Q4 2024 Torrid Holdings Inc Earnings Call

Operator: Greetings and welcome to the Torrid Holdings Inc. fourth quarter fiscal 2023 earnings conference call. At this time, all participants are in a listen-only mode.

Greetings and welcome to the Tort Holdings, Inc. Fourth quarter fiscal 2023 earnings conference call.

At this time all participants are in a listen only mode.

Operator: A brief 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. It is now my pleasure to introduce your host, Chinwe Abaelu, Chief Accounting Officer. Thank you.

A brief 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.

It's now my pleasure to introduce your host Chinmoy Abelow, Chief Accounting Officer.

Chinwe Abaelu: You may begin. Good afternoon, everyone, and thank you for joining Torrid's call today to discuss our financial results for the fourth quarter and full year of fiscal 2023, 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, Torrid's Chief Executive Officer, Mark Mizicko, Torrid's Chief Commercial Officer, and Paula Dempsey, Torrid's 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 may include, but are not limited to, statements containing the words expect, believe, plan, anticipate, will, may, should, estimate, and other words of similar meaning. These statements are subject to risks and uncertainties that could cause actual results to differ materially.

Chinmoy Abelow: Thank you you may begin.

Chinmoy Abelow: Good afternoon, everyone and thank you for joining towards call today to discuss our financial results for the fourth quarter and full year of fiscal 2023 which we released this afternoon and can be found on our website at investors don't torrid Dot com.

Chinmoy Abelow: With me today on the call Alicia Hopper towards Chief Executive Officer, Mark Mcghee co towards Chief Commercial officer, and Paul It Dempsey towards Chief Financial Officer.

Chinmoy Abelow: Before we get started I would like to remind you of the company's safe Harbor language, which I'm sure you're all familiar with.

Chinmoy Abelow: Management may make forward looking statements, including guidance and underlying assumptions.

Forward looking statements may include but are not limited to statements containing the words expect.

Chinmoy Abelow: Believe plan anticipate will may should estimate and other words in terms of similar meaning.

Chinmoy Abelow: All forward looking statements are based on current expectations and assumptions as of today March 'twenty eight 'twenty 'twenty four.

Chinmoy Abelow: These statements are subject to risks and uncertainties that could cause actual results to differ materially.

Chinwe Abaelu: 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. Reconciliation to these non-gap measures to the most comparable gap measures is included in the earnings release furnished to the SEC and available on our website. With that, I will turn the call over to Lisa.

Chinmoy Abelow: For further discussion of risks related to our business.

Chinmoy Abelow: See our filings with the SEC.

Chinmoy Abelow: This call will contain non-GAAP financial measures such as adjusted EBITDA.

Chinmoy Abelow: Reconciliation 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.

Chinmoy Abelow: With that I will turn the call over to Lisa good.

Lisa M. Harper: Good afternoon, and thank you for joining us to discuss our fourth quarter results. Today, I will begin with a review of our fourth quarter performance, highlight our accomplishments during the year, and then discuss our strategies for 2024. Then I'll turn the call over to Mark Mizicko, who will review our merchandising strategies and marketing plan.

Good afternoon, and thank you for joining us to discuss our fourth quarter results today I will begin with a review of our fourth quarter performance highlight our accomplishments during the year and then discuss our strategies for 'twenty 'twenty four.

Lisa: Then I will turn the call over to Mark Myfico, who will review, our merchandising strategies and marketing plans.

Lisa M. Harper: Paula will then review the financials and provide our outlook for fiscal 2024. We are pleased to report that our fourth quarter sales and EBITDA came in ahead of our guidance. While we are not immune to the current macro environment, we are focused on the levers we can control. Our disciplined inventory management has enabled us to reduce promotions and drive higher full price sales. For the quarter, we generated $294 million in net sales and $16 million in adjusted EBIT.

Paula will then review the financials and provide our outlook for fiscal 2024.

Lisa: We are pleased to report that our fourth quarter sales and EBITDA came in ahead of our guidance. While we are not immune to the current macro environment. We are focused on the levers we can control.

Lisa: Our disciplined inventory management enabled us to reduce promotions and drive higher full price sales for.

Lisa: For the quarter, we generated 294 million in net sales and 16 million in adjusted EBITDA.

Lisa M. Harper: During the quarter, we observed strong customer engagement and a positive response to events like Black Friday and Torrid Cash, both of which exceeded our expectations. We saw positive regular price comp momentum for graphic tees, knit tops, and bottoms, categories that we will continue to build on in 2024. Looking back on fiscal 2023, we made significant changes to improve the fundamentals of our business. We've touched just about every aspect, from merchandising to marketing to sourcing.

Lisa: During the quarter, we observed strong customer engagement and a positive response to events like black Friday and toward cash both of which exceeded our expectations. We.

Lisa: We saw positive regular price comp momentum and graphic Tees knit tops and bottoms categories that we will continue to build on in 2020 four.

Lisa: Looking back on fiscal 2023 we made significant changes to improve the fundamentals of our business. We have touched just about every aspect from merchandising to marketing to sourcing.

Lisa M. Harper: We are pleased to see sequential improvement in our regular price business as customers responded favorably to our holiday and early spring merchandise collection. Key Highlights for 2023 are an improved assortment and optimized channel investments to maximize regular price sell through, resulting in margin, Reducing our inventory levels ending the year down 21% compared to a year ago, and consolidating our sourcing base, positioning us to meaningfully reduce product costs in 2024. Launching a new digital marketing platform leading to an increase in reactivated customers compared to a year ago. We made a great deal of progress in 2023 and now have a strong foundation in place as we move into 2024.

Lisa: We are pleased to see sequential improvement in our regular price business as customers responded favorably to our holiday in early spring merchandize collections key highlights from 'twenty to 'twenty three.

Lisa: Our improved assortment and optimized channel investments to maximize regular price sell through resulting in margin expansion.

Lisa: Reducing our inventory levels, ending the year down 21% compared to a year ago.

Lisa: Consolidating our sourcing base positioning us to meaningfully reduce product costs and 'twenty 'twenty four.

Lisa: Launching a new digital marketing platform, leading to an increase in reactivated customers compared to a year ago.

Lisa: We made a great deal of progress in 2023, and now have a strong foundation in place as we move into 2020 four.

Lisa M. Harper: We will build on the work we have done by remaining focused on our strategic priority, Improving Our Merchandise Assortment. Strengthening our marketing messaging and optimizing our working capital through cost and inventory management. In terms of our merchandising, we will continue to evolve and elevate our collections to give our customers a broad assortment of relevant styles and fits. Our collection will reflect a better balance of casual and dressy that appeals to a wider age demographic. We will build on the success we saw with TRIO Denim Launch, expanding our offering of graphic tees and our coordinate program. Additionally, we are thrilled to relaunch a popular casual fabrication, Shally, which is extremely versatile and supports an opening price point offering across our tops, bottoms, and dresses.

We will build on the work we have done by remaining focused on our strategic priorities improve.

Lisa: Improving our merchandise assortment.

Lisa: Strengthening our marketing messaging and optimizing our working capital through cost and inventory management.

In terms of our merchandising, we will continue to evolve and elevate our collections to give our customers a broad assortment of relevant styles and fits.

Lisa: Our collection will reflect a better balance of casual and dressy that appeal to a wider age demographic.

Lisa: We'll build on the success, we saw with trio denim launch expanding offering of graphic Tees and our coordinate programs. Additionally, we are thrilled to relaunch our popular casual fabrication Shelley, which is extremely versatile and supports an opening price point offering across our tops bottoms and dresses.

Lisa M. Harper: We are pleased with the initial positive response we are seeing from our customers. In Curve, our intimate apparel brand, we will see the launch of new bras and innovation for the first time in many years. We will continue to invest in key items and programs. We know our price point skewed higher over the past few years as we moved away from a balance of casual and the assortment. Spring collections introduce a more casual assortment and a broader pricing architecture across a good, better, and best cost engineered in a way that offers value to our customers while remaining margin accretive. Moving to marketing, we are focused on increasing customer engagement and acquisition by leveraging insights from our new digital marketing platform. We are delighted to announce our casting call model search to find the new face of Torrid for 2025.

