Torrid Aims for 180 Store Closures in 2025 as Digital Sales Surge to 70%

Earnings Call Insights: Torrid Holdings Inc. (CURV) Q1 2025

Management View

• Lisa M. Harper, CEO, reported that sub-brands Festi, Belle Isle, Nightfall, and Retro Chic "are overachieving our expectations from 2x to 6x what we had originally planned." She stated these sub-brands are designed to attract new and younger customers, reactivating lapsed customers and creating a halo effect for the mainline Torrid offerings. Harper explained, "with a margin structure higher than our core Torrid product, we are doubling down on our efforts to further expand our strategy with planned launches of new sub-brands throughout the year" and plan to increase delivery frequency from 6-8 to 12 times annually, aiming for sub-brands to comprise up to 30% of the portfolio in 2026.
• Harper announced an accelerated store optimization plan, stating, "we are accelerating our fleet optimization efforts with a plan to now close approximately 60 stores in the first half of this year" and "an opportunity to close up to an additional 120 stores in the back half of this year, bringing the total number of targeted closures for the year to approximately 180." She emphasized, "the projected impact to net sales is expected to be negligible" due to high retention rates from closed stores and a shift toward digital sales.
• Harper shared that "our online sales demand continues to grow and is approaching 70% of total sales. We expect web demand to reach a low-to-mid 70% penetration in 2026." The digital transformation plan aims for a "demand mix of 75% online and 25% in store."
• The company has temporarily paused its shoe offerings, which are fully sourced from China, resulting in an expected revenue loss of approximately $40 million to $45 million but a neutral EBITDA impact for 2025.
• Harper highlighted tariff mitigation, stating, "our current exposure to China-sourced goods will be in the low-single digits for the balance of the year, down from the mid-teens." The net impact of tariffs is expected to be approximately $20 million for the remainder of the year, offset through expense reductions and store optimization.
• Paula S. Dempsey, CFO, remarked, "we delivered results in line with expectations for both net sales and adjusted EBITDA in Q1. After a slow start to the quarter in February, we saw improving sales momentum as the quarter progressed. Importantly, we began to realize tangible benefits from our store optimization initiative launched last year, which supported a reduction in SG&A and reinforced our focus on profitability and disciplined cost control."

Outlook

• The company revised its revenue outlook due to the footwear pause, now expecting full-year net sales in the range of $1.030 billion to $1.055 billion. Adjusted EBITDA is expected to range from $95 million to $105 million for the full year, which reflects net tariff impacts and mitigation efforts. Dempsey stated, "We expect to mitigate approximately $20 million of tariff impact through $20 million in expense reductions for the year."
• For Q2, net sales are expected between $250 million to $265 million and adjusted EBITDA between $18 million and $24 million.
• Looking ahead to 2026, management projects a benefit of 150 to 250 basis points of EBITDA margin expansion from store closures and channel realignment.

Financial Results

• Net sales for Q1 were $266 million, as reported by Harper and confirmed by Dempsey, compared to $279.8 million in the prior year.
• Comparable store sales declined 3.5%, reflecting ongoing pressure in physical retail, while digital sales continued to grow.
• Gross profit was $101.4 million, with gross margin at 38.1%. SG&A expenses were $70 million, down from $76.5 million last year, and represented 26.3% of sales.
• Net income was $5.9 million, or $0.06 per share, compared to $12.2 million, or $0.12 per share, in the prior year. Adjusted EBITDA was $27.1 million, representing a 10.2% margin.
• Cash and cash equivalents ended at $23.7 million, and total liquidity including borrowing capacity was $141 million. Total debt was reduced to $284.5 million.

Q&A

• Mary, Bank of America, asked about the cadence of newness for the second half. Harper responded there will be a new sub-brand, Lovesick, launching in August and Studio Luxe in September, with monthly deliveries of existing brands in Q4.
• Savannah Taylor Sommer, Goldman Sachs, inquired about new customer behavior from sub-brands. Ashlee Wheeler responded, "we are seeing really positive movement in the customer file related to these sub-brands, acquiring and reactivating new and younger customers than our average age in our existing file," and about 90% of sub-brand purchasers are adding core Torrid products to their baskets. Harper added, "it is performing substantially higher online than in stores."
• Katherine Read Delahunt, Morgan Stanley, questioned the Q2 sales guidance and impact of paused footwear. Dempsey explained, "we are pausing right now our shoe business until further notice... that impacts about $45 million in sales for the year kind of spread evenly through the balance of the year."
• Dylan Douglas Carden, William Blair, asked about promotional strategy and store closure accelerations. Wheeler confirmed, "we are continuing to be, I would say, as promotional as we typically are," and Harper detailed the rationale for the 75:25 online/store mix, emphasizing customer preference and digital efficacy. On negligible sales impact from closures, Harper said, "we have a high confidence level in our ability to offset the small amount that doesn't naturally transfer with new customer acquisition through the digital channel."

Sentiment Analysis

• Analysts' tone was neutral to slightly positive, focusing on operational cadence, digital trends, and sub-brand performance, with some concern about the footwear pause and store closures.
• Management maintained a confident and disciplined tone in both prepared remarks and Q&A, frequently using phrases like "we are confident" and elaborating on mitigation strategies. The tone was more assertive and optimistic compared to the previous quarter, especially regarding digital shift and sub-brand momentum.
• Compared to Q4, analysts' questions were less skeptical and more focused on tactical execution, while management showed increased confidence in strategic initiatives and digital transformation.

Quarter-over-Quarter Comparison

• The current quarter saw an aggressive acceleration in store closures, with the target rising from 40-50 in the previous quarter to approximately 180 for the year.
• Management’s tone has shifted towards greater confidence in digital and sub-brand strategies, with more explicit guidance on digital penetration and profitability gains from optimization.
• Analysts’ focus shifted from macro uncertainties and inventory management in Q4 to digital trends, customer acquisition, and execution of sub-brand launches in Q1.
• Key metrics such as net sales, EBITDA, and margin rates were discussed with a stronger emphasis on cost control and digital migration.
• There was a more detailed articulation of tariff mitigation and the direct impact of pausing the footwear business.

Risks and Concerns

• Management cited ongoing consumer price sensitivity and macro volatility impacting conversion rates.
• There is an expected $20 million net tariff impact for the remainder of the year, with mitigation planned through expense reductions and project reprioritization.
• The shoe category pause, due to 100% China sourcing, will result in a $40 million to $45 million revenue loss and remains under evaluation for future profitability alignment.
• Management is focused on offsetting sales losses from store closures through digital investment and customer retention, noting a 60% customer retention rate from closed stores.

Final Takeaway

Torrid Holdings Inc. executed on its strategy of accelerated store fleet optimization, digital expansion, and sub-brand growth in Q1 2025. The company plans to close up to 180 stores this year and expects digital sales to reach a low-to-mid 70% penetration in 2026. Sub-brand momentum continues to outperform expectations, attracting younger and new customers with higher margins. The pause in the shoe category will impact revenue this year but is accompanied by actions to maintain profitability. Management remains confident in offsetting tariff headwinds and sales migration through disciplined expense management, targeted marketing, and a robust digital-first approach, establishing a strong foundation for sustainable, profitable growth.

Read the full Earnings Call Transcript

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