Shifts In Consumer Spending Patterns Drive Downgrade For Torrid Holdings

Telsey Advisory Group analyst Dana Telsey downgraded Torrid Holdings Inc. CURV from Outperform to Market Perform, lowering the price target from $5 to $3.

The analyst sees the underlying fundamentals of Torrid Holdings as largely disappointing, with both sales and gross margin falling well short of consensus forecasts in the recently-reported first quarter of fiscal 2023.

The analyst notes that traffic trends in Q1 were choppy both in-store and online, as consumer spending patterns and behaviors have shifted towards non-discretionary categories amid the challenging macro backdrop.

The analyst is particularly cautious about the significant management turnover that the company had over the last year, which is nothing short of an overhang and will require more time to stabilize the business.

Thus, incorporating the lackluster first quarter performance, management’s moderated outlook for the full year, and the lack of visibility around consumer health, Telsey cut estimates for FY23.

The analyst estimates FY23 sales to decline 12.7% Y/Y to $1.125 billion (from up 1.1% Y/Y to $1.302 billion previously). FY23 adjusted EBITDA estimate decreases to $121.3 million (from $150.1 million prior).

However, the analyst believes CURV is well-positioned amongst specialty apparel retailers as the market leader for the large, growing, and underserved U.S. women’s plus-size apparel space.

Price Action: CURV shares are trading higher by 0.61% to $2.4850 on the last check Thursday.