Lisa: We are pleased with the initial positive response, we received from our customers.

Lisa: Curve, our intimate apparel brand, we will see the launch of new Bras and innovation for the first time in many years.

Lisa: We will continue to invest in key items in pork programs.

Lisa: We know our price points to higher over the past few years as we moved away from a balance of casual and the assortment.

Lisa: Spring collections introduced a more casual assortment and broader pricing architecture across our good better and best cost engineered in a way that offer value to our customer already amazing margin accretive.

Lisa: Moving to marketing, we are focused on increasing customer engagement and acquisition by leveraging insights from our new digital marketing platform. We were delighted to announce our casting call model search to find the new face of Torrey for 2020 five.

Lisa M. Harper: Mark will provide more details in a few minutes. Turning to working capital, we are driving profitability and strengthening our balance sheet by improving our working capital strategy through product cost efficiencies and inventory optimization. Central to our cost efficiency drive, we renegotiated our supply contracts and consolidated our supplier base, securing cost advantages that directly bolster our bottom line. This effort is complemented by our focus on design to value strategies and production efficiencies, where we scrutinize every aspect of design and manufacturing to pinpoint cost saving opportunities without compromising our quality. Parallel to these cost efficiencies, our inventory management leverages data analytics to accurately forecast demand, allowing for more strategic inventory procurement and reducing the risk of overstocking.

Mark will provide more details in a few minutes.

Lisa: Turning to working capital, we are driving profitability and strengthening our balance sheet by improving our working capital strategy through product cost efficiencies and inventory optimization.

Lisa: Central to our cost efficiency drive, we renegotiated our supply contract and consolidated our supplier base securing cost advantages that directly bolster our bottom line.

Lisa: This effort is complemented by our focus on design to value strategies and production efficiencies, where we scrutinize every aspect of design and manufacturing to pinpoint cost saving opportunities without compromising our quality standards.

Lisa: Parallel to these cost efficiencies are inventory management, leverages data analytics to accurately forecast demand, allowing for more strategic inventory procurement and reducing the risk of a restocking. This is bolstered by our product rationalization process, where we continuously evaluate and trim underperforming products.

Lisa M. Harper: This is bolstered by our product rationalization process, where we continuously evaluate and trim underperforming products, enhancing inventory turnover, and focus on productive SKU offerings. Our mindset to chase inventory, supported by strengthening our supplier relationships, minimizes the necessity for large inventory holdings, increasing our market agility and reducing carrying. These measures are expected to drive sustainable growth and significantly improve our working capital efficiency, while creating significant value for our shareholders, underscoring our unwavering commitment to operational excellence and financial performance. In closing, I am confident that the strategic transformations we've put in place position us for a future marked by sustained growth and a strong foundation in 2024. Before I hand over the Florida Mark, it's essential to recognize the relentless dedication and commitment of our team. Your tireless efforts and unwavering dedication to our customers are truly what set Torrid apart, creating an unparalleled and exceptional environment. Your contributions go beyond being recognized. They are profoundly valued. Thank you all for what you do. Now, turning it to Mark.

Lisa: <unk> inventory turnover and focusing on productive SKU offerings.

Lisa: Our mindset to chase inventory supported by strengthen our supplier relationships minimises the necessity for large inventory holding increasing our market agility and reducing carrying costs.

These measures are expected to drive sustainable growth and significantly improve our working capital efficiency, while creating significant value for our shareholders underscoring our unwavering commitment to operational excellence and financial performance.

None: In closing I am confident that the strategic transformations, we've put in place position us for a future marked by sustained growth and a strong foundation in 2024.

None: Before I handover, the Florida, Mark it's essential to recognize the relentless dedication and commitment of our team.

Mark: [noise] tireless efforts and unwavering unwavering dedication to our customers are truly what's that tore it apart, creating an unparalleled and exceptional environment. Your contributions go beyond being recognized they are profoundly valued. Thank you all for what you do.

None: Now turning it tomorrow.

Mark Mizicko: Thanks, Lisa. I'd like to start today by sharing the progress we have made on a few of our key initiatives in merchandising, product margin expansion, inventory productivity, and buy accuracy, as well as marketing. And then I will briefly discuss some of the highlights of the fourth quarter. Our merchandising and planning teams remain focused on maximizing product margin expansion through better enterprise sell-through, optimized assortment investments by channel, and continued improvements in pricing and promotion. We continued to build upon the results of the third quarter with improvement in regular price sell-through and lower overall discounts, resulting in year-over-year product margin expansion of 140 basis points in the fourth quarter. We believe that our ending inventory position, down 21%, as Lisa noted, positions us well to continue building on this momentum throughout 2024.

Mark: Thanks, Lisa I'd like to start today by sharing the progress we have made on a few of our key initiatives in merchandising product margin expansion inventory productivity and by accuracy as well as marketing and then I will briefly discuss some of the highlights of the fourth quarter.

Mark: Our merchandising and planning teams remain focused on maximizing product margin expansion through better enterprise sell through optimized assortment investments by channel and continued improvements in pricing and promotion. We continued to build upon the results of the third quarter with improvement in regular price sell through and lower.

Mark: Lower overall discounts.

Mark: <unk> in year over year product margin expansion of 140 basis points in the fourth quarter.

Mark: We believe that our ending inventory position down 21% as Lisa noted positions us well to continue building on this momentum throughout 2024.

Mark Mizicko: We shared with you in our last call the early success we saw in the testing of the clearance store conversion. We continue to be pleased with their performance and believe they will play a key role in our continued priority of maximizing inventory productivity. These clearance stores are allowing us to consolidate store markdowns and sell them more profitably, as well as freeing up space in our standard format stores to showcase a wider breadth of our otherwise e-commerce exclusive assortment.

We shared with you in our last call. The early success, we saw in the testing of clearance store conversions. We continue to be pleased with their performance and believe they will play a key role in our continued priority of maximizing inventory productivity.

Mark: These clearance stores are allowing us to consolidate store markdowns and sell them more profitably as well as freeing up space in our standard format stores to showcase a wider breadth of our otherwise ecommerce exclusive assortment.

Mark Mizicko: This advantage allows these clearance feeder stores to see incremental margin productivity from a combination of less markdown competition and additional regular price assortment. We believe this strategy will contribute to improvement in store traffic over time as well as a wider breadth of assortment choice. Given the continuing success of these initial tests, we plan to convert additional stores to this format in 2024. Additionally, the optimization of assortment depth and breadth by channel began to pay off in the fourth quarter and will continue to be a strategic initiative for merchandising and planning teams throughout fiscal 2024 and beyond. Particularly, reducing the debt of e-commerce buys and allowing for omni-channel fulfillment programs like Ship from Store to fulfill web demand is facilitating enterprise-wide higher regular price sell-throughs and producing higher product margins through markdown avoidance.

Mark: This advantage allows these clearance feeder stores to see incremental margin productivity from a combination of less markdown competition and additional regular price assortment.

We believe this strategy will contribute to improvement in store traffic over time as well with the wider breadth of assortment choice.

Mark: Given the continuing success of these initial tests, we plan to convert additional stores to this format in 2024.

Additionally, the optimization of assortment depth and breadth by channel began to pay off in the fourth quarter and will continue to be a strategic initiative for merchandising and planning teams throughout fiscal 'twenty, 'twenty, four and beyond particularly reducing the death of ecommerce buys and allowing for omni channel fulfillment.

Mark: Programs like ship from store to fulfill web demand is fulfilled facilitating enterprise wide higher regular price sell throughs and producing higher product margins through markdown avoidance. Lastly, we continue to see measurable improvement in the profitability and customer engagement of our promotional events.

Mark Mizicko: Lastly, we continue to see measurable improvement in the profitability and customer engagement of our promotional events, which in the fourth quarter included a Black Friday and Cyber Weekend event that met our expectations and saw significant margin expansion year over year, as well as a very successful Torrid Cash event in January that further built on the momentum of October's event. Turning to marketing, we continue to see improved customer response to our marketing campaigns and touch points as we leverage the data from our new data platform and in partnership with our new digital marketing agency. We were able to take responsive action throughout the fourth quarter in optimizing our allocation of marketing spend across channels in order to maximize profitability in return and increase the performance of our customer file.

