 323-bps improvement was primarily driven by lower product costs through strategic pricing renegotiations with our vendors and an increase in sales of regular priced products.
• Net income of $8.3 million, or $0.08 per share, compared to net income of $6.6 million, or $0.06 per share in the second quarter of last year.
• Adjusted EBITDA⁽¹⁾ was $34.6 million, or 12.2% of net sales, compared to $32.2 million, or 11.1% of net sales, in the second quarter of last year.
• Inventory decrease of 19% compared to the second quarter of last year.
• In the second quarter, we opened five Torrid stores and closed six Torrid stores. The total store count at quarter end was 657 stores.

Second Quarter of Fiscal 2024 Financial and Operating Metrics

Balance Sheet and Cash Flow

Cash and cash equivalents at the end of the second quarter of 2024 totaled $53.9 million. Total liquidity at the end of the quarter, including available borrowing capacity under our revolving credit agreement, was $153.8 million.

Cash flow from operations for the six-month period ended August 3, 2024 was $68.4 million, compared to $31.7 million for the six-month period ended July 29, 2023.

Outlook

For the third quarter of fiscal 2024 the Company expects:

• Net sales between $280 million and $285 million.
• Adjusted EBITDA⁽¹⁾ between $23 million and $26 million.

For the full year fiscal 2024 the Company expects:

• Net sales between $1.135 billion and $1.145 billion.
• Adjusted EBITDA⁽¹⁾ between $110 million and $116 million.
• Capital expenditures between $20 million and $25 million reflecting infrastructure and technology investments as well as new stores for the year.
• To open 12 to 16 new Torrid stores and close our usual 10 to 15 stores, while continuing to evaluate the fleet.

The above outlook is based on several assumptions, including, but not limited to, the macroeconomic challenges in the industry in fiscal 2024 as well as higher labor costs. The above outlook does not take into consideration the recent Consumer Financial Protection Bureau ruling which mandates, among other things, decreases in credit card late fees, and could alter the profitability of our agreements with our private label credit card financing company. See “Forward-Looking Statements” for additional information.

Conference Call Details

A conference call to discuss the Company’s second quarter 2024 results is scheduled for September 4, 2024, at 10:00 a.m. ET. Those who wish to participate in the call may do so by dialing (877) 407-9208 or (201) 493-6784 for international callers. The conference call will also be webcast live at https://investors.torrid.com. For those unable to participate, a replay of the conference call will be available approximately three hours after the conclusion of the call until September 11, 2024.

Notes

(1) Adjusted EBITDA is a non-GAAP financial measure. See “Non-GAAP Financial Measures” and “Non-GAAP Reconciliation” for additional information on non-GAAP financial measures and the accompanying table for a reconciliation to the most comparable GAAP measure. The Company does not provide reconciliations of the forward-looking non-GAAP measures of Adjusted EBITDA to the most directly comparable forward-looking GAAP measure because the timing and amount of excluded items are unreasonably difficult to fully and accurately estimate. For the same reasons, the Company is unable to address the probable significance of the unavailable information, which could be material to future results.

(2) Comparable sales for any given period are defined as the sales of our e-Commerce operations and stores that we have included in our comparable sales base during that period We include a store in our comparable sales base after it has been open for 15 full fiscal months. If a store is closed during a fiscal year, it is only included in the computation of comparable sales for the full fiscal months in which it was open. Comparable sales for the three- and six-month periods ended August 3, 2024 compares sales for the 13- and 26-week periods ended August 3, 2024, respectively, with sales for the 13- and 26-week periods ended August 5, 2023. Partial fiscal months are excluded from the computation of comparable sales. We apply current year foreign currency exchange rates to both current year and prior year comparable sales to remove the impact of foreign currency fluctuation and achieve a consistent basis for comparison. Comparable sales allow us to evaluate how our unified commerce business is performing exclusive of the effects of non-comparable sales and new store openings.

About Torrid

TORRID is a direct-to-consumer brand in North America dedicated to offering a diverse assortment of stylish apparel, intimates, and accessories skillfully designed for curvy women in North America. Specializing in sizes 10 to 30, TORRID’s primary focus is on providing fashionable, comfortable, and affordable options that meet the unique needs of its customers. TORRID’s extensive collection features high quality merchandise, including tops, bottoms, denim, dresses, intimates, activewear, footwear, and accessories. Revenues are generated primarily through its e-Commerce platform www.torrid.com and its stores in the United States of America, Puerto Rico and Canada.

Non-GAAP Financial Measures

In addition to results determined in accordance with accounting principles generally accepted in the United States of America (“GAAP”), management utilizes certain non-GAAP performance measures, such as Adjusted EBITDA, for purposes of evaluating ongoing operations and for internal planning and forecasting purposes. We believe that these non-GAAP operating measures, when reviewed collectively with our GAAP financial information, provide useful supplemental information to investors in assessing our operating performance.

Adjusted EBITDA is a supplemental measure of our operating performance that is neither required by, nor presented in accordance with, GAAP and our calculations thereof may not be comparable to similarly titled measures reported by other companies. Adjusted EBITDA represents GAAP net income (loss) plus interest expense less interest income, net of other expense (income), plus provision for income taxes, depreciation and amortization (“EBITDA”), and share-based compensation, non-cash deductions and charges, and other expenses

We believe Adjusted EBITDA facilitates operating performance comparisons from period to period by isolating the effects of certain items that vary from period to period without any correlation to ongoing operating performance. We also use Adjusted EBITDA as one of the primary methods for planning and forecasting the overall expected performance of our business and for evaluating on a quarterly and annual basis, actual results against such expectations.

