Torrid Holdings Inc.

Q1 2022 Earnings Conference Call

6/7/2022

spk08: Greetings and welcome to the Torrid Holdings Inc. First Quarter Fiscal 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Vince Adams, SVP of FP&A and Investor Relations. Please go ahead.
spk05: Good afternoon, everyone. Thank you for joining Torrid's call today to discuss first quarter financial results for 2022, which we released this afternoon and can be found on our website at investors.torrid.com. With me today on the call are Lisa Harper, Chief Executive Officer of Torrid, and Tanner McDiarmid, Interim Chief Financial Officer. Before we get started, I would like to remind you of the company's Safe Harbor language, which I'm sure you're familiar with. Management may make forward-looking statements, including guidance and underlying assumptions. Forward-looking statements are based on expectations that involve a risk and uncertainties that could cause actual results to differ materially. For a further discussion of risk related to our business, see our filings with the SEC. This call will contain non-GAAP financial measures, such as adjusted EBITDA and adjusted EBITDA margins. Reconciliations to these non-GAAP measures to the most comparable GAAP measure are included in the earnings release, furnished to the SEC, and available on our website. With that, I will now turn the call over to Lisa.
spk04: Good afternoon, everyone, and thanks for joining us for a discussion of our first quarter results. I'd like to start by saying that I'm very pleased to be hosting my first call today as the CEO of Torrid. I have a long history with the brand, serving on the board of directors for the past 14 years. I also served as the CEO of Torrid and Hot Topic from 2011 to 2016. I've been incredibly proud to see the growth and evolution of Torrid over the last decade, and I believe there's tremendous opportunity for us to continue that growth. A large part of our success comes from the remarkable team behind the Torrid brand, and I want to personally thank Liz for serving as our CEO for the past four years. Liz and I have worked together for more than a decade. She has an incredible passion for our product, customer, and our brand and has played an integral role in getting the business to where it is today. I'm thrilled that Liz is taking on the role of Chief Creative Officer where she will continue to lead the vision for design, product development, merchandising, and creative marketing. As for me, I bring a strong background in business strategy and operational oversight and I will lead the brand's overall vision and direction. Based on early observations, I've determined where we need to strengthen our focus, and my top priority is to provide direction to the team that will drive sustainable and profitable growth. Before I share this action plan, I want to take a moment to briefly highlight our first quarter results. Net sales were 328 million, exceeding our high guidance of 305 million, despite being up against stimulus from last year. This was an increase of 1% compared to last year and 30% compared to pre-pandemic 2019. Our results for the quarter were impacted by an estimated net five percentage points on a year-over-year basis due to shifts in event and shipment timing. Adjusted EBITDA came in at 52 million, exceeding our high guidance of 48 million. with adjusted EBITDA margin of 15.8% of sales. Our gross margin rate was slightly below our expectations, primarily due to higher promotional activity. Looking ahead, we believe we can manage gross margin more proactively while executing a plan that will continue to drive a long-term profitable growth. This brings me to my three main priorities for the business. Number one, Enhance promotional and marketing strategies to better balance margin and sales growth. Number two, drive growth across multiple opportunities, including our curve concept. And number three, develop a more efficient and effective organization by realigning resources. We have a significant opportunity to refine our promotional and marketing strategies to drive sales at higher margin rates by reducing our reliance on site-wide promotions focusing on product franchises and launches, and better balancing retention, reactivation, and acquisition activities within our customer file. We also plan to enhance our marketing strategy with better storytelling around our unparalleled fits and compelling assortment, rather than the primary focus being the discount. In the past, our promotions have been largely broad-based offers to all customers and across categories, which was anchored heavily on percentage discounts. Going forward, we plan to take a more surgical approach to promotions by closely aligning them with our merchandising and marketing strategies and our inventory investments. It will take time to refine these strategies, and we will maintain site-wide promotions in the near term while we test and react into more targeted promotions. I'll keep you updated on our progress in revising our promotional tactics as we learn more from these tests. We will create a more balanced approach to our marketing investments to drive stronger conversion of lapsed customers and improve customer retention