Shares of Torrid Holdings (CURV -2.68%) 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 9.3% 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.
