Q2 2021 Torrid Holdings Inc Earnings Call
Greetings and welcome to Torrid second quarter fiscal 2021 earnings 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 Jessica Schmidt with icr. Thank you. You may begin.
In.
So, we're looking statements are based on expectations that involve risks and uncertainties, that could cause actual results to differ materially for a further discussion, risks related to our business PR filings with the SEC. This call will contain on gaap financial measures such as adjusting, the ebit. Ah, and adjusted either. Reconciliations of non-gaap measures are included in the SEC.
Us to deliver strong and sustainable financial performance over the long term before I get started. I'd like to thank our Associates and our customers throughout this trying and difficult environment. Our Associates remain dedicated to and focused on serving. Our customers who are truly at the center of everything we do. Our IPO in July, was a tremendous milestone for everyone at Torrid and we could not have achieved.
Any of this success without the commitment and enthusiasm of our Associates as well as the Loyalty of our customers. At Torrid our mission is to help. Curvy women from getting dressed every day and apparel and Intimates that accept celebrate and honor her. And her body, we aim to be the best direct-to-consumer apparel and Intimates brand for women.
Across a wide range of sizes.
From 10 to 30 by providing an unparalleled fit any meaningful, customer experience, that truly empowers curvy women to love the way they look and feel, we attribute the strength of our brand, to our maniacal, focus on fit and on delivering an incredible. Customer experience that underscores our commitment to this underserved Market turning briefly.
We were very pleased with the strong growth in our business which was driven by new and existing customers. We saw heightened customer demands for new outfits as she returned to a more social lifestyle are comparable.
Is a continuation of our long track record reflecting positive comps and 36 of the last thirty, eight quarters adjusted ibadah of 87 million dollars, was meaningfully above last year's 34 and are even a margin expanded over thirteen hundred basis points to a record..26 percent all that said,
We are still in the early Innings of our growth and the opportunity is massive, but before sharing our strategies, I would like to take a moment to ground everyone on white or it is so uniquely positioned within a highly attractive and underserved Market.
First we operate in a large and growing Market, that is categorically underserved and has meaningfully untapped potential apparel and Intimates for women size 10, to 30 is an 85 billion dollar market. That is growing two times faster than the u.s. Women's apparel Market. No one serves this customer the way we do because it takes years and years of focused dedication and
And expertise to build the Arsenal of fit and solution, based products that we offer her second. Our deep connection. With our customers has allowed us to build a loyal and passionate customer base as well as create. Exceptional visibility into our customers preferences. We have a comprehensive and growing loyalty program with over three million members, which make up 95% of our sales within. So,
Media, we have two and a half million followers across Facebook Instagram, Pinterest, YouTube and more recently Tick-Tock with a growing customer following in an abundance of impactful. User-generated content that our customer loves to see our customer, testimonials are powerful examples of this authentic connection. We have created, and I would like to share a letter. I just received to demonstrate how
How we are changing her life. It starts with I can't begin to tell you how good your clothes make me feel. I never thought I could feel this beautiful to wear clothes. I love that fit me. The way clothes should is nothing short of a miracle. Your clothes have given me a confidence. I didn't know I had in me anymore. I am brought to tears. Just writing this because I'm so thankful to you and to all. Thank you for
Helping me love myself. Thank you.
For making it fun to get dressed every day. That is just one of many that we receive and it is a testament to how much she loves our product. Third are data-driven, low-risk merchandising model. Helps us provide a broad assortment of proprietary products with a distinct style and we provide them when and where she wants them are flexible operating model allows us to quickly read and react to
Our customers preferences and to consistently meet her needs for great. Fitting quality product at a tremendous value. Our close relationships with our customers provides us with constant valuable feedback that we deploy to continually provide her with the things she needs and wants. We further leverage this feedback and our extensive bit capabilities to expand into categories that drive high loyalty.
Just blue jeans bras, when and shoes the effectiveness of our merchandising strategy is illustrated by our ability to grow our business, across all of our categories year after year as well as by are consistently High penetration of regular price sell-through at over 80 percent of our total sales and also supported by our wildly low, nine percent return rate. And finally, we have created
They Dynamic direct-to-consumer unified, Commerce model, that truly offers an inspiring shopping experience whenever and wherever she wants to shop the door and brand. Our stores offer an immersive that experience and that along with are passionate Associates. Helps her find what she needs to look and feel as great as she can for. So many of our customers, there is no other
Or she can get dressed up and here. Oh my gosh, you look amazing. This only happens in our stores. This exceptional in store experience intern fuels growth in our e-commerce business. Our e-commerce platform provides convenient. Access to our broad product assortment and accounted for nearly 70 percent of our net sales in the trailing 12 months ending Q2 of 2021.