and frequency while maintaining a focus on acquiring new customers. Once we get customers into the funnel, the foundation of our highly successful unified commerce model is built on migrating single channel customers become Omni, where they spend over three times their single channel counterparts and deliver exceptional lifetime value. Stores continue to be the number one vehicle for acquiring customers, so we are expanding our efforts to drive traffic to our high conversion store environment. We will continue to advance our growth strategies in both our core Torrid business as well as Curve. We remain committed to expanding Curve with an emphasis on sustainable and high quality growth. While we continue to believe in the ultimate growth potential, We have seen growth in this business normalize and no longer expect to reach 500 million in sales by 2023. We are reevaluating our approach to the business, still believing that it will deliver substantial growth over the next three to five years. Our previously discussed plans for Curve this year remain intact, and we will be opening up to 10 standalone Curve stores this fall, expanding the Curve assortment and up to a third of the store fleet, and launching a tabbed experience on our websites. We'll keep you informed about the results of these initiatives and we'll plan the future expansions of Curve based on these learnings. We are also focused on a balanced approach that ensures the continued growth of our core business. Our renewed focus on innovative product launches and building franchises such as our studio and lovesick assortments and apparel and our wire-free and t-shirt bras in Curve will support compelling storytelling to the customer. Fit specific products like bras and denim continue to drive the results for customer acquisition in the stores, and we're seeing positive traffic trends in that channel. My third priority will be to develop a more efficient and effective organizational structure by realigning resources to focus on the most critical tasks. We plan to put more rigor around our resource allocation to support long-term scalable growth. This will include thoughtful investments in technology to support the business, such as the e-com site enhancements, We'll also increase capacity for our e-comm order fulfillment in Q2, which will improve productivity and throughput to better support our growing business. As part of realigning resources to focus on critical areas, we are also making organizational changes, such as the recent promotion of Vivian Alhorn to SVP Chief Digital Officer. Vivian has been with the business for almost a year and previously ran the e-comm business at Banana Republic and Pottery Barn. She brings strong leadership to our digital teams and will drive the initiative in developing the customer file. We are continuing the search for a permanent chief financial officer and will meanwhile leverage the expertise of our interim CFO, Tanner McDiarmid, and our strong finance team until a replacement is found. Looking ahead, I am confident in our ability to continue to drive sustainable and profitable growth. Torrid has exceptionally strong brand equity, and we are uniquely positioned to serve our existing and new customers during this changing environment by focusing on what is most important to our customers, unparalleled fit. I'm excited to be working with a talented, passionate, and innovative team that is energized by the opportunities that lie ahead for our brand. And with that, I'll now hand the call over to Tanner to provide more detailed financials on the quarter and updated guidance.
spk06: Thank you, Lisa, and good afternoon, everyone. I'm pleased to be here today as the interim CFO of Torrid. I've spent the majority of my career working with businesses to execute operational improvements, increase productivity, and determine where to best invest cash to drive profitable growth, both as an advisor and in interim management roles. I look forward to working with Lisa to help Torrid strengthen its foundation in support of long-term growth until a permanent CFO is named. I will begin my discussion with a review of our financial results for the quarter followed by our outlook. Starting with the first quarter results, we exceeded our sales guidance as net sales grew 1% to 328 million compared to 326 million in the first quarter last year, and they were up 30% versus pre-pandemic 2019. Comparable sales in the quarter declined 2% on a year-over-year basis. Our sales in the quarter were impacted by an estimated net 5 percentage points on a year-over-year basis due to shifts in event and shipment timing. Adjusting for these shifts, our net sales growth would have been up 6% for the quarter and comparable sales would have been up 3%. As a reminder, we were up against a difficult 108% comp increase last year. as government stimulus and pent-up customer demand drove significant consumer spending. We were pleased with the strong consumer demand throughout the first quarter and inter-record cash event, which delivered above expectations. Gross profit for the quarter was $125 million, or 38.1% of net sales. This compares to $145 million, or 44.5% of net sales, in the first quarter of last