Torrid (CURV) Q1 2025 Earnings Call Transcript

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ETCALL PARTICIPANTSChief Executive Officer — Lisa HarperChief Financial Officer — Paula DempseyChief Strategy and Planning Officer — Ashlee WheelerNeed a quote from one of our analysts. [ tected] RISKSThe decision to pause the footwear will result in a jected revenue loss of $40 million to $45 million this year, with management stating there will be a neutral EBITDA impact in 2025, as explicitly stated by management

Gross margin (GAAP) declined by 320 basis points to 38. 1% for Q1 FY2025 due to "planned motional initiatives"

Sales Transfer Rate: Post-closure customer and sales retention rate remains apximately 60% for closed stores, as stated by management

SUMMARYManagement confirmed first-quarter results met prior guidance

Harper stated, "sub-brands are attracting new and younger customers, reactivating lapsed customers, while also creating a halo effect for our mainline Torrid offerings. " indicating expanded reach and higher customer value

Dempsey emphasized that "Stores identified for closure are underperforming relative to our fleet, with an average of apximately $350,000 in annual sales, as discussed in the context of FY2025. " clarifying the rationale for foot optimization

Harper cited that "Our current exposure to China-sourced goods will be in the low single digits for the remainder of the year, down from the mid-teens. " underscoring the company's tariff mitigation gress

Management committed to "refreshing 135 stores in the third quarter" as low capital investments int to align in-store experience with digital strengths while maintaining an omnichannel presence

INDUSTRY GLOSSARYSub-brand: A distinct duct line within Torrid, designed and marketed for specific customer segments and lifestyles, often carrying different price points and fashion sensibilities than the core brand

Torrid Cash: A motional event and rewards gram specific to Torrid, offering customers incentives redeemable for future purchases to drive both sales and retention

Full Conference Call TranscriptLisa Harper, Chief Executive Officer of Torrid, Paula Dempsey, Chief Financial Officer, and Ashlee Wheeler, our Chief Strategy and Planning Officer, who is also present and will be participating in the Q&A session

Before we get started, I would to remind you of the company's safe harbor language, which I am sure you are 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 and terms of similar meaning

These statements are subject to risks and uncertainties that could cause actual results to differ materially

For further discussion of risks related to our, see our filings with the SEC

This call will contain non-GAAP financial measures, such as adjusted EBITDA

Reconciliations to these non-GAAP measures to the most comparable GAAP measures are included in the earnings release furnished to the SEC and available on our website

With that, I will turn the call over to Lisa

Lisa Harper: Thank you, Chinwe

Hello, everyone, and thanks for joining us today

I am excited to you on the gress we are making across our strategic initiatives, namely enhancing our duct asment, driving customer growth, and executing our store optimization plan

I am also pleased to report that we dered on our first quarter sales and EBITDA guidance

Now an on our strategic initiatives

Performance of our sub-brands continues to reinforce our belief that the strategy is working

Festi, Belle Isle, Nightfall, and Retro Chic have all had multiple deries at this point, and they are overachieving our expectations from two to six times what we had originally planned

These sub-brands are designed and marketed for distinctive lifestyles, targeting a broader range of plus-size consumers

They are revolutionizing our collections to embrace diverse fashion sensibilities and der truly differentiated options

This calculated expansion has attracted new clientele and has deepened relationships with our current customers, driving increased spending across our portfolio

Importantly, our sub-brands are attracting new and younger customers, reactivating lapsed customers, while also creating a halo effect for our mainline Torrid offerings

With the margin structure higher than our core Torrid duct, we are doubling down on our efforts to further expand our strategy with planned launches of new sub-brands throughout the year, while also increasing the dery frequency on existing sub-brands from the current six to eight times a year to 12 times annually

We will continue to fund the growth of our sub-brands through reductions in less ductive Torrid SKUs, enabling us to der compelling high-margin ducts

Now shifting to our channel optimization initiative

Our customers continue to send a strong message that they prefer an online experience, which better supports our internal marketplace strategy that showcases the entire breadth of our asment

Our website experience is powerful, and the perceived value to the customer is high across this channel

She loves that she can see and explore everything we offer, view outfitting options, and see herself

This is supported by our consistent sizing expertise and overall customer satisfaction, which continues to drive our industry-leading low return rate

This brings me to an on the optimization of our retail foot

With our customers increasingly preferring to shop our online experience, we are accelerating our fleet optimization efforts with a plan to now close apximately 60 stores in the first half of this year

We are planning to allocate a portion of the cost savings from the store closures to customer acquisition marketing, as well as a more expansive effort to retain and transfer existing customers to the web or neighboring stores

Our physical stores will continue to represent an important touchpoint to complement our omnichannel go-to-market strategy

They serve as community hubs and immersive brand-building experiences, introducing customers to our brand and sub-brands, offering the dressing room experience, and acting as service centers for purchases made online or in stores

Most importantly, our passionate sales associates bring the brand to life, dering personalized service that deepens customer connection and drives long-term loyalty

As we mentioned on the Q4 call, we see opportunities to enhance the expression of our brand in stores to better align with the online experience

These are low capital investments with an expected fast return

In summary, the optimization of our retail store fleet represents a strategic shift to better align our distribution with customer demand, which is expected to dramatically enhance our customer experience and der healthier sales growth while imving our overall fitability and cash flow

Let me start with the punchline

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

Imving our sourcing has been a key area of focus for several years, and I am ud of the robust sourcing infrastructure we have in place today

Our team has worked to reduce our exposure to China by diversifying into other countries and cultivating strong relationships with a broad range of vendor partners who, in many cases, have developed manufacturing capabilities in multiple countries

In addition to shifting duction out of China, our tariff mitigation playbook also includes sharing the increased cost with our vendor partners, exploring cost-saving fabric opportunities, such as using Egyptian denim instead of Turkish denim, and strategically and selectively making low single-digit price adjustments where we see a value position opportunity

We will offset primarily through discretionary expense reductions, store optimization, and prioritization of jects across the

On a go-forward basis, we are actively exploring opportunities to reenter the shoe category in a way that adds fitability and aligns with our broader sourcing strategy

Turning to marketing, our strategy this quarter focused on creating momentum through bold storytelling, elevated community engagement, and agile execution

We leaned heavily into messaging around newness, supported by more frequent site refreshes

This not only resonated with customers but helped set the stage for strong performance during our Torrid Cash and Afterparty events

While consumer sensitivity to motions remains elevated in the current macro environment, our strategic messaging helped capture demand and drove conversion during key moments

One of the most exciting highlights of the quarter was our Coachella activation under the Festi by Torrid sub-brand

Beyond the numbers, it demonstrated the power of showing up in cultural moments where plus-size women are often underrepresented

The response from our community was overwhelmingly positive, reaffirming our strategy to lead with authenticity

We saw meaningful success in evolving our apach across channels

In digital, we prioritized spending toward customer acquisition, contributing to solid performance in both new and reactivated customer segments