And in that to, to, we saw sustained momentum in our eCommerce business. While traffic to our stores, continue to improve sequentially as customers returned to, in store shopping to further. Enhance her shopping experience. We have invested in Omni Channel capabilities, including buy online, pick up in store, shift from store curbside, pickup, order, and store and zoom store consultation.
We launched ship from store.
400 locations in the second quarter and have plans to further, expand our bopus offering as well. We will continue to build upon these capabilities. As we launch our next Generation mobile app by early next year. We believe our stores will continue to play an integral role in customer acquisition and in providing an immersive customer experience. Post COVID-19 longer term. We will continue to selectively.
Ali open, approximately 25 new stores, annually in targeted, markets, from an organizational standpoint at Torrid. We are committed to cultivating a workplace where diverse perspectives and experiences are welcomed and respected during the second quarter. We advance our diversity and inclusion goals with the implementation of a four-course series called leading for inclusivity, encouraging our leaders to support and
After both open dialogues and collaboration among other initiatives. We also launched an internal dni website to provide employees with diversity, equity, and inclusion resources as well as information and educational opportunities. This initiative is important to all of us at Torrid and one, we are committed to. Our organization is diverse in many ways with 93% of our employees.
Identifying as female and we will continue to do the work to hire into, and promote, diversity and inclusion. In all areas of our business. Looking ahead to third quarter and Beyond. We remain focused on executing, our strategic plan and leveraging our existing infrastructure to drive profitable sustainable. Long-term growth drivers of growth.
It's business. We believe the Intimates category will continue to drive customer acquisition and enhance, customer loyalty and increased basket size as evidence of this blog, or the number to entry item, purchased by new toward customers in stores and online. Our bras are game changers for our customers from our patent pending.
Smoothing technology to our Revolution to continue the momentum.
Porting this with marketing campaigns that Target specific customer segments with personalized offerings to encourage first purchases of toward curb.
Seb second, we are taking initiative to deepen our customer relationships and expand while it share with our existing customer base. We constantly offer product loads to create customer excitement and keep her engaged some recent examples. Include brand collaborations, like Betsey Johnson, the launch of Love stick and our unique life and store. Offering. We also plan to leverage our customers trust and products and fit.
By expanding our offer.
Two nice and categories such as Footwear scrubs and special occasions among others.
We're also building on our loyalty program to improve customer engagement through various activation initiatives. These include offers that strategically Drive customer purchases across categories, that deliver long-term customer value. For example, we know a customer that buys into bras jeans and tops is our most valuable. So, we are sending customers who have purchased tops and denim from a reward to be used on bras.
To drive our curve business. We are highly encouraged by the participation in this test, by the incremental, results on Broad customers and that it is still merch. Margin accretive third. We are focused on attracting new, customers to Torrid by increasing brand awareness and accelerating customer acquisition across all channels.
Our brand awareness is approximately 31% today and we only have captured four percent of the potential customer base in the United States illustrating, the massive opportunity ahead of us to capture this opportunity. We are continuing to invest in social media channels, where we are currently present, as well as testing emerging platform.
We are expanding our influencer ambassador program, which we launched during the second quarter and are encouraged by the social engagement. We're saying we are also expanding our presence on Tick-Tock, which we know is a big untapped opportunity for us. We will also continue to invest in community events, both online and in store to drive customer engagement and further our commitment to represent the diversity of our brand in met.
We launched a virtual casting call to discover and celebrate inspiring women within their Community. We had over seven thousand applicants and our customers. We are following up this success.
Joining our company.
We are also continuous collaborations which generate excitement and support causes that are important to us and to our community. During the second quarter. We launched our celebrate love collection, which is a collaboration with glad and our performance, exceeded all of our expectations. In the third quarter. We will launch our breast cancer awareness collection with the National Breast Cancer Foundation. And finally, we will continue to
Works of the Investments we've made.
Need in our organization and our infrastructure particularly related to data analytics and Omni Channel capabilities to drive continued profitable growth.
As evidenced by our company record, even a margining to to our investments in our distribution, facility and roll out of omni Channel capabilities, provide a significant operating leverage, which we will continue to benefit from as we grow.
And before I turn the call over to George, I would like to discuss the macro challenges. We are seeing as an industry today, our manufacturing base and our long-term relationships with our vendors remain very strong. Our primary concerns are around getting products into the United States and the related costs. The global supply chain remains challenged with the Resurgence of COVID-19 in certain markets as well as Court congestion.
And higher freight costs coupled with inflation. While we believe these challenges are largely transitory and will not impact. Our long-term view of the business. We are actively taking steps to mitigate the pressure and any area we can. Which George will speak to more in a moment in conclusion over the last four years. We've taken measures to enhance our infrastructure and strategies which have enabled us to establish a leading Market.