Mark: Which in the fourth quarter included a black Friday, and cyber weekend event that met our expectations and saw significant margin expansion year over year as well as a very successful toward cash in January that further built on the momentum of October's event.

Turning to marketing, we continue to see improved customer response to our marketing campaigns and touch points as we leverage the data from our new data platform and in partnership with our New digital marketing agency, we were able to take responsive action throughout the fourth quarter and optimizing our allocation of marketing spend across channels.

In order to maximize profitability and return and increase the performance of our customer file.

Mark Mizicko: We will maintain an emphasis on driving customers to our stores through cohesive omnichannel messaging, special in-store experiences, and dedicated loyalty events. Additionally, we will continue to leverage social media content to drive engagement and better connect with our customers. Our stores are the leading gateway for introducing customers to our brand. Those who first engage with us in store are more inclined to utilize both our physical and online channels, becoming valuable on-channel customers and spending three times more than a single channel shop. Finally, we are thrilled to be bringing back Torrid Casting Call in 2024, a nationwide model search for the next official face of Torrid.

Mark: We will maintain an emphasis on driving customers to our stores through cohesive omnichannel messaging special in store experiences and dedicated loyalty events. Additionally.

Additionally, we will continue to leverage social media content to drive engagement and better connect with our customers.

Mark: Our stores are the leading gateway for introducing customers to our brand.

Mark: Those who first engage with us in store are more inclined to utilize both our physical and online channels, becoming valuable omnichannel customers and spending three times more than single channel shoppers.

Mark: Finally, we are thrilled to be bringing back toward casting call in 2024 and nationwide model search for the next official face of toward.

Operator: We ran this wildly successful campaign in 2019, and this year's will kick off in April and conclude in September. This will include multi-city casting calls, photo shoots, and styling consultations, finally culminating with a group of finalists who will gain invaluable mentorship from seasoned industry professionals who will engage the contestants in professional development activities aimed at kickstarting their modeling career. The ultimate winner will become the 2025 face of Torrid. To summarize, our team continues to make progress in our merchandising, planning, and marketing processes. We believe that many of the successes we began to see in the business in the fourth quarter will continue to lead to greater margin expansion and improve customer file growth in 2020. And with that, I will now turn the call over to Mark. Thank you, Mark. Good afternoon, everyone.

We ran this wildly successful campaign in 2019, and this year's will kick off in April and conclude in September.

This will include multi city casting calls photo shoots and styling consultations finally, culminating with a group of finalists who will gain invaluable mentorship from seasoned industry professionals, who engage the contestants and professional development activities aimed at kick starting their modeling careers the.

Mark: That winter will become the 2025 face of tour it.

Mark: To summarize our team continues to make progress in our merchandising planning and marketing processes. We believe that many of the successes we began to see in the business in the fourth quarter. We will continue to lead greater murder margin expansion and improved customer file growth in 2024.

Mark: And with that I will now turn the call over to Paula.

Paula: Thank you Mark good afternoon, everyone and thank you for joining us today.

Paula Dempsey: And thank you for joining us today. Cisco 2023 was a year of robust execution for our company, despite encountering a softer demand environment than we had initially anticipated. Our focus and resilience have been paramount, especially as we navigated through the challenges of the first half of the year in 2023. The second half, however, marked a critical turning point on our journey.

Paula: 2023 was a year of robust execution for our company despite encountering a softer demand environment than we had initially anticipated.

Paula: Our focus on resilience has been paramount, especially as we navigate through the challenges of the first half of the year in 2023.

Paula: The second half however marked a critical turning point in our journey.

Paula Dempsey: We took strategic actions to establish a strong foundation for the future. Our performance improved in the latter months of 2023, while we executed on our core initiatives that we believe will drive our long-term success. I will now begin with a detailed discussion of our fourth quarter and full year, followed by our outlook for fiscal 2024. Our fourth quarter results came in ahead of our expectations on both the top and bottom lines. We generated meaningful year-over-year gross profit expansion driven by improved product margins as we began to see the impact of our product cost initiative. We remain disciplined with inventory management, ending the year with healthy inventory levels. For the fourth quarter, net sales came in at $294 million, compared to $301 million last year. This includes sales for the 53rd week, which were approximately $22 million. Comparable sales declined 9%.

Paula: We took strategic actions to establish a strong foundation for the future.

Paula: Our performance improved in the latter months of 2023, while we execute on our core initiatives that we believe will drive our long term success.

I will now begin with a detailed discussion of our fourth quarter and full year, followed by our outlook for fiscal 'twenty 'twenty four.

Paula: Our fourth quarter results came in ahead of our expectations on both the top and bottom lines well generated meaningful year over year gross profit expansion driven by improved product margins as we began to see the impact of our product cost initiatives.

Paula: We remain disciplined with inventory management, ending the year with healthy inventory levels.

Paula: For the fourth quarter net sales came in at 294 million compared to $301 million last year.

Paula: This includes sales for the 50, <unk> week, which where a prospect approximately 22 million comparable sales declined 9%.

Paula Dempsey: Growth profit increased to 101 million from 96 million last year, reflecting a growth margin increase of 250 basis points to 34.5%, driven by lower product costs and fewer markdowns. Store occupancy expenses were flat compared to a year ago. SG&A expenses in the quarter were $80.6 million or 27.5% of net sales compared to $77.8 million or 25.8% of net sales last year. The increase is related to a one-time $1.6 million expense reversal in a prior year related to performance incentives. Marketing expenses in the quarter were $16.5 million compared to $15.8 million in the fourth quarter of last year.

Paula: Gross profit increased to 101 million from 96 million last year, reflecting a gross margin increase of 215 basis points to 34, 5% driven by lower product costs and fewer markdowns.

Paula: Store occupancy expenses were flat compared to a year ago.

Paula: SG&A expenses in the quarter were 86 million or 27, 5% of net sales compared to $77 8 million or 25, 8% of net sales last year.

Paula: The increase is related to a one time $1 6 million expense reversal in the prior ear related to performance incentives.

Paula: Marketing expenses in the quarter were $16 5 million compared to $15 8 million in the fourth quarter of last year.

Paula: As a percentage of net sales marketing increased 30 basis points to five points six compared to five 3% in the fourth quarter of last year.

Paula Dempsey: As a percentage of net sales, marketing increased 30 basis points to 5.6 compared to 5.3% in the fourth quarter of last year. This increase is a result of a slightly higher investment in digital marketing. Our net loss for the quarter was $4.1 million, or a loss of $0.04 per share, versus a net loss of $3.9 million, or $0.04 per share, for the same period last year.

Paula: This increase is a result of a slightly higher investment in digital marketing.

Paula: Our net loss for the quarter was $4 1 million or a loss of four cents per share versus a net loss of $3 9 million or four cents per share for the same period last year.

Paula: In addition to GAAP measures, we believe that adjusted EBITDA is an important measure that we use to evaluate and manage our business.

Paula: Adjusted EBITDA was $16 4 million or five 6% of net sales compared to $16 4 million or five 4% of net sales in the fourth quarter of 2022.

Paula Dempsey: In addition to gap measures, we believe that adjusted EBIT is an important measure that we use to evaluate and manage our business. I just said EBITDA was 16.4 million, or 5.6% of net sales compared to 16.4 million, or 5.4% of net sales, in the fourth quarter of 2022. This includes the 53rd week impact of approximately $2.5 million. Turning to our fiscal 2023 results for the full year, net sales were $1.15 billion.

Paula: This includes a 50 <unk> week impact of approximately two and a half million dollars.

Paula: Turning to our fiscal 2023 results for the full year.

Paula: Net sales were 1.15 billion.

Paula: We opened 36 toward stores and closed 20 stores ending the period was 655 stores.

Paula: Gross profit in the fiscal 2023 it was 406 million or 35, 2% of net sales.