year. Roughly half of the 640 basis point decline in gross margin was from higher discounts and promotions compared to last year. And the remainder was due to increased product and transportation costs, which were partially offset by select price increases. As Lisa mentioned, we were focused on actions to drive margin performance. Selling general and administrative expenses in the quarter were 67 million compared to 110 million for the first quarter in the prior year. As a percentage of sales, SG&A was better than expected and decreased to 20.5% from 33.7% compared to the first quarter of last year due to lower share-based compensation and performance bonus expense. This was slightly offset by an increase in store payroll and store expenses as we are operating with more normalized operating hours and wages have increased since last year. Marketing expenses in the quarter were $18 million, compared to 10 million in the first quarter of last year. As a percentage of sales, marketing increased approximately 250 basis points to 5.5% compared to 2.9% in the first quarter of last year. The higher marketing costs as a percentage of sales was driven by further investment in digital marketing channels to drive acquisition in the incremental marketing test we discussed last quarter. Turning to profitability. Net income for the quarter was $24 million or $0.23 per share versus net income of $13 million or $0.12 per share for the same period last year. We had no adjustment to net income in the first quarter of 2022, but for comparison purposes, adjusted net income last year was $45 million or $0.41 per share. In addition to GAAP measures, we believe that adjusted EBITDA and adjusted net income are important measures that we use to evaluate and manage our business. Adjusted EBITDA came in above the high end of our guidance at 52 million or 15.8% of net sales compared to 76 million or 23.2% of net sales in the first quarter of 2021. Turning to the balance sheet, Our cash and cash equivalents at the end of the quarter totaled 25 million. Total liquidity at the end of the first quarter, including available credit, was 145 million. During the quarter, we repurchased 23 million of the common shares outstanding and had 54 million remaining on our stock repurchase program at the end of the quarter. Total debt at the end of the quarter was 357 million compared to 202 million in the first quarter of 2021. Our net debt to adjusted EBITDA was 1.5 times at quarter end. Inventory at the end of the quarter was $179 million compared to $112 million in the prior year. Excluding in transit, inventory was up 51% to pre-pandemic 2019 with approximately 30% sales growth and increased product costs over that period of time. We ended the quarter with a comparatively elevated inventory balance, but with our current level of planned sales and receipts, inventory levels should be better positioned going into the second half of the year. We opened four Torrid stores in the first quarter and remain on track to open 35 for the year, including up to 10 Curve stores. Turning to the outlook for the second quarter, while we were pleased with our first quarter results, we remained thoughtful in our outlook as we continue to face macro headwinds and lapse significant stimulus from last year. We expect net sales to be between 350 million and 360 million for the quarter, and we expect adjusted EBITDA to be between 53 million to 58 million. This outlook assumes our gross margin rate will be below Q1 as we clear through inventory heading into the back half of the year. For the full year, we are maintaining our full year sales guidance of between 1.3 billion and 1.365 billion. As Lisa stated, we are focused on creating a better balance of sales and margin in the business that is expected to moderate sales growth in the back half while driving improvements in margin. For adjusted EBITDA, we still expect to deliver between 195 million to 220 million for the year. Capital expenditures are expected to be between 30 to 35 million for fiscal 2022, reflecting infrastructure investments and roughly 35 new store openings in 2022, including up to 10 curve-only test stores. We're also planning to close approximately five stores this year. As we move into the remainder of the year, I'm looking forward to the opportunity to help strengthen the foundation for Torrid that will allow for sustainable long-term growth. Torrid has an incredible brand equity and customer loyalty, and I'm excited to help build upon Torrid's organization and operations. With that, I will now turn it over to the operator for questions.
spk08: Thank you. At this time, we'll be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Your first question comes from Mark Altrager with Baird. Please proceed with your question.
spk07: Thanks for taking my questions. I guess first off, you commented in the release that the brand and the Torrid customer have proven to be extremely resilient. I was hoping you could expand on that a bit, how we should think about the durability of demand should the economic backdrop soften a bit in the back half of the year, and whether there's anything you're seeing within your customer data that would indicate she's pulling back at all.
