Torrid Holdings (CURV): A Beaten-Down Stock With an Attractive Valuation

Argosy Investors, an investment management company, recently released its second-quarter 2022 investor letter. A copy of the same can be downloaded here. Year to date, the fund returned -25.4% in select accounts compared to -20% for the S&P 500. The main reason for the fund’s underperformance was the poor performance of its most significant holdings. For more information on the fund’s top picks in 2022, please check its top five holdings.

Argosy Investors discussed stocks like Torrid Holdings Inc. (NYSE:CURV) in its second quarter letter. Headquartered in the City of Industry, California, Torrid Holdings Inc. (NYSE:CURV) is into the business of plus-size women’s apparel. The stock of Torrid Holdings Inc. (NYSE:CURV) closed at $5.98 per share on August 19, 2022. In one month, the stock returned 42.38% and its shares lost 79.16% of their value over the last 52 weeks. Torrid Holdings Inc. (NYSE:CURV) has a market capitalization of $619.97 million.

Here is what Argosy Investors specifically said about Torrid Holdings Inc. (NYSE:CURV):

“During the quarter, we added to some beaten-down stocks whose businesses we like and that offer very attractive valuations. Torrid Holdings Inc. (NYSE:CURV) is a great example as we believe it is trading at a mid-single-digit multiple of cash flow. CURV is a plus-size womens’ retailer that, like many retailers of late, reported that its sales and profits will be lower this year due to excess inventories which will need to be discounted to sell. This phenomenon is repeating itself throughout the retail world, from companies like Torrid to Walmart.

What appears to have happened is that the supply chain bottlenecks that plagued many companies in 2021 began to relieve themselves sometime after the holiday season. As a result, some merchandise that was ordered for holiday season 2021 arrived late, and orders for spring merchandise may have shown up in larger quantities than was planned based on lead times that existed late in 2021, but dramatically compressed as supply chain issues eased. On top of that, the merchandise assortment at companies was skewed more towards work-from-home (WFH) where comfortable clothing was in vogue. This shifted as more people felt comfortable going out again, which required “going-out” attire these companies had not planned for. These are more generalized comments about retail in general, but it seems these concepts led to weakness for CURV specifically.

While some believe the market for plus-size women’s clothing has become more competitive recently, evidenced by the Yitty clothing line released by musical artist Lizzo, I believe CURV’s true commitment to this category provides it an enduring place in the hearts and minds of its customers. CURV’s returns on capital are terrific, and its growing Curve shapewear line should provide years of mid-single digit growth, while we were buying at ~5x steady-state FCF.”

Torrid Holdings Inc. (NYSE:CURV) is not on the list of  30 Most Popular Stocks Among Hedge Funds. As per our database, Torrid Holdings Inc. (NYSE:CURV) was held by 7 hedge fund portfolios at the end of the first quarter, which was 9 in the previous quarter.

We discussed Torrid Holdings Inc. (NYSE:CURV) in another article and shared Argosy Investors’ insights about the company. You can check out our hedge fund investor letters Q2 2022 page for more investor letters from hedge funds and other prominent investors.

Disclosure: None. This article is originally published at Insider Monkey.