Why Torrid Holdings Stock Was Surging Today

What happened

Shares of Torrid Holdings (NYSE:CURV) were moving higher today after the maker of plus-size women's apparel posted better-than-expected results in its fourth-quarter earnings report last night.

While the company is still struggling following a boom earlier in the pandemic, the results were enough to give investors some encouragement.

As of 12:33 p.m. ET, the stock was up 23.1%.

So what

Comparable sales in the quarter fell 5.4%, and revenue dipped 5.5% to $301.2 million, though that beat estimates at $295.5 million.

Gross margin in the quarter fell 70 basis points to 31.9% due to increased markdowns and inflation on the cost side, and the company finished the quarter with adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $16.4 million, down from $28.4 million in the quarter a year ago.

On the bottom line, the company posted an adjusted loss per share of $0.04, which compared to an adjusted profit per share of $0.09 in the quarter a year ago but still beat the consensus at a loss-per-share of $0.08.

CEO Lisa Harper said, "This past year, we focused on improving the health of our organization and made operational changes that have set us up to drive long-term growth in the business."

Now what

Even with today's gains, Torrid stock is still down more than 90% from its post-IPO peak in 2021, as the company has faced similar challenges to other e-commerce and apparel companies.

The company's guidance showed it expected those challenges to persist in 2023. It called for revenue of $1.265 billion to $1.32 billion in full-year revenue, roughly flat from 2022 but slightly better than estimates at $1.26 billion, and it expects $140 million to $152 million in adjusted EBITDA for the year, down about 4% at the midpoint from 2022.

The apparel stock might look cheap after today's gains, but Torrid will need to return to growth in order for the stock to move consistently higher.

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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.