Position in North America, what's even more exciting is that we believe we are just getting started. We have enormous opportunity to serve this meaningfully underserved customer segments in a way that she has never experienced. I am inspired by the brand loyalty. We have garnered over the years as well as by The Passion of our team. We are confident that our proven strategy will drive profitable long-term growth for years to come.
I will now turn the call over to George to discuss our second quarter financial performance in Greater detail. He will also provide you with our financial outlook for the full year as we grow and build upon the success of our brand. Thank you, Liz and good afternoon. Everyone. Thank you for joining us today. As Liz mentioned. We are very excited to be sharing our strong financial performance with you, in our first earnings, call at the public company.
Before I review our performance and discuss our Outlook, I would like to thank the our team for their continued hard work and dedication throughout the pandemic, especially our stores teams and our DC teams who continue to be the face of our brand to our customers on a daily basis.
In my remarks, I will make select comparisons to our second quarter, 2019 to normalize for the anomalies created by COVID-19. And the prior year. We believe this comparison will provide you with a better understanding of our growth profiles. Now, turning to our financial results. In the second quarter, net sales group, 34% to 333 million compared to two hundred and forty nine million last year, and increased 29% from 2019.
Our growth was better than anticipated and was primarily.
Driven by our continued strength and our e-commerce business and the ongoing recovery in our store productivity, which is nearing pre-pandemic levels comparable sales for the quarter increased..30% driven by an increase in transactions, as well as higher average transaction size.
We are extremely pleased with our sales performance, as we continue to attract new customers to the brand and drive spend per customer.
We attribute this momentum to Greater acceptance of our curve, offering stronger engagement with our loyalty, customers and increase acquisition from our stores. As customers are increasingly shopping. Both channels, gross profit. In the second quarter was a hundred fifty millions, or 45 percent of net sales compared to 80 million, or 32.1% of net sales and the second quarter of twenty twenty and a hundred and three million or 39.8% of net sales and the second quarter 29.
This nearly 1,300 basis point expansion and our gross profit rates from the prior year, was primarily due to an improved product margins, resulting from less discounting during the quarter as compared to the prior year.
Our gross profit also benefited from leveraging distribution expenses, store occupancy costs and store depreciation expenses.
Selling General and administrative expenses is 1/4.179 million as compared to 51 million in the second quarter of 2020. This increase was primarily due to the charge associated with revaluing our Legacy incentive units, as part of our IPO. Totaling $111,000.
It's non-cash charge was a one-time in nature. We do not expect to incur this expense again in the future. Additionally. We incurred approximately twelve million dollars of incremental store expenses due to increased store openings vs. Last year, excluding the one-time non-cash. Stock-based compensation, cost from remeasuring incentive units sgna increased ten percent as compared to the second quarter of fiscal..2019.
Marketing expense in the quarter was 11 million dollars as compared to 10 million in the second quarter 2020, as a percentage of sales marketing. Decrease, 72 basis points to three point two percent compared to 3.9 percent in the second quarter 2020. Do the sales leverage, despite our increased investment given a strong organic momentum in our business. During the quarter. We made the decision to redeploy, some of our marketing budget to the back half of the year.
Turning to profitability in addition to gaap measures. We believe that adjusted ibadah and adjusted. Net income are important measures that we use to evaluate and manage our business. The adjustments are particularly relevant this quarter and for the remainder of the year, due to the one-time non-cash impact on Gap earnings from the charge associated with revaluing our Legacy incentive units, as part of our IPO.
Adjusted ebitda was 87 million dollars or twenty six percent of net sales compared to thirty four million dollars for 13.7 percent of net sales and the second quarter 2020. This compares to 40 million dollars or fifteen point four percent of net sales in the second quarter of 2019.
For the quarter. Our tax rate was a hundred and
Four point three percent compared to a negative, twenty one point, three percent in 2020, due to an increase in the amount of non taxable items that were associated with the share based compensation during the three and six months periods into July thirty first. Twenty Twenty-One. This increase was largely driven by the 111 million dollar, non-cash charge associated with revaluing, our Legacy and Sint of units. As part of our IPO, the remeasurement, non-cash charge also, DressBarn.
Drove the 87 million dollar income tax receivable. In our condensed Consolidated, balance sheet as of July 31, 2021, which we expect to become an income tax payable by the end of fiscal 2021.
Net income with 39 million dollars or thirty five cents per share an increase of a hundred, thirty one percent of net income of 17 million or 15 cents per share. In the second quarter of last year, adjusted income was 39 Point..1 million dollars for 36 cents per diluted share an increase of three hundred. Seventy two percent from adjusted income of 8.3 million dollars or eight times per diluted share in a second quarter of 2020.