spk04: Thanks, Mark. Our customer is incredibly resilient. They have a household income of approximately $85,000. We continue to see the shopping patterns, more customers coming into the store, which is encouraging. Average unit retails we're comfortable with. So we are seeing what we consider to be a sustained performance by the customer broadly. So encouraging to that standpoint, because I think of their lack of kind of competitive opportunities, our customers have, you know, are highly retentive, as well as that higher household income we think may have a combination to help provide a net of stability as we kind of continue to navigate.
spk07: That's very helpful. Thank you. Just as a follow-up, with respect to the new marketing and promotional strategy, does there necessarily need to be a sales reset in the near term or even into 2023 as you walk away from some of the less profitable sales, or is this transition going to be a little bit more subtle than that? Any further color there would be helpful. Thank you.
spk04: Sure. I think reassessing our promotional strategy in a a time period that we have a little bit more inventory than we would ideally like to have. We have to be very cautious about that in addition to the macro conversations that are perpetually being shared at this point. We feel very strongly that we have an opportunity to test price elasticity models with a more surgical approach to promotions. And also to enhance our product launch strategy, so building franchise businesses. For instance, we have a big relaunch of the studio concept in September of this year, which is one of our biggest launches ever. So we have good product progression and innovation, but I also think it's something that I'm excited about in the back half of the year. But broadly to the promotional mindset, we're not resetting sales. We've considered this as we've continued to reinforce our guidance moving forward. I feel like we just have to take a more holistic, 360-degree strategic approach to our promotional as well as our marketing strategies that allow us to really give the best advantage and really call out the advantages of the product and our brand to the customers as we're acquiring them and retaining them. So, Mark, to your point, all of that has been considered in our forecasting. And we'll test and learn, particularly in second quarter, but going into the third quarter with these more surgical offerings so that we can really model the price elasticity as we move forward. And then, again, to reinforce focusing on product launches and product benefits and features that I think we'll enhance our desirability as we move forward at a lower discount rate.
spk07: Okay. Thank you for all the detail. I'll jump back in the queue.
spk04: Thank you.
spk08: Your next question comes from Lorraine Hutchinson with Bank of America. Please proceed with your question.
spk03: Thanks. Good afternoon. Can you talk a little bit more about what happened in the quarter with Curve that's causing you to step away from the longer-term goals? Was it a specific product line? Was it the attachment to other products? Maybe just a little more insight into that and then the changes you're making to try to improve on that business.
spk04: Sure. I wouldn't say that there was an abrupt shift in curve. There are some categories of business, particularly active, the athletic businesses that are waning, I think, as the customer comes out of the pandemic and makes different choices. I also think that we have an opportunity to highlight our five core frames and really build franchises off of those. We are a little bit overbought in basics, which isn't a long-term issue. We'll work out of that inventory really productively, but I just wanted to make sure that we have so many things that we're learning about Curve, the 50-50 stores, the towards the curved standalone stores that are launching in the third quarter, the tabbed experience, that I wanted to make sure that we were moving forward in a really productive and profitable long-term mindset versus, you know, really just rushing to make those things happen. I'm still incredibly bullish about this. I think that, you know, seven percent, I don't know if this is, like now I'm thinking if I'm getting in trouble. Seven of our top 10 items for customer acquisition are bras. So it's absolutely a way that the customer enters the brand and it still is. So we're seeing consistency in that and that it's really a driver for customer acquisition and retention. It's just an opportunity to be more prudent and step back a little bit, take the real learnings from all of these initiatives that we have undertaken and make sure that we put together a plan that is profitable and sustainable over a slightly longer timeframe.
spk10: Thank you.
spk08: Your next question comes from Dylan Cardin with William Blair. Please proceed with your question.
