Why Torrid sees massive opportunity in providing plus-size clothing

Torrid CEO Liz Muñoz joins Yahoo Finance to discuss the brand’s market debut after the pricing of its initial public offering of 11 million shares at $21 each, valuing the company at $2.3 billion. Muñoz discusses the company’s ambition to provide stylish apparel options for plus-sized women, and why she thinks there’s more room to grow in the $85 billion market.

Video Transcript

BRIAN SOZZI: Somewhat of a rare IPO is taking place today, especially a power retailer. Plus sized women's clothing brand Torrid is debuting over on the New York Stock Exchange under the ticker symbol C-U-R-V, or CURV. There are a couple of interesting tidbits to this one here.

First, Torrid has long been part, had long been part of retailer Hot Topic. Hot Topic was acquired by Sycamore Partners for $600 million in 2013. Torrid then branched off from Hot Topic in, I believe, 2015. Torrid's valuation alone, based on its IPO pricing, is $2.31 billion. Talk about unlocking value there. Next, since going private, Torrid's store base has gone from 230 or so locations to 608. About 70% of the business is driven by online sales.

Let's dive further into the company now with the CEO, Liz Muñoz. Liz, good to see you down there on the New York Stock Exchange floor. Congrats on this deal.

Listen, Torrid is a brand that I have followed for some time. Why is the plus size women's clothing market, why is it not being served by other retailers?

LIZ MUNOZ: You know, I've asked myself that question. I'm a big girl. I've been a big girl my whole life. I don't know why. I think we are by far the most ignored and underserved customer in apparel history. And I don't know that people fully understand what needs to be done. Fit is incredibly important. And that skill doesn't really exist in a lot of places.

BRIAN SOZZI: You're right, fit is very important here. And your secret sauce, or I see it, the way I see it is your ability to leverage data. Take us through how you use data. And then secondarily, you're a merchant at heart. How do you design the clothes?

LIZ MUNOZ: So what's great about Torrid is because our customer's so wildly engaged, 91% of them participate in our loyalty program. So we have an immense amount of information about her. She engages with us on social media 92% more than she does with any competitor. So she's very invested in this brand and tells us what she loves and what she doesn't.

MYLES UDLAND: And Liz, over the last year, of course, every retailer, it seems, wants to have some kind of omnichannel part to their business. It's really at the core of what you guys do. Talk us through a little bit of the dynamics you see with the relationship between your physical locations, the online buying experience, and sort of how that fits together for you guys today.

LIZ MUNOZ: So what I will tell you is we're 70% e-commerce, we're 30% stores. We think we have the model that really everyone's going to try to get to, which is this amazing balance of stores welcoming customers, indoctrinating them into the brand, educating them on fit and what they love. And then that customer becomes an omnichannel customer and ends up shopping both channels.

And what's extraordinary about us is even though it's 70% e-com, our return rate is 9%, which, if you guys know, it's, the average is 30%. And that's just a testament to how great our stores help our customer find what they want and how great our product fits.

BRIAN SOZZI: Liz, let's just be real here. I don't see Victoria's Secret selling plus size women's lingerie. I don't even see Aerie, a division of American Eagle, selling these types of things. How big is the intimate apparel business is for-- how big is it for Torrid and where do you go from here?

LIZ MUNOZ: How big can it be?

BRIAN SOZZI: How big could it be for Torrid?

LIZ MUNOZ: I think the opportunity is endless. When you think about, we are talking about 70% of the American women in this country are in our size range. Just to give you a little-- 98% of the retail stores selling product to women only sell to the 30% that's straight size. So I think the opportunity is massive.

We also launched Torrid Curve, which is our intimates brand that has been incredibly successful. So we think we have a tremendous amount of runway to continue to service this customer. We are very close to her and excited about continuing to grow and find more women that are settling and wearing things they don't love.

BRIAN SOZZI: Liz, I love how-- I love this stat that you all put in the prospectus here. 93% of your employees are female. Talk to us a little bit about the culture inside Torrid.

LIZ MUNOZ: Yeah, so 93% of our employees are, in fact, do identify as female. And you know, we use them. So fit is so important. If I want to know what a size 24 looks like, we have what we call the line up. We always have women that we can reach out to that will try things on for us in the building. We do wear testing on everything that we launch. It is really an extraordinary resource to have that many women.

MYLES UDLAND: And, you know, Liz, you guys filed to go public a couple years back, pulled the filing, you know, stayed private for a few years there. What are you seeing in the market today that gives yourself and the leadership team confidence that this is the right time to bring this company with this story to tell into the public market?

LIZ MUNOZ: Yeah. I mean, to me, it's not about what's going on in the market, it's what's going on at Torrid. We did, a few years ago, and then we took a step back and said, are we ready? Do we have everything done that we need to be done? We've put disciplines in place that we really needed. I became CEO at the end of '18, built a team. And so it's really more about Torrid being ready than the market.

BRIAN SOZZI: All right. Well, we will leave it there. Torrid CEO Liz Muñoz, congratulations on the IPO today. Look forward to following your story moving forward.