Turning now to the balance sheet, cash and cash equivalents, at the end of the quarter, total of 51 million dollars. We achieve strong, cash flow from operations, totaling 107 million dollars for the six-month period. Ended July 31st, 2021, as we continue to deliver profitable growth and tightly managed, our working capital.
Total dad as of the end of the quarter with 341 million dollars reflecting the do Term Loan. We implemented prior to our IPO, which lower interest rate and extended our maturity to 2020, as a result of our strong ibadah growth and cash generation in the quarter. We quickly deleverage to approximately 1.3 times. Net debt to adjust the, even odds at the end of the quarter.
Inventory of the end of the quarter was a hundred and ten million dollars compared to a hundred twenty eight million dollars at the end of the second quarter of 2020, strong product, sell through combined, with delays associated, with global supply chain challenges, resulted in lower inventory levels at the end of the quarter. Although. Our inventory levels are lower than we would. Like. We are very pleased with the composition of our inventory.
Turning to our Outlook. Well, we were very pleased with our strong sales performance. In the first half of the year. We are closely monitoring customer Behavior. Given the potential impacts of the Delta variance. In addition. The global supply chain has become more challenged and we expect continued shipping delays or congestion and Manufacturing disruptions.
While we continue to carefully monitor, the supply chain situation, and take proactive measures such as are freighting. Goods, holdingford purchase orders as appropriate. The situation is highly Dynamic. We're also facing inflationary pressures from rising product costs and anticipated wage increases
as part of our
More review of our pricing architecture. We will be selectively adjusting pricing as appropriate throughout the second half to largely mitigate these macro cost, pressures, notwithstanding these pressures. We expect to be able to deliver the exceptional results that we have guided to for the remainder of the Year. Given the one-time nature of these factors and related uncertainties. We are providing both quarterly and full year 2021 guidance on what we're seeing today.
Going forward, we will continue to assess our approach to the guidance as the situation merits.
In the third quarter, the expect net sales to be between three hundred and five million to 350 million dollars and adjusted ebitda to be between 99 million dollars. Our guidance assumes more modest gross margin expansion than we delivered in the second quarter reflecting current trends as well as anticipated impact of supply chain challenges.
This also reflects our expectation for elevated. Expenses in the second half of the year, including increased marketing expense, as well as the impact of the new costs associated with being a public company.
For fiscal 2021, we expect net sales between 1.2.9 billion to 1.3 billion dollars and adjusted. Even a between 506 million dollars. This assumes gross, margin pressures in the back half of the Year from the supply chain challenges. As I previously referred to, as a reminder. The seasonality of our sales is not as pronounced as other retailers in the fourth quarter. All those his typically, our lowest gross margin quarter due to our
You know, promotional Katie Capital expenditures are expected to be approximately 25 million dollars for fiscal 2021 reflecting, roughly 25, new store, openings and the second half of the year in conclusion. We are very pleased with the strength in our business and we remain focused on executing our strategic growth initiatives while carefully monitoring and adjusting our business in the current macro environment.
With that, I will now open the call up for your questions.
Thank you. If you would like to ask a question, please, press star one on your telephone keypad. A confirmation tone will indicate your line is in the question Q. You may press star two. If you would like to remove your question from the queue, and for participant, using speaker equipment and may be necessary to pick up the handset. Before pressing the start. He's our first question is from Lorraine Hutchinson with Bank of America. Please proceed.
Thank you. This is Alice. Tell on for Lorraine. Hutchinson. Thanks for taking our question and congrats on the nice quarter. Do you expect to see an impact from Old Navy's recent boat, equality launch and as other brands publicize efforts to participate in plus size apparel. How old would continue to gain market? Share?
Well, there are plenty of big girls to go around that are wildly underserved, you know close to 90 million. So I I personally welcome other people coming into this space. I think it excites the customer about her. Possibilities that said I also will remind you that Old Navy has been doing Plus for a long long time.
Before Torrid I used to, you know.
Where that, so it's not as new as this inclusivity, and they've had it in stores and pulled it out of stores. What I will tell you about tour it is we we fit her head to toe our product fits like, no one else's. We do extensive competitor, research. We are and always have been aware of all the competitors in the space and they have traditionally not had any impact on our
- I will tell you in 20 at the end of 2018. A lot of announcements were made of people going into the plus-size sphere or expanding their size range. And we went on to have a very, very, very good year. So I don't see one store capitalizing on a market, that's this vast. And this underserved and the final thing I'll say is with Old Navy. The product is
Categorically casual. And it is at a much lower price point, which is prohibitive of doing the kinds of things that our customer would want and our customer does want dressy wear to work or even occasion where which we do offer. So we're really happy with where we are and we welcome the competition. Like I said in the beginning, there are plenty of big girls to go around.
Happy to hear that. Thank you. Thank you.
