Image source: The Motley Fool. DATEThursday, June 5, 2025 at 4:30 p.
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". Comparable sales fell by 3.
5% in Q1 FY2025, with management attributing the decline to pressure in physical retail and persistent motional sensitivity among consumers.
TAKEAWAYSNet Sales: Net sales were $266 million for the first quarter, compared to $279. 8 million in the prior year. EBITDA: Adjusted EBITDA was $27. 1 million, representing a 10.
2% margin for the first quarter compared to $38. 2 million and 13. 7% in the prior year. Gross fit: Gross fit was $101. 4 million, down from $115.
4 million in the prior year; gross margin declined to 38. 1% for Q1 FY2025. SG&A Expense: SG&A expense was $70 million, an imvement of $6.
5 million year-over-year for the first quarter, with SG&A leveraging 100 basis points to 26. 3% of sales for Q1 FY2025. Marketing Investment: Marketing investment was $15. 4 million, up from $12.
8 million in the prior year, primarily supporting sub-brand launches and customer acquisition.
Digital Channel Penetration: Online demand is apaching 70% of total sales as of Q1 FY2025, with expectations for digital sales to reach the low to mid-70% range of total sales in 2026.
Store Closures: 35 stores were closed in FY2024 with a targeted 180 closures in FY2025 (60 by mid-year, 120 more in the back half), as part of accelerated fleet optimization.
Sales Transfer Rate: Post-closure customer and sales retention rate remains apximately 60% for closed stores, as stated by management. Inventory: Inventory was $149. 6 million, a 3.
3% increase versus the prior year, driven by in-transit timing; year-end comparable store inventory is expected to decline by mid to high single-digit percentages in FY2025.
Liquidity: Cash and cash equivalents at quarter end totaled $23. 7 million for Q1 FY2025, with total liquidity of $141 million, including the credit facility, for Q1 FY2025; total debt was $284.
5 million after a $16. 2 million reduction from the prior year. Full-Year 2025 Guidance: Net sales are forecast in the range of $1. 03 billion to $1.
055 billion for FY2025, with adjusted EBITDA between $95 million and $105 million for FY2025 (non-GAAP), both reflecting the footwear pause and tariff impacts.
EBITDA Margin Outlook: Fleet optimization and marketing investments are expected to yield 150 to 250 basis points of EBITDA margin expansion in FY2026.
Tariff Impact: Net exposure to tariffs is expected to be $20 million for the remainder of the year, with mitigation through expense reductions, store optimization, and vendor negotiations.
Sub-brand Penetration: Existing sub-brands are expected to increase their penetration from 10% in FY2025 to up to 30% of the portfolio in FY2026, with increased dery cadence and planned new launches throughout the year.
Q2 2025 Guidance: Net sales (GAAP) are expected to be between $250 million and $265 million for Q2 FY2025; adjusted EBITDA guidance is $18 million to $24 million for Q2 FY2025, incorporating a jected $5 million tariff impact for Q2 FY2025.
SUMMARYManagement confirmed first-quarter results met prior guidance.
The company will accelerate its planned store closures in FY2025, targeting apximately 180 closures, with a retention strategy leveraging high loyalty gram enrollment and digital migration.
While gross margin contraction was driven by increased motional activity to support customer conversion in Q1 FY2025.
Management explicitly forecast a digital penetration rate in the low to mid-70% range by 2026, alongside a higher sub-brand mix and reiterated plans to use cost savings from closures to fund customer acquisition initiatives aligned with a digitally led omnichannel model.
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.
All forward-looking statements are based on current expectations and assumptions as of today, 06/05/2025.
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.
Growing their penetration from apximately 10% this year to up to 30% of our portfolio in 2026.
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.
Our online sales demand continues to grow and is apaching 70% of total sales. We expect web demand to reach a low to mid-70% penetration in 2026.
As part of our digital transformation long-term, we see the model evolving to an apximate demand mix of 75% online and 25% in-store. This brings me to an on the optimization of our retail foot.
As we mentioned on our Q4 call, we closed 35 stores in 2024, and we were targeting 40 to 50 closures in 2025, with the potential for additional closures as apximately 60% of our store fleet is up for lease renewals this year.
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 believe we have an opportunity to close an additional 120 stores in the back half of this year, bringing the total number of targeted closures for the year to apximately 180.
Paula will vide more detail on the net impact of these closures, but importantly, given many of these stores have lower ductivity, and we continue to experience sales and customer retention rates from closed stores of apximately 60%, the jected impact on net sales is expected to be negligible.
With the annualization of these closures, we would expect to see from 150 to 250 basis points of EBITDA margin net of increased marketing investment.
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.
As a reminder, 95% of our customers are in our loyalty gram, so we have a large amount of data on their shopping patterns.
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.
And we remain committed to refreshing 135 stores in the third quarter. 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.
Now to tariffs. 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.
As it stands today, after these actions, we expect the net impact of tariffs to be apximately $20 million for the remainder of the year, calculated based on current tariff rates.
We will offset primarily through discretionary expense reductions, store optimization, and prioritization of jects across the.
We have also made the strategic decision to temporarily pause and reevaluate shoe offerings, which are 100% sourced out of China.
This strategy shift will result in a neutral EBITDA impact in 2025 and an expected revenue loss of apximately $40 to $45 million.
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.
Looking ahead, our goal is to keep any individual country, Vietnam included, to under 20% of apparel sourcing penetration.
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.
The campaign sparked remarkable engagement, generating millions of impressions and expanding our social ing significantly in just one week.
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. SMS and push.