Torrid Holdings Inc.

Greetings. Welcome to Torrid Holdings Incorporated fourth 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. Please note this conference is being recorded. I will now turn the conference over to Paula Dempsey, Senior Vice President of Finance and Investor Relations. Thank you. You may begin.

Good afternoon, everyone, and thank you for joining Torrid's call today to discuss the fourth quarter and fiscal year financial results for 2022, which will release 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 Tim Martin, Chief Operating Officer and 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 include, but are not limited to, statements containing the words expect, believe, plan, will, may, should, estimate, and some other expressions. All forward-looking statements are based on current expectations and assumptions as of today March 23, 2023. These statements are subject to risks and uncertainties that could cause actual results to differ materially. For further discussion of risks related to our business, see our filings with the SEC. This call will contain non-GAAP financial measures such as adjusted EBITDA, reconciliations to these non-GAAP measures to the most comparable GAAP measures I included in the earnings released, furnished to the SEC, and available on our website. With that, I will turn the call over to Lisa.

Thanks, Paula. Good afternoon, everyone, and thank you for joining us for a discussion of our fourth quarter and full year results. Before I begin, I'd like to thank the Torr team for their dedication in providing our customers with exciting new products and a compelling customer experience. We've navigated a year of retail challenges with new leadership in many parts of the organization, elevated inventory levels resulting in a higher promotional environment, and decreased customer discretionary spend. Despite all of this, the team has accomplished a great deal in a short time. I believe that the changes we've made have been essential to reignite profitable long-term growth. I'm also very happy to announce the return of Mark Mazzucco to Torrid as Chief Commercial Officer. Mark previously served as the Chief Operational Officer of Torrid back in 2016, and prior to that he served as the Chief Planning Officer at both Hot Topic and Torit. He brings a wealth of experience and expertise in retailing, and we are excited to have him rejoin the team. Mark will be leading all aspects of margin optimization, inventory planning, and buying, as well as working with Vivian Alhorn, our Chief Marketing Officer, on marketing and e-commerce activities. Essentially, he's focusing on all things that drive product sales for the company. We believe that with Liz Munoz focused on design, Vivian's expertise in marketing and e-commerce, my involvement in product selection, as well as Mark's leadership of inventory planning, marketing, e-commerce, and planning functions, we had a strong team focused on delivering the very best product for our customers. Now moving into our fourth quarter performance, we delivered net sales at the upper end of our guidance range. Customers responded favorably to our Black Friday and Southern Monday events, taking the pressure off to our cash later in the quarter. Our gross margins began to stabilize in the fourth quarter as the rate of gross margin declined significantly lower than the third quarter. This sequential improvement in gross margin enabled us to exceed the upper end of our guidance, delivering an adjusted EBITDA of $16 million. Our primary focus for 22 was on enhancing the organization's focus in order to reignite sustainable long-term growth. We brought on Tim Martin, our Chief Operating Officer and Chief Financial Officer, Han Park, Chief Technology Officer, Bridget Zetterberg, Chief Human Resources Officer and Chief Legal Officer. We promoted Vivian Alhorn to Chief Marketing Officer, and we have now brought on Mark Mazzico as our Chief Commercial Officers. These new leaders have a wealth of experience from public and private retail and consumer-facing companies. and they will be instrumental in bringing our teams into alignment and driving our strategic initiatives. We also invested in new technology across the business that will enable us to provide customers with a more seamless experience moving forward. In the distribution center, we put in place new technology that has increased our capacity and allows us to deliver product to our customers faster than ever before, much improved over last year. Our new ERP system provides the foundation for an improved shopping experience on the website and enhanced data integration across the organization. Within inventory and product, we prioritized right-sizing our inventory with the goal of entering 2023 with adequate levels to support demand and the environment. Although we had to be more promotional to move these units last year, we were successful in these efforts and ended the year with inventory up only 6% compared to prior year. with the year-over-year increase coming solely from basics and early spring receipts. Normalizing for these categories, we were down 5% to the prior year, representing the most efficient levels of inventory we have seen in some time. We know that new product consistently drives customer anticipation and demand. We delivered new collections to her this year with the successful relaunch of our studio collection, the launch of SESTI, another collaboration with Betsy Johnson, and a refined focus on delivering more colors and fashion forward pieces that drove frequency and demand from our loyal customer base. And finally, we focused on expanding our customer file through re-engagement of lapsed customers and new customer acquisition. We shifted our marketing efforts toward customer retention, bringing back lapsed customers, and reaffirmed our commitment to attract new customers into our brand through our store channels. These efforts allowed us to deliver an increase in our active customer file this year. Overall, 2022 was a year of new learning, transformation, and laying the groundwork for the brand's continued success and expansion. We believe that the changes we made this past year were critical to set us up for future growth. As we look ahead to 2023, we will continue to expand our store footprint, driving customer file growth, delivering exciting merchandise to fill every need in our closet, and enhance our customer relationships. With these key areas in mind, we will keep investing in optimizing and growing our store footprint to acquire new customers into the brand and expand our customer file. Our store base is profitable and they remain our primary new customer acquisition channel. New stores drive significant web sales from newly acquired customers and the net spend of these customers in their first year is approximately 25% higher than that of web-acquired customers in their first year. Customers develop a connection with our product and brand by interacting with us in our stores. We are committed to bringing customers into our stores where we believe a compelling and personalized experience will increase engagement and loyalty. We plan to open between 30 and 40 new stores in 2023 as stores are a proven competitive advantage for this business. We understand that customer loyalty is determined by her ability to provide her with new and innovative products that increase her frequency of purchases. In 2023, we plan on launching a steady stream of new products across multiple categories to peak her interest and increase her engagement with the brand. The new products we introduced generated positive feedback and customer interest, and we will build on this throughout the year. In terms of marketing and promotional strategies, We are focused on improving our promotional cadence. We plan to offer a more consistent flow of smaller, exciting events to engage our customer and drive spend frequency. As part of this, we are redesigning our Torrid Cash promotion from a quarterly event to smaller and shorter events throughout the year. This change will reduce our reliance on large Torrid Cash events at the end of every quarter. While there is a lot of discussion in the retail industry about the macro environment, we will remain laser-focused on what we can control. We believe that the product and operational improvements we've made will position us for success and allow us to focus on key areas that we know will drive the business, such as enhancing the customer experience, driving productive growth in our customer file, and delivering exceptional product. I am thrilled to see our team continue to provide our customers with world-class fit and products that are truly life-changing, as well as unmatched in-store customer experience. With that, I'll turn the call over to Tim, who will provide more detailed quarterly and annual financials.