Hi, thank you so much really great quarter and Liz thank you for the the the wonderful overview. Obviously the long-term opportunity here looks looks very clear. They're just these sort of, you know, wobbles here in the short term because of supply chain. So I just wanted to dig a little bit more into the back.
How Outlook I'm wondering if you can talk about, you mentioned inventory which which is about 10% below 2019 levels here at the end of Q2 being just a little bit low. Do you feel like there could be potentially some sales opportunities that that you could miss out on in the back half of the year for lack of inventory. Maybe that creates pain, septum and anthro.
An opportunity for next year. I'm just wondering if you can look at the inventory, slow through the back half of the year and help us understand. If you feel like you're going to, you can deliver at the potential of the brand or if there is potentially a little bit of shortfall there and if it falls in either Q3 or Q4, if there is a little bit of flow disruption on the gross margin.
I wanted to just ask about the guidance gave George on Gross.
The expansion in the third quarter just a little bit less robust than the the really nice expansion. We got here in the second quarter. Are you comparing that vs last year or you looking at that compared to 2019? Thanks so much.
Much sure, so I'll start with the gross. Margin when we are really looking compared to 19 from that perspective, since 2020 was kind of an anomaly and in various quarters. So the comparison really is 219 for that and correct a little bit less robust and we saw in the q1 Q2 Arena.
As far as inventory and how we are thinking about the back half of the year. There's a little bit of it. That's unclear. But for the most part, there's a couple of things that I think are really important. One. Torres does not rely on cue for like traditional retailers are fourth quarter is in general, kind of the same size as every other quarter. So we're not one of those retailers that does 60% of their business. And that last quarter, it
Just like another quarter for us and I think that's going to help us unlike many others. As we head into these wobbly times. As you describe them. I like that word. I think that the second thing about us is our our collection is so vast that we do have a lot of opportunities to flex in different directions. And if we have abundance of some categories and shortfalls and others, we can use our lifewear.
Loyalty program to encourage her into the categories that we do have inventory in but I think we are going to run Lane for the rest of the year. What I find remarkable is how much we've been able to do with running lean and our stores feel lean and are still making it happen. So I think it's going to be a little wobbly, but I feel like we're in a good position to continue on the road.
That we're on it. In addition to that as Liz mentioned. Where are the model that we have being the unified Commerce piece? Is that opens up to where we have inventory, customers have access to or inventory, whether it be ecomm or stores with our ship from store capabilities that we did not have prior to the the pandemic. So that opens up some capabilities for that as well. Right? We're not limited to do the inventories online and we wish we had it in stores or it's in stores that that accessibility is Sir.
Certainly a really good thing for us going into the back half of the year for sure. Our next question is from Janine Stitch.
Hi, good afternoon, and congratulations. Want to ask a bit more about the commentary around, raising pricing. Sounds like this is still in the works for these. Give a little bit more detail around how broad or how large these but those price increases to be and then maybe in the past. I have you taken price what you've seen from the consumer and what gives you confidence in your ability to adjust tickets. Thank you.
So glad you asked that.
We have a long Heritage. I've been here 12 years. We have a long Heritage of raising prices where we see the value. So where we have built more into the product and believed that if we did that, she would come. And so, we have a long, long, long Heritage of having done that, from our best-selling, Cami, and, and legging. I'll give you a good example in, I'd
Say about five years ago. We raised prices on black pants. We raised him a whole 10 dollars and some no slowdown of any kind in our business. What we do that's very different as far as raising prices. And I think it's an important thing at least for us to do is we don't just unilaterally raise prices. The merchants will look at every style and make decisions about whether there is value. There. There is the possibility.
Lady of a higher price there. And we will raise prices on garments that we know the customer will see the valuing and still want that. So we are, we are looking at that. We look at it in a very different way, from a customer and product perspective and we do it Style by style, making sure that the value is there. And if it's not, then we don't raise the price on it. We make a determination whether we want to run it the way it is, or we want to make it, you know.
Stand out and be more special and demand the price. It should.
Great. It's a pop of color. And then just one more on the supply chain. I know in the past, you talked about flexibility and leaving open to buy as a big Advantage, maybe speak to your ability to, it. Sounds like your ability to chase in the in the fourth quarter will be limited how you feel like that impacts your flexibility. And maybe how to think about Mark down with your inventory, risks, just with a bigger upfront inventory, commitment.
