Torrid Holdings Inc. shares will begin trading later Thursday after the company’s initial public offering, which was priced late Wednesday and claims to be North America’s largest direct-to-consumer seller of women’s plus-size clothes and intimates by sales. Torrid, based in City of Industry, California, in eastern Los Angeles county, is trading on the New York Stock Exchange under the ticker “CURV.”
After upsizing the sale from an initial proposal to issue 8 million shares, the company sold 11 million shares at $21 each, the top end of a projected range of $18 to $21. Based on 110 million shares projected to be issued after the deal closes, the company raised $231 million at a valuation of $2.3 billion. Morgan Stanley, BofA Securities, Goldman Sachs, and Jefferies were among the eight banks that underwrote the deal. Torrid is a fast-growing company, hence it is exempt from the same disclosure requirements as larger public firms. A corporation is classified as an emerging growth company until it meets certain criteria, such as yearly revenue of more than $1.07 billion. Read: Figs will first focus on medical scrubs, but it may expand to other industry uniforms in the future. Elizabeth Muoz, Torrid’s CEO, has been in the position since 2018. George Wehlitz, Jr. has been Chief Financial Officer since January 2021, however he has been in charge of the firm’s finance operations since 2013, when he was named Chief Financial Officer of the parent company Hot Topic. Sycamore Partners Management has a total commitment of around $10 billion. Sycamore will control more than half of the voting power after the offering, and Torrid will be a controlled firm. Sycamore’s portfolio includes Hot Topic. Women between the ages of 25 and 40 are Torrid’s target market. In 2020, more than half of Torrid’s customers (58%) were under the age of 40, and the average size worn was 18. The corporation also claims that the ethnic makeup of its consumers is representative of the general population in the United States. According to Torrid, the plus-size clothes and intimates business in the United States is worth $85 billion. There are 90 million plus-size women in the United States who wear sizes 10 and higher. According to Edited, a market research platform, this category will rise to $697 billion by 2027. See: Victoria’s Secret demonstrates how a refusal to embrace the plus-size market can be detrimental to an apparel company. In 2020, Torrid served 3.2 million active customers and generated $974 million in sales. Torrid serviced 3.4 million consumers in 2019 and made $1.037 billion in revenue. The company’s net sales compound annual growth rate (CAGR) was 8% between 2017 and 2020. In 2020, net income was $25 million, a decrease from $42 million in 2019. In 2018, the company earned $87 million in net income. Sales were $1.143 billion and net income was $25 million for the 12 months ended May 1, 2021. Torrid’s “style is shamelessly youthful and sexy,” according to their prospectus, in a market where obtaining on-trend items is difficult.
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Torrid claims that because there are so few plus-size options, buyers underspend by billions of dollars, putting the total addressable market at $104 billion. Torrid sees a large growth opportunity among plus-size women in the United States, with less than 4% penetration and 78,000 plus-size women for every plus-size store vs 700 women for other women’s specialized clothes businesses. According to the prospectus, “the average plus-size woman has historically struggled to locate trendy products that fit well,” and “78 percent of plus-size women said they would spend more on clothing if there were more options available in their size.” As of May 1, 2021, there were 608 Torrid stores, with e-commerce accounting for 48 percent of sales in 2019 and 70 percent in 2020. COVID-19 forced Torrid locations to close for a while last year. Torrid also has a rewards program that allows it to collect information about its consumers in order to better service and target them. Loyalty members accounted for 95 percent of net purchases in 2020. Also, Playboy’s purchase of Honey Birdette, an Australian lingerie brand, boosts the company’s stock by 10%. Torrid is able to sell a large portion of their inventory at full price. The most popular styles are basic and core. “Furthermore, we iterate our new product offering using a read-and-react testing approach with shallow initial purchase, lowering fashion and inventory risk,” the prospectus states. “Through our merchandising strategy, we have been able to generate roughly 80% of our net sales from products sold at normal pricing, which we define as things sold at the initial ticket price or with a conventional marketing promotion (e.g., “Buy One Get One 50% Off”). “ Bras are also a huge seller. Bras are the second most popular item in a new customer’s initial buy, after tops. Torrid sees Torrid Curve, its intimates line, as a growth engine. According to the prospectus, the company’s bras include patent-pending technology that can’t be simply copied. Here are five additional facts about Torrid: Torrid will not pay a dividend. For the time being, the corporation does not intend to pay a cash dividend. The proceeds from the sale of common shares will not go to Torrid; instead, they will go to the selling stockholders. Many Torrid stores are located in shopping malls. Even before the COVID-19 pandemic, mall traffic was declining. “In places where customer traffic may drop, certain of our expenses are contractually set, and our ability to lower these expenses if sales declines is restricted in the near term,” according to the prospectus. Debt and leases may be a problem. The corporation owed $202.0 million as of May 1, 2021. The expected annual future occupancy payments for 2021 are $334.3 million. Torrid plans to enter into a new credit facility consisting of a $350 million senior secured seven-year term loan and amend its five-year revolving credit facility prior to the offering. The revenues will be used to cover transaction costs, pay down the revised term loan credit arrangement, and distribute a special dividend to direct and indirect equity investors. And: As athletic firms turn their focus to women, Adidas introduces period-proof tights. Torrid’s business relies heavily on its ability to fit customers. The majority of Torrid’s goods is designed and developed in-house, ensuring constant fit, quality, and affordability. Instead of utilizing mannequins, the company uses plus-size fit models during the fitting procedure. Most plus-size clothing businesses employ a “grading up” strategy, in which they offer current goods in larger sizes, which Torrid claims results in a lower-quality product. According to the prospectus, “our consistent fit contributed to a return rate of only 9% for e-commerce transactions in 2020,” although “return rates for e-commerce purchases normally can be as high as 30%.” Torrid has a “cultural tailwind” thanks to the body-positive trend. Torrid claims to be riding a wave of expanded inclusivity that has prompted changes at brands such as L Brands Inc.’s LB, +1.19 percent Victoria’s Secret and paved the door for newcomers such as American Eagle Outfitters Inc.’s AEO, +1.05 percent Aerie. The firm added, “Growing celebrations of femininity, inclusivity, and self-identity, as well as the emergence of plus-size celebrities and influencers, drives young curvy customers to want more flattering and attractive clothes they are happy to wear.”/n
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