spk00: Yeah, I guess mine's kind of a follow-up from that. If you're talking about sort of a more radical, or not radical perhaps, but definitely a shift in the promotional activity or the promotional stance and your customer historically has really been, you know, it's been a call to arms for them. And Curve has sort of a different outlook here. It sounds like there's something here where you're measuring profit versus growth, whereby the longer-term sales outlook kind of is muted in favor of gross margin growth. Is that kind of the way that we should be thinking about how this progresses from where kind of our models are currently set coming out of the IPO?
spk04: No, I would still consider us to be a growth company, absolutely. I think it's prudent to make sure that we're growing productively and profitably. I think one of the things that we're really focusing on, I'll give you an example of how this applies. there is an enormous focus placed on top of funnel acquisition marketing. That, while that is, you know, acquisition is always important, our number one acquisition mode is through the stores. Our highest quality customer comes from the stores. Those customers all convert, not all, but a large percentage of them convert to an omni customer. All of those things still exist. Curve is still an enormous growth vehicle for the company. But we also have an enormous opportunity within the core businesses to grow. The studio launches, the dressy, pretty, polished looks. She'll buy everything in her closet. And I think we need to have a very broad-based approach to growth and profit as we move forward. So it's not one or the other, it's balancing. And I think that as we move forward, we want to make sure that our margin expectations and how we're managing the business from a margin perspective ensures that we can continue that long-term profitable growth still at a high level of growth. So I'm not changing that model at all. I'm just trying to explain our approach, which is more of a prudent approach to ensure that we, before we accelerate something, that we're clear what that acceleration means to the ultimate business. And while we're opening the stores, I still think curves the standalone, you know, intimate concepts. I still think that there's enormous growth there. There's enormous growth in the core of the business, the storage side of the business as well. And we're committed to making sure that we continue the growth and we continue it profitably.
spk00: Understood. And I guess more near-term, how should we think about sort of the cadence of gross margin, second quarter, third quarter? It sounds like maybe more promotions in the near term and maybe some opportunities in the back half.
spk04: Yeah, as Tanner said in his comments, we would expect more promotions in the short term and also some testing of some of these more surgical concepts in conjunction with that. So we can really kind of... determine price elasticity and the customer's appetite for the different types of promotions, which we have an opportunity to address. And then on the back half, we would expect it would be somewhat more moderated.
spk00: Very good. And I guess one quick one, sorry. The ideal leverage ratio here, has that changed? Are you going to prioritize debt pay down at this point?
spk06: We're comfortable with where we are.
spk00: Yeah, we're comfortable with where we're allocating capital.
spk08: Thanks. Your next question comes from Brooke Roach with Goldman Sachs. Please proceed with your question.
spk02: Good afternoon, and thank you so much for taking our question. Can you provide some additional color on your third priority of efficiency and resource allocation? How do you envision this playing out in terms of SGA investment behind technology and fulfillment versus potentially increasing the rate of marketing spend as you invest behind profitable growth at lower promotions? Thank you.
spk06: Sure. So when we think about resource allocation, it's really about ensuring we're making investments in infrastructure that really help us meet customer demand, streamline our processes, and support long-term growth. You know, as of now, we're sort of focused on investing resources in distribution capacity and some technology upgrades, such as e-comm site enhancements and looking at our ERP systems. As an example, we've implemented infrastructure and system enhancement in our DC. It will significantly increase our daily fulfillment. The changes are really sort of focused on reconfiguration to increase throughput and productivity and should resolve some of the shipping delay issues that you're seeing through customer sentiment online.
spk04: And from a marketing perspective, we're going to continue to invest in marketing. At the same time, we're going to be clear that the goal of marketing is to build the ultimate customer file, build retention, and build frequency. And we're going to invest in all aspects of that, from acquisition, retention, reactivation, frequency, and to reduce attrition. So we have, again, fundamentally the same goal, which is to build the customer file. We also want to make sure we're building that customer file with very high-quality Omni customers. And so the investments will continue, not at the same rate as the first quarter, but we still expect to be spending this year about 5% on marketing. Does that answer your question, Brooke?
spk02: Yes, thank you. And if I could squeeze in one follow-up, I would love to hear a little bit more about how you're thinking about AUC inflation into the back half. What are you seeing in terms of rate of cost increases, both in terms of raw materials and freight in the back half of this year and into early 2023? Thank you.