Yeah, II think that our ability to chase into for will be very different from what we were able to do. In the front half of the year that said we feel like we are in a good place as far as what we've purchased. I don't George you can talk to that but I don't see. Yeah, I think part of that is also with the flexibility that we continue to have as we have 16 different collections that come throughout the year. So we're not bringing in just like
Honk all in the fall spring collection. It's kind of throughout the year. So it spreads that risk out a bit as well for that. And we can adjust for that piece of it. So I think that gives us some flexibility on an ongoing basis related to our inventories and and a lot of as is also said we relate to our assortment a lot as core and it's not necessarily, you know, the high fashion trend items and that also helps limit the exposure as well. Yeah, that's such a great point because we
Don't go after Trend. It's not like we have a ruffle collection that's coming. That's only going to, you know, what's going on. We're going to be as hot as Ruffles or hot because of how we build our assortment because of the type of product we do because it's more more fit and experience focused Vs. Fashion. There's a lot less risk in products coming at different times. The only thing that we'll look at is anything that is truly ccs.
And all of, which isn't a lot.
But we will make sure to look at and watch.
Our next question is from Oliver Chen, with Khalid and Company. Please proceed.
Lead by listen, George torque. Curve is a big ongoing opportunity. What would you say? A set? You apart? And the, how will you acquire and think about acquiring new customers to torque curve and would love your thoughts as you continue to plan this assortment how the assortment architecture and or pricing May evolve their thank you. Okay. Thanks Oliver. So what I I believe that what fundamentally sets
Horrid curve apart from most other bras companies is I find as a woman myself. You are often forced to choose sexy or comfortable, but they rarely come in one bra. So our approach to our bra building was to create bras that were not only sexy but that were also functional and that they were solution-based. So we have a patent pending smoothing.
G and a lot of our bras that are customer, just loves because it creates a comfort ratio that she's never had while still having the back look, very pretty and not look orthopedic. And anyway, she asked us for a wire, free bras, that is been a huge success. We spent over two and a half three years building that bra. Because any of those of us that remember our mothers and wire-free bras will know that they generally do not look good.
XE or young. So we spent a lot of years broke. A lot of rules to create this bra. I have never worn a bra like this in my life. It is incredibly comfortable while still being sexy. So I think that's the point of differentiation for us. As far as what we will do forward. One of the big opportunities we have is to capture more customers within the toward brand and move them into curve. So one of the
The things I mentioned when we were on the road and I'll mention again because I'm very excited about these results. But we tested the idea of sending a coupon to new customers that came to the brand through at Opera blue. Jean to get them into a bra. What we found the early results on this test were that we were able to get twice as many women into bras than we would have had. We not done this and to top it off even though we gave them a discount coupon.
And coupon it was actually margin accretive. So it's a small test but it's one of the ways that we are intending to Usher our customer through into bras because a customer that buys a bra, a blue. Jean and a top is our most valuable customer were three times more than one that doesn't. I think I answered all your questions. Was there a part? I didn't George and I think just to reiterate to Oliver did sec.
Second, most highest way, we attract a new customer is through a bottle just as well, was there more. They're all over that. I didn't answer. So that's that's very helpful. As you think about managing inventory levels. And in this environment where there's not enough, what areas of the assortment do you have less product? And I mean,
do you think customers will respond and
And the supply constraint environment. Thank you. Okay. So performance in Q2 as always kind of, with this brand was broad-based. We tend to be a company and a brand that is able to grow all of its categories simultaneously without sacrificing one over the other. So Q2 was very broad-based. I would say going into the back homage.
Half. How will the customer respond? I think that she will be excited by what she's going to see particularly in Q4 because it's fun. It's playful. It's sexy. We are all hoping that we're going to have a Christmas where we can go out this year. So lots of dresses and things that she can buy for whatever celebration, she intends to have as far as the, the being leaned on product. This is not new to Torrid throughout.
Towards years of growth, because our growth was so outsized. We were always chasing product. We were always chasing this bigger broader volume. So we're kind of comfortable on the space and we know how to flex wonderwest tion, or the other based on what we have inventory. And again, to what George said, part of the game changer for us is this accessibility of ship from store bopus. She can do Zoom.
Options. There's and she can obviously shop online. So the inventory will be available to her in in multiple ways, which we didn't have last year and I think is a huge benefit this year. Well, lastly lives on that topic with digitization and the integration of cologne digital as you think about bopus and ship from store. How will you manage execution risk and also, you know, both the opportunities and the and the path ahead.
And merging and blending. Those inventory buckets as well. Thank you.
How will we manage the execution rescue you mean? As far as making sure that we're at the inventories in the right place when she makes a purchase and we don't disappoint her.
Is that what you mean? And you know the inventory, you know, between your digital and physical channels, but yes, that'd be great. Any thoughts there. Yeah. So Oliver from that standpoint. We've so far, the stores have really embraced the whole ship from store and bopus, they get, you know, part of their incentive comp is based on that as well. So go and kind of going back.