Paula Dempsey: We opened 36 Torrid stores and closed 20 stores, ending the period with 655 stores. Gross profit in the fiscal 2023 was $406 million, or 35.2% of net sales. Adjusted EBITDA was 106 million, or 9.2% of net sales, compared to 152 million, or 11.8% of net sales, in 2022. Despite facing some initial challenges in the beginning of the year, we experienced a turnaround in the second half that was marked by more stable traffic trends, robust product margins, and a remarkable reduction in inventory levels. In addition, our focused efforts on digital marketing strategies in Q4 successfully reengaged our customer base, leading to a 4% increase in customer reactivation. Net income for the year was $12 million, or $0.11 per share, compared to a net income of $15 million, or $0.48 per share, for the same period last year. Moving to the balance sheet, our cash and cash equivalents were $12 million at the end of the quarter. Our total liquidity, including available borrowing capacity under our revolving credit agreement, was $115 million. Total debt at the end of the quarter was $312 million, compared to $329 million in the fourth quarter of 2022.

Paula: Adjusted EBITDA was $106 million or nine 2% of net sales compared to 152 million or 11, 8% of net sales in 2022.

Paula: Yeah.

Paula: Despite facing some initial challenges in the beginning of the year, we experienced a turnaround in the second half that was marked by more stable traffic trends robust product margins and remarkable reduction in inventory levels.

Paula: In addition, our focused efforts on digital marketing strategies and kill for successfully re engage our customer base, leading to a 4% increase in customer reactivation.

Paula: Net income for the year was 12 million or 11 cents per share compared to a net income of $15 million or 48 cents per share for the same period last year.

Paula: Moving to the balance sheet, our cash and cash equivalents were 12 million at the end of the quarter, our total liquidity, including available borrowing capacity under our revolving credit agreement was 115 million.

Paula: Total debt at the end of the quarter was 312 million compared to 329 million in the fourth quarter of 2022.

Paula: Our net debt to adjusted EBITDA was 2.9 times.

Paula: At quarter end we.

Paula: We made significant progress with our inventory levels and an eight year with inventory down 21% to $142 million compared to $180 million a year ago.

Paula: Turning to our outlook for 'twenty 'twenty four.

Paula: We expect consumers remain cautious with their spending giving elevated interest rate and inflation levels. While we believe this will limit our topline sales growth, we expect to realize the benefits of our product cost initiatives.

Paula Dempsey: Our net debt toward Jess and Eva was 2.9 times at quarter end. We made significant progress with our inventory levels, ending the year with inventory down 21% to $142 million compared to $180 million a year ago. Turning to our outlook for 2024, we expect consumers to remain cautious with their spending given elevated interest rates and inflation levels.

Paula: We estimate full year revenue of between one.

Paula: 0.13, 5 billion to 1.155 billion.

Paula: In fiscal 'twenty 'twenty four we expect to open 15 to 20 towards stores and close 10 to 15 stores.

Paula: As a reminder, fiscal 'twenty 'twenty four is a 52 week year compared to a 53 week here in 2023.

Paula Dempsey: While we believe this will limit our top line sales growth, we expect to realize the benefits of our product cost initiative. We estimate full year revenue of between $1.135 billion and $1.155 billion. In fiscal 2024, we expect to open 15 to 20 new stores and close 10 to 15 stores. As a reminder, fiscal 2024 is a 52 week year compared to a 53 week year in 2023. Sales for the 53rd week were approximately $22 million, resulting in $2.5 million of EBITDA.

Paula: Sales for the 53rd week for approximately $22 million, resulting in two and a half a million dollars of EBITDA.

Paula: We expect adjusted EBITDA of between 100 and sex to $116 million.

Paula: This includes the investments are expected to increase SG&A as a percentage of sales by 100 to 120 basis points compared to last year.

Paula: The increase is driven primarily due to the.

Paula: The expectation that we meet our targets and have accrued for incentive compensation in 'twenty 'twenty four we did not accrue for incentive compensation in 2023.

Paula: And we continue with investments in technology, including new product lifecycle and product allocation system.

Paula Dempsey: We expect adjusted EBITDA of between $106 to $116 million. This includes investments that are expected to increase SG&A as a percentage of sales by 100 to 120 basis points compared to last year. The increase is driven primarily due to the expectation that we meet our targets and have accrued for incentive compensation in 2024. We did not accrue for incentive compensation in 2023.

Paula: Capital expenditure is expected to be between $20 million to $25 million, which includes investments in new systems and technology as well as the opening of 15 to 20 new stores.

Paula: Our guidance does not reflect the consumer financial Protection Bureau, or C. S. T V's ruling to lower the maximum allowable charge for late fees.

Paula: As it is subject to ongoing legal challenges initiated on March seven 2024.

Paula: Should the court granted a stay in this really we anticipate any impact on our net sales and EBITDA in the range of $11 million to $15 million for the last eight months of fiscal 'twenty 'twenty four.

Paula Dempsey: And we continue with investments in technology, including a new product life cycle and product allocation system. Capital expenditure is expected to be between $20 to $25 million, which includes investments in new systems and technology, as well as the opening of 15 to 20 new stores. Our guidance does not reflect the Consumer Financial Protection Bureau or CFPB's ruling to lower the maximum allowable charge for late fees, as it is subject to ongoing legal challenges initiated on March 7, 2024.

Paula: In response, we're actively collaborating with our credit card partners to lessen the impact if this goes into effect.

Paula: Let me provide some comments on our expectations for the quarterly cadence for the year.

Paula: For the first quarter, we project net sales should be in the range of 277 to 282 million and adjusted EBITDA to be between 31 and 34 million.

Paula Dempsey: Should the court grant a stay of this ruling, we anticipate an impact on our net sales in EBITDA in the range of $11 to $15 million for the last eight months of fiscal 2024. In response, we're actually collaborating with our credit card partners to lessen the impact if this goes into effect. Let me provide some comments on our expectations for the quarterly cadence for the year. For the first quarter, we project net sales to be in the range of $277 to $282 million and adjusted EBITDA to be between $31 and $34 million.

There are a few factors impacting our first quarter sales.

Paula: We have one toward cash event planned for the quarter compared to two events last year.

Paula: And given our more disciplined inventory management, we plan to move through less clearance inventory, which impact topline sales, but it's margin accretive.

Paula: We anticipate that sales volumes will remain relatively consistent throughout each quarter and adjusted EBITDA to remain relatively consistent for the first three quarters with a normal seasonal decline in the fourth quarter.

Paula: This cadence is more aligned with our seasonality in 2019, a more normalized year for our business.

Paula Dempsey: There are a few factors impacting our first quarter sales. We have one Torrid cash event planned for the quarter compared to two events last year. And given our more disciplined inventory management, we plan to move through less clearance inventory, which impacts top-line sales but is margin accretive. We anticipate that sales volumes will remain relatively consistent throughout each quarter and adjusted EBITDA to remain relatively consistent for the first three quarters with a normal seasonal decline in the fourth quarter.

Our guidance assumes continued traffic pressure impacting top line.

Paula: Estimate also incorporates gross profit expansion throughout the year.

We expect the combined effect of increased margins and sustained reductions in inventory levels should lead to improvements in working capital.

Paula: As we look forward to the upcoming year, our journey reflects a path of strategic decisions disciplined financial management, and our commitment to driving shareholder value.

Paula: The past year has laid a strong foundation setting the stage for sustained growth and continued innovation.

Paula Dempsey: This cadence is more aligned with our seasonality in 2019, a more normalized year for our business. Our guidance assumes continued traffic pressure impacting the top line. The estimate also incorporates gross profit extension throughout the year.

Paula: With their continued support of our shareholders the loyalty of our customers and the hard work of our team we're eager for the prospects that lie ahead.

None: I will now turn the call over to the operator to begin the question and answer portion of our call.

Operator: We expect the combined effect of increased margins and sustained reductions in inventory levels to lead to improvements in working capital. As we look forward to the upcoming year, our journey reflects a path of strategic decisions, disciplined financial management, and a commitment to driving shareholder value. The past year has laid a strong foundation, setting the stage for sustained growth and continued innovation. With the continued support of our shareholders, the loyalty of our customers, and the hard work of our team, we're eager for the prospect that lies ahead. I will now turn the call over to the operator to begin the question and answer portion of our call. Thank you. We will now 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 that 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 start key.

