Why Torrid Holdings Shares Finished Higher Today

Actions of Torrid Holdings (CURV 8.96%) climbed today after the plus-size women’s clothing brand posted better-than-expected results in its second-quarter earnings report.

Shares finished up 9% on the news.

Image source: Getty Images.

Torrid impresses the market

Like other apparel retailers, Torrid is battling a challenging consumer environment, but the company cut discounts to boost profits in the quarter.

Comparable sales fell 0.8 percent, although the company said full-price comparable sales rose 6.4 percent, showing it successfully reduced inventory to raise prices.

Total revenue fell 1.6 percent to $284.6 million, which missed estimates of $285.4 million.

However, the company reduced inventory levels by 19%, leading to a 323 basis point improvement in gross margin to 38.7%. Torrid also benefited from lower product costs due to renegotiations with suppliers.

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 expects to return to positive comparable sales with a low figure in the second half of the year.

What’s next for Torrid?

Looking ahead, the company expects revenue of $280 million to $285 million in the third quarter, which is below consensus of $290.6 million.

For the full year, it cut its revenue estimate from $1.135 billion to $1.155 billion to $1.135 billion to $1.145 billion, compared with the average estimate of $1.15 billion.

Despite the unfavorable revenue guidance, investors appear encouraged by the improvement in margin performance. Torrid is now trading 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 consistent top-line growth.