Further, we recognize Adjusted EBITDA as a commonly used measure in determining business value and, as such, use it internally to report and analyze our results and as a benchmark to determine certain non-equity incentive payments made to executives.

Adjusted EBITDA has limitations as an analytical tool. This measure is not a measurement of our financial performance under GAAP and should not be considered in isolation or as an alternative to or substitute for net income (loss), income (loss) from operations, earnings (loss) per share or any other performance measures determined in accordance with GAAP or as an alternative to cash flows from operating activities as a measure of our liquidity. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items.

Forward-Looking Statements

Certain statements made in this earnings release are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and are subject to the safe harbor created thereby under the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical or current fact included in this earnings release are forward-looking statements. Forward-looking statements reflect our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “anticipate,” “estimate,” “expect,” “project,” “plan,” “intend,” “believe,” “may,” “will,” “should,” “can have,” “likely” and other words and terms of similar meaning (including their negative counterparts or other various or comparable terminology).

For example, all statements we make relating to our estimated and projected costs, expenditures, cash flows, growth rates and financial results, our plans and objectives for future operations, growth or initiatives, strategies or the expected outcome or impact of pending or threatened litigation are forward-looking statements. In addition, all of the statements under the heading “Outlook” are forward-looking statements, and any other forward-looking statements including statements regarding projected net sales, projected Adjusted EBITDA, projected comparable store sales, projected capital expenditures and projected store openings and closings are subject to risks and uncertainties that could cause actual results to differ materially from those that we expected, including:

• the adverse impact of rulemaking changes implemented by the Consumer Financial Protection Bureau on our income streams, profitability and results of operations;
• changes in consumer spending and general economic conditions;
• the negative impact on interest expense as a result of rising interest rates;
• inflationary pressures with respect to labor and raw materials and global supply chain constraints that could increase our expenses;
• our ability to identify and respond to new and changing product trends, customer preferences and other related factors;
• our dependence on a strong brand image;
• increased competition from other brands and retailers;
• our reliance on third parties to drive traffic to our website;
• the success of the shopping centers in which our stores are located;
• our ability to adapt to consumer shopping preferences and develop and maintain a relevant and reliable omni-channel experience for our customers;
• our dependence upon independent third parties for the manufacture of all of our merchandise;
• availability constraints and price volatility in the raw materials used to manufacture our products;
• interruptions of the flow of our merchandise from international manufacturers causing disruptions in our supply chain;
• our sourcing a significant amount of our products from China;
• shortages of inventory, delayed shipments to our e-Commerce customers and harm to our reputation due to difficulties or shut-down of our distribution facility;
• our reliance upon independent third-party transportation providers for substantially all of our product shipments;
• our growth strategy;
• our failure to attract and retain employees that reflect our brand image, embody our culture and possess the appropriate skill set;
• damage to our reputation arising from our use of social media, email and text messages;
• our reliance on third-parties for the provision of certain services, including real estate management;
• our dependence upon key members of our executive management team;
• our reliance on information systems;
• system security risk issues that could disrupt our internal operations or information technology services;
• unauthorized disclosure of sensitive or confidential information, whether through a breach of our computer system, third-party computer systems we rely on, or otherwise;
• our failure to comply with federal and state laws and regulations and industry standards relating to privacy, data protection, advertising and consumer protection;
• payment-related risks that could increase our operating costs or subject us to potential liability;
• claims made against us resulting in litigation;
• changes in laws and regulations applicable to our business;
• regulatory actions or recalls arising from issues with product safety;
• our inability to protect our trademarks or other intellectual property rights;
• our substantial indebtedness and lease obligations;
• restrictions imposed by our indebtedness on our current and future operations;
• changes in tax laws or regulations or in our operations that may impact our effective tax rate;
• the possibility that we may recognize impairments of long-lived assets;
• our failure to maintain adequate internal control over financial reporting; and
• the threat of war, terrorism or other catastrophes that could negatively impact our business.

The outcome of the events described in any of our forward-looking statements are also subject to risks, uncertainties and other factors described in the sections entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on April 2, 2024 and in our other filings with the SEC and public communications. You should evaluate all forward-looking statements made in this earnings release in the context of these risks and uncertainties.

We caution you that the important factors referenced above may not include all of the factors that are important to you. In addition, we cannot assure you that we will realize the results or developments we expect or anticipate or, even if substantially realized, that they will result in the outcomes or affect us or our operations in the way we expect. The forward-looking statements included in this earnings release are made only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise except to the extent required by law. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments.

Investors and others should note that we may announce material information to our investors using our investor relations website (https://investors.torrid.com), SEC filings, press releases, public conference calls and webcasts. We use these channels, as well as social media, to communicate with our investors and the public about our company, our business and other issues. It is possible that the information that we post on social media could be deemed to be material information. We therefore encourage investors to visit these websites from time to time. The information contained on such websites and social media posts is not incorporated by reference into this filing. Further, our references to website URLs in this filing are intended to be inactive textual references only.

Non-GAAP Reconciliation

The following table provides a reconciliation of Net income to Adjusted EBITDA for the periods presented (dollars in thousands):

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