Unified Commerce piece of it tying it together. It's not a store versus the ecomm, its total Collective. So the stores really have embraced what that program, what those programs are. And again, we are again, we don't have the big seasonal build up in Q4. So therefore, it's a little bit more, even though our stores are moderated, a little bit more than a lot of other retailers are, especially in Q4. So, the reaction that the store has been very excited, and we think that will continue as we go through the rest of this year. And the stores are doing a great.
It job when one of the steps I think.
Did earlier but it's just II think very exciting is a customer 25% of the customers that come in to pick up a bopus order to make another purchase that doubles the value of their initial purchase. So we're incredibly excited about connecting this amazing group of humans, we have with the technology we have. So that the customer truly gets not an omni Channel, but a unified complexcon.
Immersive experience.
Our next question is from Mark altschwager with Baird. Please proceed. Good afternoon. Thanks for taking my question. I guess just start off, you know with with Delta variant increasingly and focused. Are you seeing any impact on your consumer Behavior at this point? You just in more broadly, you know, we've seen consumer confidence, take a dip recently. Just is there been any change to your view on the health of the customer or potential spend portmans?
Customer vs. Your expectations, at the time of the IPO.
Well, yeah, I I think that our customer shops with a clear want, or desire or because something is really emotional and excites her what we have seen with the Delta variant is, I think so many people started to think. Okay. I'm going to go back to work and we saw our customers start to buy back to back to work clothing. And I think that that has
I think what's going to happen next for her is somewhat unclear to her. So she's taking a moment to figure that out. So, you know, when when we opened up the country, it was a very specific time where we were about to open up the country and spring break was happening and she needed clothing to go out and it was pent-up demand and I think we're in a different place. Now where things are leveling off more toward a normal type of
- I don't know if you want to add anything to that. George. Yeah. Mark, I think part of that related to the, you know, unknown relate to the Delta. We have some of the hot spot areas. I think we're, you know, not that much different from others as we see a little bit of an impact on traffic necessarily, you know, when those has to do happen, but across the board, we are saying that the customer has come back to the store and she and she wants to shop at her store.
That's really helpful color. I also wanted to follow up regarding marketing. Spend seems like you saw some really nice deficiencies here in the second quarter. Just then any help understanding, what's driving that what factors are at play there and just any thoughts with respect to marketing for the back half of the Year. Thank you.
You, yes, so we did see some efficiencies what we have been doing, you know, tour. It has primarily historically in the past acquired customers through stores and we were really good at it. What we have expanded is to continue to acquire customers to do stores, but also to relook at our margin marketing budget, and make sure that we are spending money in places that are designed to acquire customers. And I think that's an important shift. What we found
Sound is we do not need to keep.
Purchasing the same customer when we bring a customer into this brand. They are in to the point that it was 90% of what was that? They're signed up for loyalty, 90.90 percent, sign up for loyalty. But then we also retain 90 percent of the dollars from 2020. So retention was not something that we felt we needed to focus marketing dollars on to that level. So the efficiency some of it is because we
Deployed dollars that were going to a mailer. That was no longer effective. We reap deployed, those dollars into social and digital and paid paid search or or, you know, T connected TV or all the different areas. So many of the efficiencies were, were driven from really taking things that we felt like we're unnecessary or weren't working and redeploying them into areas that were
We're in the process of really learning a lot and testing a lot and we will scale up as we see success in whatever projects that come down the line. What were excited about? As far as marketing go forward is we have just concluded our ambassador search where we had 7,000 entrance and we were able to put together a group of women that are really inspiring and that will be in our fourth quarter.
Ting. We also did a search for employees and had a nice sign up form employ ease, and we intend to use them. Also, in different ways. What we know is that our customer loves ugc. And what's great about user-generated content, is she interacts with it four times more than she does with a regular photo? And they are significantly cheaper to get. So we're working on how to drive more users.
Generated content. And then finally, we do have this Ambassador this influencer program that we are working on that. We've launched that we think has tremendous potential as well. So those are the things will be focused on the back half of the year. And again as we see things work, we invest in them.
Our next question is from Dana tells, please proceed.
As you think about Marketing in the back half of the year. How do you see the marketing profile differ differing from what you've done in the past? And will there be more? More spend at your adjusting for Q3 or Q4? And just lastly, on bringing product in? How do you expect inventories to balance between the third and the fourth quarter and given the supply chain disruptions? And there's some things where you expect to have Maurices.
Originally would have or less.
Thank you.
So I'll talk to the inventory question first, Dana related to inventories. We are really monitoring what those, what those arrivals are and shifts are in our inventory and to the extent that if we see that as Liz mentioned about seasonal Goods, if there's something that we're really going to be delayed on, will look at potentially cutting the tail of that. So we're not bringing in continuing, bring in something seasonal. We're really looking at what that looks like again, looking at the products, the categories to relate to
Seasonality. If it's a more of an ongoing item. Therefore. We have some of that flexibility to be able to control some of that and working with our vendors. Again, we work with a lot of our vendors long-term relationship with them working with them to work on relate to their production issues timing and how do we get the goods here? So we're really, really concentrating on how do we manage that whole flow to be able to get it in? And again, we have multiple collections coming in throughout the year. So again that also helps they're not big.