spk06: Oh, go ahead. Sorry. We see it continuing through the remainder of the year, and it's been included in our guidance for the year. On a year-over-year basis, you know, we believe the product cost inflation to be somewhere close to 10% on a year-over-year basis.
spk04: And we are able to bridge that gap with increased initial retails. And so we will continue to thoughtfully and carefully reconsider retails as it applies to closing that gap on higher costs.
spk02: Thank you so much. I'll pass it on.
spk01: Okay.
spk08: Your next question comes from Kimberly Greenberger with Morgan Stanley. Please proceed with your question.
spk09: Okay, great. Thanks so much. Lisa, I wanted to dig a little bit more into marketing, if we could. If I'm sort of reading between the lines of what you're saying, it sounds like you're you've been most successful acquiring and retaining customers, meaning minimizing the churn rate for those customers acquired in store, whereas there has been maybe success at acquiring customers online, but you have maybe a very high churn rate. Am I reading you correctly on those? Are those the correct assumptions that I'm walking away with? And Do you think that some of the shipping issues are at play here in terms of the churn in digital customer acquisition? Because I would think that there's such a vast market out there for this product, and so many of those women don't necessarily shop at the mall. there have to be other ways of talking to those women, whether it's through a sort of, you know, more developed influencer network or some other form of social commerce. But I'm just wondering, I don't know if you've had time to sort of rethink, if you and Vivian, for example, together have had time to sort of rethink marketing strategies and where you take this going forward. Thank you.
spk04: Sure. Thanks, Kimberly. Broadly on the marketing strategy, I think if you walk away with nothing else, what I would ask you to walk away with is we have many different ways of filling the customer file. And the efforts that the company was focused on was very, very high top-of-funnel consideration mindset. And that was the big investment that went into first quarter, that we're not going to continue that focus level of high funnel investment in marketing. What I'm asking the team to do, and I've met directly face-to-face with the digital agencies that we use, is really to focus on a 360 approach to acquisition, retention, reactivation frequency. And because we can fill that customer file, we have many different touch points that we can use to to maintain and build that customer file. And we have a real opportunity to do that in a more comprehensive, integrated, strategic way. My ultimate goal is to build the customer file with high quality, highly retentive, high frequency customers. So that is fundamentally the marketing goal. That's the brief. And we have many different tactics Part of that also is to acknowledge the store's role in customer acquisition, the quality of the customer that comes there, and that there will be a shift in some small way to drive customers to the store because of that quality of acquisition has the highest conversion to Omni customers long term. I do agree with you. Net promoter score in storage for the store experience is exorbitantly high. I don't know if I can give it to you, but it's in the 90s, it's in the mid-90s for the experience in the store environment. It isn't echoed as effectively in our digital experience, and one of our goals and some of the things that Tanner's been talking about in terms of investment will even out that score. I think I would also highlight our very low return rate. Our return rate is still And so that idea that it's still a product that they very much like and that fits them well, and so that is a huge accomplishment. But I think we are making the investments and we'll start to see some improvements in this quarter in terms of being able to ship to the customer very, very quickly. And that will, I think, resolve a lot of the issues that we have in the differentiation in line. As we bring up that experience online and make it equivalent to the experience that she has in the stores or more equivalent to the experience that she has in the stores, I think that expansion of acquisition and retention on the digital side will continue to improve. I see it as an opportunity. And we're investing in systems and processes and capabilities and capacity to be able to improve the speed of shipping product to that customer so that we can also build frequency and retention.
spk01: Does that answer your question? That's very helpful.
spk04: It does.
spk09: Thank you.
spk04: Thank you.
spk08: Your next question comes from Oliver Chen with Cowan & Company. Please proceed with your question.
spk10: Thank you for taking our question. This is Jill Nan for Oliver. Could you just talk about which category performed well during the quarter and if you think you have the ability to chase into some of the trends and categories that are working better in the second half and maybe also touch on the opportunities to take pricing. I know you mentioned you have some room, but How do you think about that across your portfolio and how much room there is going forward? Thank you.
