Dive Brief:
- As part of an effort to optimize its cost structure, Torrid reduced its headquarters staff by 5% at the beginning of the third quarter, CEO Lisa Harper said on a call with analysts Wednesday. The cost-saving initiative will help position the company for future growth, per a Seeking Alpha transcript of the call.
- The decision comes as its second-quarter net sales dropped 18.2% year over year to $289.1 million, according to a Wednesday press release. The plus-size apparel brand saw its net income decrease 70.8% to $6.6 million while gross margin fell from 37.2% the year before to 35.5%. Torrid opened three stores and closed two during the quarter, ending the period with a store count of 639.
- Torrid lowered its full-year outlook, now expecting net sales between $1.08 billion and $1.115 billion instead of the previously projected $1.095 billion to $1.145 billion.
Dive Insight:
While Harper said in a statement that Torrid’s Q2 results were “in line with our guidance,” the executive also acknowledged setbacks during the call.
“Our second quarter results reflect the impact of continued choppy customer behavior,” Harper said on the call. “They are more selective in their purchases and exhibit inconsistent traffic trends. In addition, we have identified missed opportunities in our casual product assortment that we are addressing immediately.”
To help position the business toward long-term growth, Torrid will focus on its pricing strategy, marketing investments and cost structure in addition to inventory.
“We have not had the ideal balance in value pricing, which we now see as having a negative impact on both customer acquisition and retention,” Harper said. “Our initial retail prices have risen too much in the last few years, and we are implementing a comprehensive strategy that balances both value and price, which will be fully integrated into our spring lines with a good, better, and best assortment and pricing strategy.”
Torrid will expand its ship-from-store program and test clearance stores in an effort to enhance its inventory management. If the clearance store tests in Q3 yield positive results, the brand will expand the network by converting underperforming stores, Harper said.
Torrid’s latest results follow news in May that its CFO and COO Tim Martin resigned after about eight months on the job. Senior Vice President of Finance and Investor Relations Paula Dempsey is serving as interim CFO until the company names a successor. Chief Technology Officer Hyon Park is assigned to lead supply chain efforts while Harper is responsible for operations including real estate.
