What happened
Shares of Torrid Holdings (CURV 7.69%) were surging this week in the aftermath of last week's fourth-quarter earnings report.
While there was no additional company-specific news out on the plus-sized women's clothing retailer, it continued the upward path it began late last week. Starting from a beaten-down share price, the momentum from its March 23 earnings report was enough to send the stock up by more than 51% for the week as of the close of trading Thursday, according to data from S&P Global Market Intelligence.
NYSE: CURV
Key Data Points
So what
Torrid had a successful IPO in 2021, but the stock fell by around 90% from peak to trough as sales growth slowed, investors broadly moved away from the e-commerce sector, and the company reported losses.
However, the fourth-quarter earnings report was good enough to help restore investor confidence, though it also showed the challenges the company faces.
Comparable sales in the quarter fell by 5.4% year over year, and revenue was down 5.5% to $301.2 million, though that was at the high end of the company's guidance and better than analysts' consensus estimate of $295.5 million.
Gross margin was down 70 basis points year over year to 31.9% due to promotional events and cost inflation, and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) fell from $28.4 million in the prior-year quarter to $16.4 million this time, but that was still better than the company's own guidance.
On the bottom line, it reported a loss of $0.04 per share, compared to an adjusted profit of $0.09 per share in the quarter a year ago, and beat the consensus expectation of a loss of $0.08 per share.
In the press release, CEO Lisa Harper noted that inventory levels had improved and said that gross margin rates were stabilizing.
Following the report, the responses from analysts were mixed. Baird analyst Mark Altschwager lowered his price target from $7 to $5.50 though he maintained an outperform rating on the stock. He noted the company's better-than-expected guidance for 2023.
Morgan Stanley analyst Alexandra Straton lowered her price target from $5 to $4, reiterated an equal-weight rating, and pointed out that profitability guidance was short of the consensus again.
Now what
For 2023, the company expects revenue of $1.265 billion to $1.32 billion, which would be an increase of about 1% at the midpoint. The full range is slightly better than the analysts' consensus estimate of $1.26 billion. On the bottom line, Torrid expects adjusted EBITDA of $140 million to $152 million, which would be down slightly from the $152.4 million it booked in 2022. Analysts expect per-share profits to be flat year over year.
While those numbers aren't particularly encouraging, the stock is now trading at a price-to-earnings ratio of just 9. With the company's bottom line stabilizing, the stock could still have some upside given its low valuation.