Operator: Thank you Bill.

Operator: Now be conducting a question and answer session.

None: He would like to ask a question. Please press star one on your telephone keypad.

A confirmation tone will indicate that your line is in the question queue.

You May press star two if you'd like to remove your question from the queue.

None: 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.

None: Thank you.

None: Our first question comes from the lineup Brooke Roach with Goldman Sachs. Please proceed with your question.

Brooke Siler Roach: Good afternoon, and thank you for taking our question.

Brooke Siler Roach: I was hoping you could speak a little bit further about the impact that you're seeing with regards to traffic ticket and conversion outcome and some of the new product and marketing initiatives that you have underway at the company.

Brooke Siler Roach: And then specifically can you help us bridge the path back to positive comp growth at Port and when you expect to see that inflection for your business.

Yeah.

Hey Brook and thanks for your question.

None: We anticipate pressure on traffic in the first half of the year recovering in the back half what we're seeing is.

None: Improvement in stores slightly faster than we had anticipated.

Operator: One moment, please, while we pull for questions. Thank you. Our first question comes from the line of Brooke Roach with Goldman Sachs. Please proceed with your question. Good afternoon, and thank you for taking our question. I was hoping you could speak a little bit further about the impact that you're seeing with regard to traffic, ticket, and conversion outcomes from some of the new product and marketing initiatives that you have underway at the company. And then specifically, can you help us bridge the path back to positive comp growth at Torrid and when you expect to see that inflection for your business? Thank you. Hi Brooke.

None: We think that this is because the opening price point key item programs that we've put into place are working as well as more casual product assortments and so where we are encouraged by the transaction values that we're seeing out of the store channel and the improvement there.

None: We think that the back half of this year is the inflection point as we have anticipated normalized traffic trend more toward a flat traffic.

The numbers in the back half and anticipate that continuing kind of improvement that we're seeing from the inventory management the regular price sales improvements as well as a much more efficient.

Lisa M. Harper: Thanks for your question. We anticipate pressure on traffic in the first half of the year, recovering in the back half. What we're seeing is improvement in stores slightly faster than we had anticipated. We think that this is because the opening price point key item programs that we've put into place are working, as well as more casual product assortments.

None: And inventory that's the gross margin. So we're not just looking at comp we're looking at margin comp as a critical kpis for this year, which we're seeing expansion, we'll see expansion.

None: Most of the year accelerating in the back half as well.

None: Great. Thanks, so much and then maybe one for Paul.

Paul Dempsey: As you contemplate the margin outlook that you provided today as well as some of the potential headwinds as you think about credit card income and mitigation factors there.

Lisa M. Harper: And so we are encouraged by the transaction values that we're seeing out of the store channel and the improvement there. We think that the back half of this year is the inflection point, as we have anticipated a normalized traffic trend more toward flat traffic numbers in the back half and anticipate the continuing kind of improvement that we're seeing from inventory management, the regular price sales improvement, as well as the, you know, much more efficient investment in inventory. That's the gross margin.

Paul Dempsey: Thinking about the path back to pre Covid adjusted EBIDTA margin levels.

Paul Dempsey: What are the most important drivers that you expect to realize as you journey back to that level.

None: Yeah, that's that's a great question.

None: So I think as we think about that the late fee I'm really we're so obviously working with our partners at this point as I as I brought it up this has an impact of $11 million to $15 million, possibly but at this point, we again, we're working with them to minimize that impact.

Lisa M. Harper: So we're not just looking at comp, we're looking at margin comp as a critical KPI for this year, and we're seeing expansion. We'll see expansion most of the year, accelerating in the back half as well. Great, thanks so much.

None: More to come from that standpoint, but I think as we think about gross expense our EBITDA margin expansion throughout the year, we're going to see it really in two in one major form really which is gonna be a gross profit expansion, which we're gonna see more dramatically from Q1 to Q3 and.

Paula Dempsey: And then maybe one for Paula, as you contemplate the margin outlook that you provided today, as well as some of the potential headwinds as you think about credit card income and mitigation factors there, how are you thinking about the path back to pre-COVID adjusted EBITDA margin levels? And what are the most important drivers that you expect to realize as you journey back to that? Yeah, that's a great question.

In Q4, right, we're gonna start lapping that as we think about to be more close to fiscal 19, I would say that our cadence in general whether it's sales from a topline perspective or even S. Juno will be much more aligned.

With fiscal 19.

None: Yeah.

None: Thank you so much I'll pass it on.

None: Your next question comes from the line of Alex <unk> with Morgan Stanley. Please proceed with your question.

Paula Dempsey: So, I think as we think about this, the late fee ruling, we're still obviously working with our partners at this point. As I brought it up, this is an impact of $11 to $15 million, possibly, but at this point, again, we're working with them to minimize that impact. But I think as we think about our EBITDA margin expansion throughout the year, we're going to see it really in one major form, which is going to be our gross profit expansion, which we're going to see more dramatically from Q1 to Q3 and easing it in Q4, right? We're going to start lapping that. As we think about being more close to Fiscal 19, I would say that our cadence in general, whether it's sales from a top-line perspective or even SG&A, will be much more aligned with Fiscal 19. Thank you so much. I'll pass it on.

Alex: Great. Thanks, a lot that's super helpful overview of the initiatives you've done this year in our focus areas are as we look ahead, maybe for Paul where do you think we should initially see signs of these efforts showing up in the P&L first.

Alex: And then perhaps for Paul I Am Lisa what Kpis are you focused on as a management team I know Lisa you mentioned, one but maybe just a quick summary of what from your end you guys are are super focused on thanks a lot.

Alex: Yeah, I would say, Alex, but youre going to start seeing them in the P&L, you're going to start seeing our gross profit expansion.

Alex: That's gonna be the first place you're going to see it. So this year. We're you know we're very very focused and honestly its results from everything that we all of the strategies that started last year, but where are you going to see the results is really going to be through expansion of gross margin, which we did see that already in Q4 of fiscal 'twenty three and work.

Alex: We're continuing to see that throughout the year I would say from an SG&A basis, SG&A standpoint, youre going to continue to see our SG&A almost at the same levels as Q4 of fiscal 'twenty three from a dollar standpoint, and there's as I mentioned two reasons for that right.

Operator: Our next question comes from the line of Alex Straton with Morgan Stanley. Please proceed with your question. Great, thanks a lot.

Paula Dempsey: Super helpful overview of, you know, the initiative you've done this year and the focus areas as we look ahead. Maybe for Paula, where do you think we should initially see signs of these efforts showing up in the P&L first? And then perhaps, both for Paula and Lisa, what KPIs are you focused on as a management team? I know Lisa mentioned one, but maybe just a quick summary of what, from your end, you guys are super focused on. Thanks a lot. Yeah, I would say Alex that you're going to start seeing in the P&L, you're going to start seeing growth profit expansion. That's going to be the first place you're going to see.

Alex: One is we're back with the incentive compensation in 2020 for which we did not have in 2023 as well as we are continuing with some heavy investments in technology at toward with new product lifecycle product allocation systems and not only that we are in the second half of the year and to start looking.

Alex: Into our ear ERP upgrades, so, but I think in general youre going to see them on the P&L, it's gonna be and gross profits one other thing, though from SG&A, what we're experiencing right now and what we started seeing in late Q4, even early I mean, even late Q3 actually we are seeing.

Paula Dempsey: So this year, we're, you know, we're very, very focused, and obviously, results from everything that we, all of the strategies that started last year. But where you're going to see the results is really going to be through the expansion of gross margin, which we did see already in Q4 of fiscal 23, and we're going to continue to see that throughout the year. I would say from an SG&A standpoint, you're going to continue to see our SG&A almost at the same levels as Q4 of fiscal 23, from a dollar standpoint. And there are, as I mentioned, two reasons for that, right?

Alex: Improvements in store labor expenses, and we expect to leverage that this year, which is a great sign.