spk04: Thank you. Some of our best categories for the quarter were dresses. Anything that was occasion-based was great. Accessories is also an area, particularly shoes, that we see expansion in. And anything that, as I said, that was more occasion-based, Swim is doing well. We're happy with that. So I think that we did not shift quite enough into those more polished or occasion-based categories. And we have as we've moved into the back half of the year. I'm really happy with how they've bought the back half of the year and the types of product categories are reflected based on the selling that we're seeing in this half of the year. where to work, dressy, those types of things. So I feel that we're well positioned in the back half to capitalize on the trends that we're seeing in the front half.
spk10: Got it. And just on pricing, how much room do you think you have to increase pricing?
spk04: I think we have some room in particular categories. I think we have room. And I won't go category by category. I've seen where we have raised prices that we've actually had good results. So we're focused on the team. We look at the value of the product and make sure that the value equation remains the same or we think that it holds a high value for the customer. We're repricing goods. So that's under constant evaluation. But I do think we have room to take some prices up in the back half.
spk10: Thank you.
spk04: Thank you.
spk08: Your next question comes from Dana Telsey with Telsey Advisor. Please proceed with your question.
spk01: Hi. Good afternoon. Lisa, the framework, the holistic framework that you set out regarding the adjustments to the business that you're making, whether it's the surgical promotions, the marketing, the efficiencies, and the team, as you think of the markers as we go through the balance of this year, What should we be looking for to say, check the box, check the box? And how do you embed this with the macro environment that you're navigating with supply chain and inventory levels? Thank you.
spk04: Thank you, Dana. I think that I'm going to take the end of your question first. Business has been managing in a very nimble way for two and a half years now, and that continues. So I think we've all developed the skill set to be able to be nimble at the different macro pressures coming, but we've certainly had a lot of shipping and cost of goods challenges for a while now. So I'm less concerned about that broadly. What I would say is in terms of marker, I would expect to see more launch messaging. I would expect to see more product franchise messaging. I would expect to see more storytelling. I would expect to see influencers that are guided towards store events. I would expect to see, I can't give you a timeline on kind of margin shifts until I can read more what we learn in the second quarter and the third quarter. But I would, you guys are all very good about watching our marketing, our promotional cadence, and it should be more focused on storytelling as we move into the third and fourth quarter. That being said, we always have the opportunity, if the macro pressures are there, to be slightly more promotional based on the competitive scenario that we might face in the broader marketplace. So we will be nimble in those terms. But our goal is We have world-class kits. We have product that she wants that she fills her closets with, and we want to make sure that we have the opportunity to tell her that story and sell the product on its own merits and make sure that we focus on the opposite side, on the customer file development, and that will kind of offset our need for high levels of promotionality to continue to build that file.
spk01: Got it. And then on the inventory levels, Lisa and Tanner, what should we be thinking about inventory growth as you move through the year?
spk06: So we are comfortable with the position of the inventory through the remainder of the year. We are going to have to be more promotional in Q2 so that we're feeling cleaner on our inventory, having the post-summer timeframe. But we feel like we've planned receipts in the back half of the year such that we're going to be comfortable with our inventory position Q3 to Q4 timeframe.
spk04: Yeah, our receipts are in the back half or below last year. And I'm happy with the categories that we've invested in. And so that we should, you know, we should be, I think we can turn faster. Obviously, even in the back half of this year on a year-over-year basis. And our goal will be to make sure that we are investing appropriately in inventory to also drive the highest level of productivity in the overall business. Thank you.
spk08: Ladies and gentlemen, we have reached the end of the question and answer session. And I would like to turn the call back to Lisa Harper, CEO, for closing remarks.
spk04: Thank you, everyone, for joining us today. I really appreciate your focus on Torrid and our time together. We'll look forward to our next call with you at the end of the summer. Have a great season, everybody. Thanks.
spk08: This concludes today's conference. You may disconnect your lines at this time. Thank you all for your participation.
Disclaimer

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