Gigantic collections coming in and certain times of the year and we are looking at things. If we do, have any items that are highly, highly seasonal, we and there were either cutting them off. We're cutting off the tail end of the delivery and making a decision. To either not bring them in or to reduce what we are bringing. And that's a small part of what we do as far as the marketing. I think one of the things that traditionally happens going into Q4, is that the marketing costs in general? Just go up because
Buddy is in there trying to make, you know, for everyone else, Q4 is a really big deal. So it drives the just general cost of marketing in the digital space up, but that happens every year. So we're prepared for that. I think our focus is really what we can do with influencers with this ambassador program with our own employees as far as creating a lot of excitement creating.
Dating tick-tocks, that ideally will go viral and making sure that we're able to tell our story. One of the things that I find very exciting about Tick-Tock is that it gives towards the opportunity because you have a little bit more time gives toward the opportunity to really show the world, the difference in our product and the difference that it makes on her.
So that'll really be our Focus. Does that answer your question? Yep. Thank you very much. Okay. Thanks. Dana.
Our next question is from Brook Road with Goldman Sachs. Please proceed.
Good afternoon, and thank you so much for taking the question. I I'd love to to dig in a little bit more and and hopefully get some additional context on the results that you're seeing by channel in your stores. How is productivity trending and how is that shifted throughout the quarter?
So row we've seen, you know, our product in our stores continue to do well throughout Q2. We're we're very excited about, you know, the stores and have they continued to perform. They started off well and q1 and that just continued into Q2 and improve their as well. So again, the connection with the customer, she was wanting to come back to the store and we've seen that she has come back to the store and we see that connectivity.
Going on between the store associate sandal.
The customers and we believe that that's, you know, again is a key part of how we're attracting new customers that we're very pleased with the results of what that looks like and expect, you know, the stores to Katie to continue to perform.
Great, and then if I could just follow up on in the quarter, you saw very strong fixed cost. Leverage it. Can you talk to your outlook for fixed cost, leverage into second half? And how much of that leverage can you get from growing the Top Line regardless of Channel? What additional leverage can you get? As you start to see that store Parco productivity continue to improve with your customer connection. Thank you.
Thanks, bro. Yeah, I think we'll still be able to see leverage as we go into the back, half of the year. We won't see it as pronounced related to the sales level that we projecting out. But we still again, will be the Investments that we've made our infrastructure. We will continue to see leveraging off of those pieces as well as we move through the back half of the year. So don't really see any significant change related to the the way we're approaching our fixed cost and and basic making sure that
Can leverage off with those in the back half of the year?
And our final question is from Dylan Carden with William. Blair. Please proceed.
Leave my boy. Okay, great. Thanks for squeezing me in so small one here to round us out. Just curious the new store number here. The 25 store. Just want to confirm that. That's a net number and we're maybe just how you're thinking about what these stores look like. Go forward from a location standpoint, you know, integrating some of the more complex, fulfillment capabilities, maybe expanding the assortment, you know, what can we expect from this sort of the newer newer part of the fleet? Thanks.
Georgia, let the 25 or the are gross. Actually, new stores will have some closures, but not expecting any significant closures and and the back part of the year. As far as the composition of them, again. We will probably filter more towards outside mall locations. We've seen those respond quicker as far as from the pandemic recovery, and that's where we're concentrating. Most of our store openings for this year.
We will potentially look at more locations, but most of the opportunities were seeing small as well. It gives us a little bit bigger footprint, sometimes that we can have and potential, but a little bit larger assortment in there especially related to curb product as we move forward. So it probably give us a little bit more flexibility from that standpoint as well as using it as a little fulfillment related to shift from store as well.
Great. And are you seeing kind of opportunities here on the cost side as it relates to sort of new stores? Are you kind of being better locations? That sort of is Awash?
So we're seeing still good opportunities from a real estate location standpoint. Those are those was still there. So we're still we're not concerned about that, piece of it, the cost of the build-out. We are seeing a little bit of an increase again with some of the cost increases. But nothing that's, you know, so significant that it is impeding what we're going to do from productivity standpoint because we look at every store individually, so we are factoring in that cost when we're looking at what do we do the store deal or not?
Excellent. Thank you very much. Thank you. Thank you.
You have reached the end of our question and answer session. I would like to turn the conference back over to lids for closing. Commons. Just like to say, thank you. Thank you for your interest, in our brand, for your questions. We're excited about what's happening today and where we're going and I guess we will talk to you soon. Thank you so much.