Alex: And then other Kpis I mentioned product margin comp expansion and probably the biggest mover. This year. The other thing I would reinforce is the kind of rationalization between channels. So we're seeing a faster you know faster than planned recovery in the store channel that leverages fixed expenses at a faster rate so.

Paula Dempsey: One is we're back with incentive compensation in 2024, which we did not have in 2023, as well as continuing with some heavy investments in technology at Torrid with new product life cycle, and product allocation systems, and not only that, but we are, in the second half of the year, going to start looking into our ERP upgrade. But I think in general, you're going to see on the P&L that it's going to be gross profit. One other thing, though, from SG&A, what we're experiencing right now and what we started seeing in late Q4, even early, I mean, even late Q3, actually, we're seeing improvements in store labor expenses, and we expect to leverage that this year, which is a great sign. And then other KPIs I mentioned, product margin comp expansion is probably the biggest mover this year. The other thing I would reinforce is the kind of rationalization between channels.

Alex: That there's a positive momentum there not just with pure.

Alex: Dollars, but with kind of those the underlying leverage of the fixed expenses related to the stores I think we've done a good job with store payroll.

Alex: And I think it can be.

Alex: The other piece of that is looking at how we're turning inventory. It's obviously, a very dramatic shift in inventory down 21% beginning of the year, you'll see that continuing to leverage as we move through 'twenty fiscal 'twenty for us we're very focused on.

Alex: Turning that inventory more quickly and in the investments required a lot of our investments required.

Alex: In order to generate the type of the topline sales and the margin dollars that we're talking about so yeah for the year. It's.

Alex: Product margin comps, it's working capital investment and inventory improvements and it's that kind of channel reach distribution kind of with our store recovery that are all going to have positive impacts on the gross profit.

Lisa M. Harper: As we're seeing a faster, you know, faster than planned recovery in the store channel, that leverages fixed expenses at a faster rate so that there's positive momentum there, not just with pure dollars, but with kind of the underlying leverage of the fixed expenses related to the stores. I think we've done a good job with store payroll, and I think the other piece of that is looking at how we're turning inventory. So obviously, a very dramatic shift in inventory, down 21% at the beginning of the year.

Alex: But ultimately positive comps in both channels.

Alex: It is our goal by the end of the year moving into 'twenty five that helps you know exacerbating an increase that the continuing the leverage that we've been able to generate with margin expansion.

None: Great. Good luck. Thank you.

None: Yeah.

None: Our next question comes from the line of Jeff <unk> with B Riley Securities. Please proceed with your question.

Jeff: Thanks for taking my question Congrats on a good end of the year and fourth quarter.

Lisa M. Harper: You'll see that continuing to leverage as we move through fiscal 24, as we're very focused on turning that inventory more quickly, and the investments required, lower investments required in order to generate the top-line sales and the margin dollars that we're talking about. So, you know, for the year, it's product margin comps, it's working capital investment and inventory improvements, and it's that kind of channel redistribution kind of with store recovery that are all going to have positive impacts on gross profit. But ultimately, positive comps in both channels, you know, is our goal by the end of the year, moving into 25, that helps, you know, exacerbate and increase that continuing leverage that we've been able to generate with margin expansion. Great Good luck!

Jeff: Lisa I was wondering if you know.

Jeff: Five initiatives I counted you started talking about some time in Q3 Q of last year your gross margin optimization.

Jeff: Sharper price points to casual assortment marketing data platform and Thats a clearance store conversions I was just wondering if you could kind of walk through like when do you start how much more do you have to go into 2024 before you start to watch those.

None: I'm just curious with respect to your guidance.

None: She lives.

None: Things could go better like where do you see things where it could go better there would be upside.

None: Sure. So gross margin is a little bit of it in fourth quarter. It will increase as you go through this year and we won't be lapping anything until we get to the back end of fourth quarter of 24. So we have a full year of expansion there opening price point, we just launched that as well, it's exceeding our expectations, particularly in the store channel.

Operator: Thank you. Our next question comes from the line of Jeff Lick with B Riley Securities. Please proceed with your question. Thanks for taking my question.

Lisa M. Harper: Congratulations on a good end to the year and fourth quarter. Lisa, I was wondering if, you know, the five initiatives I've counted, you know, that you started talking about, you know, sometime in 2Q or 3Q of last year, you know, gross margin optimization, sharper price points, the casual assortment, the marketing data platform, and then the clearance store conversions. I was just wondering if you could kind of walk through it, like when do you start?

None: So that is brand, new as well and that kind of rolls out and as refined as we move through the balance of the year Casuals Asia started when winter of last year, So really more like September October.

None: With the first movement and to kind of the casual and casual chic mindset and minimizing the dressier side of the assortment. So you have that for at least three more quarters, but then refinement beyond that I think you know some of the things that I would say on a product basis, where we have the right silhouettes in denim now I know weird no.

Lisa M. Harper: How much more do you have to go into 2024 before you start to phase those out? And then I'm just curious, with respect to your guidance and then these initiatives, if things could go better, like, where do you see things where they could go better, and there would be upside? Sure. So, gross margin, you saw a little bit of it in the fourth quarter. It'll increase as you go through this year, and we won't be lapping anything until we get to the back end of the fourth quarter of 24. So, we have a full year of expansion there. Opening price point, we just launched that as well, and it's exceeding our expectations, particularly in the store channel. And so, that is brand new as well, and that kind of rolls out and is refined as we move through the balance of the year. Casualization started in the winter of last year, so really more like September-October, with the first movement into kind of this casual-casual chic mindset and minimizing the dressier side of the assortment.

None: We while we have the new products, the new shapes, the new silhouettes in denim, we werent investing appropriately there and we are.

None: We've corrected that and have moved more appropriately into those next says so you know theres product improvements as well in the casual elevation that graphic Tees are very very good we've appropriately invested in the graphic tees in a niche so they're all sort of improving I think the Sally dress program is Ah, it's exceeding our expectations, particularly in the <unk>.

None: Channel. So some of those things that we've already invested in and casual or are off to a great. A very strong start and we expect that to continue through the balance of this year. The data platform right now where we we had good initial results I think is a little challenging during the holiday period is a digital.

None: It's cost for digital marketing changes pretty dramatically.

None: We're continuing to test that and anticipate continued improvement in opportunity associated with an increase in marketing spend.

Lisa M. Harper: So, you have that for at least three more quarters, but then refinement beyond that. I think, you know, some of the things that I would say on a product basis. We have the right silhouettes in denim now. You know, we were...

We will be able to rationalize that you know, we're very cautious about that.

None: It's easy to move week to week in terms of those investments what we're doing some AB testing on that so that we can really give you a kind of a fee.

Full understanding of what we think the opportunity is there in the back half of the year and then clearance centers Martin mentioned in his comments and we're happy with with how those are working and we anticipate rolling out additional we actually just opened one I think last week and it's exceeding our expectations.

Lisa M. Harper: While we had the new products, the new shapes, the new silhouettes of denim, we weren't invested appropriately there. We've corrected that and have moved more appropriately into those mixes. So, you know, there are product improvements as well in the casualization. Graphic tees are very, very good.

None: Each of those stores have eight to 10 theater stores that we see gross margin expansion, even above the chain expansion related to being able to take the second and third markdowns out of those stores and expand the assortment over half of our stores based on our tests because they can handle an expanded assortment with either Bobby.

Lisa M. Harper: We've appropriately invested in graphic tees and in knits, and those are also improving. I think the shally dress program is exceeding our expectations, particularly in the store channel. So some of those things that we've already invested in in casual are off to a very strong start. And we expect that to continue through the balance of this year. The data platform right now, we had good initial results.

None: In a theater store or by having additional space and less space dedicated to clearance as we are more regular price driven at this point. So there isn't there's expansion related to that I think that will have you know the first half of the year, we have another eight or so clearance centers that we're aiming for and we will continue to read.

Lisa M. Harper: I think it's a little challenging during the holiday period as the cost of digital marketing changes pretty dramatically. We're continuing to test that and anticipate continued improvement and opportunity associated with an increase in marketing spend. We'll be able to rationalize that. You know, we're very cautious about that.

None: That carefully and cautiously as.

None: As we roll out that strategy, but weird at four today, we're at three through the end of last year. We will look at you know, adding another eight or so into the mix and think that that's that that will impact 80 to 90 stores and incrementally that are driving a higher gross margin an improvement of them or so.

Lisa M. Harper: It's easy to move week to week in terms of those investments. We're doing some A-B testing on that so that we can really give you a full understanding of what we think the opportunity is there in the back half of the year. And then clearance centers, Mark mentioned in his comments, we're happy with how those are working, and we anticipate rolling them out. We actually just opened one, I think, last week, and it's exceeding our expectations.

None: And in the chain.

Then your other question.

None: Oh I was just curious about what are the what.

What could go better.

Kind of answered the engineered hardwood okay I'll answer.

Lisa M. Harper: Each of those stores has eight to ten feeder stores that we see gross margin expansion even above the chain expansion related to being able to take second and third markdowns out of those stores and expand the assortment. Over half of our stores, based on our tests, can handle an expanded assortment either by being a feeder store or by having additional space and less space dedicated to clearance as we are more regular price driven at this point. So there's an expansion related to that. I think that we'll have, you know, in the first half of the year we have another eight or so clearance centers that we're aiming for, and we'll continue to read that carefully and cautiously as we roll out that strategy. But we're at four today; we were at three through the end of last year.

None: Yeah, I mean, I think that's it.

None: We expect the customer to still be a little the trial, we're seeing traffic improve but it's still negative and when you expect it to be negative through the beginning of the year and improve in the back half and I think that is that that assumption is built into our guidance and if that changes or improves more quickly if the.

None: Model search drives traffic at a faster rate, that's an opportunity for second quarter as well, but we've you know where we are forecasting that based on what we're seeing now.

None: That's helpful.

None: Yes, just a quick one for Paul or would it be possible to break out for Q4 sales that you reported $293 5 million.

Lisa M. Harper: We'll look at, you know, adding another eight or so to the mix and think that that's a good idea and that that will impact 80 to 90 stores and, incrementally, that is driving a higher gross margin improvement than we're seeing in the chain. Then your other question.

None: Merchandize sales versus plc.

Hmm.

None: The way that I would think about it is P. L. P C. It's usually about.

Paul Dempsey: One two to one 5% of our net sales and.

Paul Dempsey: In general.

None: But you'll continue to disclose that if a K O correct.

Lisa M. Harper: I was just curious about what could go better, but you kind of answered that in your highly detailed answer. Yeah, I mean, I think that we expect the customer to still be a little bit, we're seeing traffic improve, but it's still negative, and we expect it to be negative through the beginning of the year and improve in the back half. And I think that assumption is built into our guidance, and if that changes or improves more quickly, if the model search drives traffic at a faster rate, that's an opportunity for the second quarter as well. But we are forecasting it based on what we're seeing now. And that's helpful. Just a quick one from Paula.

None: We disclosed the Nikkei, our total value of our private label credit card yes.

None: Correct.

None: We did it when we take them so.

None: That is yes.

None: Okay, great. Thank you.

None: Yeah.

None: Thank you.

None: Yeah.

None: Our next question comes from the line of Corey Tarlow with Jefferies. Please proceed with your question.

Corey Tarlow: Thanks, and good afternoon, I wanted to ask on promotions.

Corey Tarlow: So you've reduced promotions and it seems like merchandise margins are on a good trajectory product margins are up and inventories are down. So how are you thinking about the prospects for promotions ahead within the context of how you are planning.

Paula Dempsey: Would it be possible to break out for Q4's sales that you reported, the $293.5 million merchandise sales versus PLLC? The way that I would think about it is PLLC is usually about 1.2 to 1.5% of our net sales, in general. But you'll continue to disclose that in the K, correct? We disclose and decay our total value of our private label credit card, yes, correct. So I'll be able to get it when the cake comes.

Corey Tarlow: Tories and clearance and markdowns et cetera.

None: Yeah I think.

None: Some of the notable things that happened promotional and during the quarter were during black Friday, and the cyber weekend, where we discounted much less than we had.

Paula Dempsey: That is. Okay, great. Thank you. Thank you. Our next question comes from the line of Corey Tarlowe with Jeffries.

None: In the prior year and again running up until the week before Christmas again, we ran much higher year over year margin rates less discounted and then I think the other thing that was notable is that in January we continued the momentum that we've been seeing building in tour.

Operator: Please proceed with your question. Thanks, and good afternoon. I wanted to ask about promotion. So. You've reduced promotions, and it seems like merchandise margins are on a good trajectory. Product margins are up, and inventories are down. So how are you thinking about the prospects for promotions ahead within the context of how you're planning inventories and clearance and markdowns, et cetera? Yeah, I think some of the notable things that happened promotionally during the quarter were during Black Friday and the cyber weekend, where we discounted much less than we had in the prior year. And again, running up until, you know, the week before Christmas, again, we ran much higher year over year margin rates, less discounted. And then I think the other thing that was notable was that in January, we continued the momentum that we'd been seeing building in the Torrid cash promotion, which is, as I've said before, our most productive promotion and had been really suffering at the beginning of last year.

None: Cash promotion, which is us.

None: As I've said before our most productive promotion and had been really suffering at the beginning of last year, and we started to see a little momentum build and mid year.

None: Some improvement in October and then we saw continued improvement in the January January toward cash redemption. So I think the way that plays forward, we've gotten back to nearly nearly where we expect the toward cash promotion to be I expect that it'll continue to improve and continue to remain our best so.

None: That that will be normalized we'll have four of them this year versus the five that we had in 2023.

None: The promotion period has pretty much been normalized the issuance policies as you know, we're pretty happy with what those are.

Operator: And we started to see a little momentum build in mid-year, some improvement in October, and then we saw continued improvement in the January Torrid cash redemption. So, I think the way that plays out, we've gotten back to nearly where, you know, we expect the Torrid cash promotion to be. I expect that it'll continue to improve and continue to remain our best. So, that will be normalized. We'll have four of them this year versus the five that we had in 2023.

None: I think I think thinking about that.

None: Day in day out promotions, where we're starting to see traction in the stores as as we've talked about with.

None: With inventory levels down it's just it's not necessary to promote to move inventory to the same degree that it has been last year and even 2022 to some degree. So we're we're pretty we're pretty pleased with our initial reads on how we can let off the gas promotional Lee and allow.

Lisa M. Harper: The promotion period has pretty much been normalized. The issuance policies have, you know, we're pretty happy with what those are. So, we're pretty pleased with our initial reads on how we can let off the gas promotionally and allow higher margins, lower discounts to drive the inventory. And, of course, with less clearance inventory also, there's much less need to have clearance promotions to get through that. I understand. Thank you. And then just a quick one.

None: I'll allow.

None: Allow higher margins lower discounts to drive inventory and of course with less clearance inventory also there's much less need to have clearance promotions to get through that.

Understood. Thank you and then just a quick one how are you thinking about marketing expenses as we look throughout the year ahead. I think that you are also adding in addition on additional marketing events and activation that you haven't done in the past.

Lisa M. Harper: How are you thinking about marketing expenses as we look ahead? I think that you are also adding in an additional marketing event or an activation that you haven't done in the past. Curious what the other associated implications of that investment and other marketing expenses might be within the outlook for this year. I think as a percent of business, the marketing spend is fairly similar to where it has been slightly increased. And the spend that is, you know, the additional spend as we continue to test in digital, the model search, etc., that is all being funded within that slight increase as a percent of revenues that marketing spends. As we learn more through the A-B testing, that would only invest if we see an incremental EBITDA contribution based on that investment.

None: Curious what other what the other associated implications of that investment in and other marketing expenses might be within the outlook for this year. Thank you.

None: I think as a percent of business are the marketing spend is fairly similar to where it has been slightly increased and the the spend that is the.

None: The additional spend as we continue to test and digital the model search et cetera that is all being funded within that.

None: <unk> increase as a percent of revenues that marketing spend will be.

None: As we learn more through the a b testing that that would we would only invest if we see an incremental EBITDA contribution based on that investment so well have more to comment. The next time, we talk with you guys. Because we will have more definitive kind of results based on that.

Lisa M. Harper: So we'll have more to comment the next time we talk with you guys because we'll have more definitive results based on that. That might change the number slightly, but it all is predicated on an incremental EBITDA contribution based on that investment. Great, thanks. As a reminder, ladies and gentlemen, if you would like to ask a question, please press star one on your telephone key. Our next question comes from the line of Dana Telsey with Telsey Advisory. Please proceed with your question. Hi, good afternoon, everyone.

That might change the the number slightly but it at all is predicated on an incremental EBITDA contribution based on that investment.

None: Great. Thanks, so much.

None: Yes.

None: Yeah.

None: As a reminder, ladies and gentlemen, if you would like to ask a question. Please press star one on your telephone keypad. Our next question comes from the line of Dana Telsey with Telsey Advisory Group. Please proceed with your question.

Dana Lauren Telsey: Hi, good afternoon, everyone interesting to hear about the labor costs are nice to see the progress that'd be worth how do you think about labor expenses are they coming down because of hours that are being reduced is it wage expenses wage rates are you shifting wage rates, what do you expect to see going forward and are there other any other.

Dana Lauren Telsey: Hi, good afternoon, everyone interesting to hear about the labor costs are nice to see the progress that'd be worth how do you think about labor expenses are they coming down because of hours that are being reduced is it wage expenses wage rates are you shifting wage rates, what do you expect to see going forward and are there other any other.

Operator: It's interesting to hear about labor costs and nice to see the progress everywhere. What do you think about labor expenses? Are they coming down because of hours that are being reduced? Is it wage expenses, wage rates, or you're shifting wage rates? What do you expect to see going forward? And are there any other elements of the expense structure, either changes up or changes down, that we should account for in the margin outlook? Thank you. Hi Dana, it's Paula.

Dana Lauren Telsey: Elements of the expense structure, either changes up or changes down that we should account for in the margin outlook. Thank you.

Dana Lauren Telsey: Hi, Dana it's all up so what we're doing with our labor expenses. It's it's truly a couple of things one is.

Paula Dempsey: So what we're doing with our labor expenses is truly a couple of things. One is creating efficiency and higher productivity in the stores. That's the work, and we're seeing the results right now. We started doing this in the second half of last year, and we're finally collecting some of those positive results right now.

Dana Lauren Telsey: Creating efficiency and higher productivity into this in the stores. That's that's the work and we're seeing the results right. Now we started doing this in the second half of last year and were finally collect from some of those positive results right. Now. So what we have done is definitely shifted some of the wages around so we're seeing the benefits.

Paula Dempsey: So what we have done is definitely shifted some of the wages around, so we're seeing the benefit from that. And in addition to that, we're just becoming a lot more effective with how we spend our time in the stores, really, from our labor hours. So those are the two items on which we're highly focused.

Dana Lauren Telsey: From that and in addition to that we're just becoming a lot more effective with our with how we spend our time in the stores really from a from a labor hours. So those are the two items in which we're highly focused.

Lisa M. Harper: I would add that we changed the leadership structure in the stores to rationalize the right balance of leadership to hourly associates, and that's having a result. We also have had a new chief stores officer join us, and with a really focus on sales culture, and I think we were more oriented toward a task culture, even though our net promoter scores and our CSAT scores in stores are in the high 80s and mid 90s, so the customer is having a great experience. We felt like we could improve that even more, and so it's not a rate issue. We've managed it really through structural shifts in what we're asking the stores to do and in the leadership structures in the stores. I got it. And then when you're thinking about new store openings this year, locations, off-mall, mall, any changes in sizes of stores and regions? Yeah, it's a very small number of stores, and they will all be Stripper Canada.

Dana Lauren Telsey: I would add that we we changed the leadership structure in the stores.

To rationalize kind of the the right balance of leadership to hourly associates.

Dana Lauren Telsey: Associates and that's having a result, and we also have how did your chief stores officer join us and with really a focus on sales culture and I think we were more oriented toward a task culture, even though our net promoter scores and receive that scores are in stores or in the high eighties mid nineties.

Dana Lauren Telsey: It so the customers having a great experience, we felt like we could improve that even more and so there is no. It's.

Dana Lauren Telsey: It's not a rate issue, we've managed it really through structural shifts and what we're asking the source to do and then the leadership structures in the stores.

Got it and then when you're thinking about new store openings. This year locations off mall mall any changes in sizes of store and regions.

None: Yeah, it's a it's a very small number of stores and it's it will all be strip or Canada.

Lisa M. Harper: Got it. And then, Lisa, just the competitive environment with the core customer base, how is it changing the competitive environment, whether online or physical, and how do you see your pricing given the better product cost that you're getting? Yeah, I would still say it's a very highly segmented space, with a lot of small players in it.

None: Got it.

None: And then Lisa just the competitive environment with the core customer base, how is that changing the competitive environment, whether online or physical and how do you see your pricing given the better part of costs that you're getting.

None: Yeah, I would still say, it's a very highly segmented space a lot of small players in it and <unk>.

Lisa M. Harper: So it's, I don't think it's changed appreciably. I think, you know, the self-inflicted elevated retail, you know, the ticket, the sticker shock has been mitigated somewhat by the efforts that we put into a better mix of product, both casual as well as initial tickets and rationalizing those tickets to the value of the product. And we are seeing, because of that, and I also think because of our inventory positioning, improvement in regular price sales that, not just an initial markup, but through, but in regular price sell through, that is benefiting that. So I think that, you know, always stopping to reevaluate the appropriate value pricing of our product is critical. And I think we've made some big shifts. We're seeing, as I mentioned earlier, our core programs working well, particularly in the store environment.

None: So it's I don't think that's changed appreciably I think you know the self inflicted elevated retail you know just the ticket the sticker shock has been mitigated somewhat by better.

None: Our efforts that we put it into better mix of product both casual as well as initial tickets and rationalizing those tickets to the value of the product and we are seeing because of that and I also think because of our inventory positioning.

None: Improvement in regular price sales, but we're not just an initial markup, but through what but in regular price sell through.

None: <unk> is benefiting that so I think that you know always stopping to reevaluate the appropriate value pricing of our product is critical and I think we made some.

None: Big shifts, we're seeing as I mentioned earlier, our core programs are working well, particularly in the store environment. We think we have some opportunity in how we market them online to improve that but speeding the beating our forecast and both are both categories opening price point.

Lisa M. Harper: Core Items, as well as what we've done in the SHALI programs, which are part of the Opening Price Point Strategy. I think we're making progress there. And then shifting toward more casual products has also brought the average retail down in the store, but it's not really impacting the average unit value going out the door, which is still positive. So I think one of the concerns people had was if you were going more to the opening price point or changing those initial tickets, you'd have a challenge with your average ticket price out the door, and that we're actually not seeing an impact on that.

None: Core items as well as what we've done and the Xiaomi programs, which are part of the opening price point strategy. So.

None: I think we're making progress there and then shifting towards more casual product has also brought the average retail down in the store, but it's not really it's not really impacting the average unit value going out the door, but still that's still positive. So that I think one of the concerns people had was if you're going to.

Or to opening price point or changing those initial tickets that you'd have a challenge on your average ticket price out the door and that we're actually not we're not seeing an impact to that.

Lisa M. Harper: Thank you. Thanks, Dana. There are no further questions at this time. I would like to turn the floor back over to Lisa Harper for any closing comments. Thank you. Thank everyone for joining us today. We really appreciate your focus on the business and are looking forward to talking with you in the interim as well as when we release our first quarter later this year. Talk to you soon. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation. (inaudible)

None: Yeah.

None: Thank you.

None: Thanks Dana.

None: There are no further questions at this time I would like to turn the floor back over to Lisa Harper for any closing comments.

Lisa M. Harper: Thank you and thanks, everyone for joining us today, we really appreciate your focus on the on the business and looking forward to talking with you in the interim as well as when we released first quarter later this year plus Houston.

Lisa M. Harper: Yeah.

None: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

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