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TH

Torrid Holdings Inc. (CURV)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 FY2024 net sales were $263.8M (down 4.2% YoY) and Adjusted EBITDA was $19.6M (7.4% margin), with gross margin expanding 285 bps to 36.1% on lower product costs and higher regular-price mix .
  • Results fell below the company’s prior Q3 guidance (sales $280–$285M; Adj. EBITDA $23–$26M) and the company cut both Q4 and FY2024 outlooks; hurricanes and pre-election hesitancy also weighed on demand .
  • Management is accelerating a product-refresh strategy (new sub-brands Festi, Nightfall, Retro Chic) and a store optimization program (30–40 closures in FY2024), targeting 80–100 bps EBITDA margin uplift in FY2025 from the fleet actions .
  • Wall Street consensus from S&P Global was unavailable today; however, Q3 was a clear miss versus company guidance and FY2024 guidance was lowered across sales and EBITDA ranges (see Guidance Changes) .

What Went Well and What Went Wrong

What Went Well

  • Gross margin expanded 285 bps YoY to 36.1%, driven by reduced product costs and higher full-price mix; regular-price comp was +1% despite softer topline .
  • Inventory discipline: inventory ended the quarter down 19% YoY; clean inventory and liquidity ($44M cash; ~$152M total liquidity) position the company for chasing winners .
  • Early validation on refreshed categories (denim, novelty sweaters), and holiday kickoff: Black Friday/Cyber demand flat YoY with improved product margin; “more newness in the next 6 months than the past 6 years” .

What Went Wrong

  • Q3 missed company guidance (sales $263.8M vs $280–$285M guided; Adj. EBITDA $19.6M vs $23–$26M guided); Q4 and FY2024 outlooks were reduced .
  • Macro and weather headwinds: traffic deteriorated sharply in October; hurricanes during Torrid Cash reduced full-price comp by ~100 bps; heavier promotions were needed to ensure clean inventory .
  • Assortment misstep: fall core product lacked sufficient newness/novelty, pressuring demand and comp (-6.5% total comp; clearance comp down 47%) .

Financial Results

Quarterly P&L and Operating Metrics (oldest → newest)

MetricQ1 FY2024 (ended May 4, 2024)Q2 FY2024 (ended Aug 3, 2024)Q3 FY2024 (ended Nov 2, 2024)
Net Sales ($MM)$279.8 $284.6 $263.8
Gross Margin %41.3% 38.7% 36.1%
Income from Operations ($MM)$26.1 $20.4 $7.2
Net Income ($MM)$12.2 $8.3 $(1.2)
Diluted EPS ($)$0.12 $0.08 $(0.01)
Adjusted EBITDA ($MM)$38.2 $34.6 $19.6
Adjusted EBITDA Margin %13.7% 12.2% 7.4%
SG&A ($MM)$76.5 $76.8 $74.9
Marketing ($MM)$12.8 $13.0 $13.1
Comparable Sales %(9.0%) (0.8%) (6.5%)
Regular-Price Comp %—+6.4% +1%
Clearance Comp %—~ (50%) (47%)
Store Count (end)658 657 655
Inventory ($MM)$144.8 $128.4 $138.3
Cash & Equivalents ($MM)$20.5 $53.9 $44.0

Q3 Actual vs Prior Company Guidance (issued with Q2)

MetricPrior Q3 Guidance (as of Sep 4, 2024)Q3 Actual
Net Sales ($MM)$280–$285 $263.8
Adjusted EBITDA ($MM)$23–$26 $19.6

KPIs and Operating Notes

  • Total comp (Q3): (6.5%); Regular-price comp +1%; Clearance comp (47%) .
  • Black Friday/Cyber demand: flat YoY with better product margin .
  • Inventory: down 19% YoY; markdown inventory down 34% YoY .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Sales ($MM)Q4 FY2024$280–$285 $255–$270 Lowered
Adjusted EBITDA ($MM)Q4 FY2024$23–$26 $9–$15 Lowered
Net Sales ($B)FY2024$1.135–$1.145 $1.083–$1.098 Lowered
Adjusted EBITDA ($MM)FY2024$110–$116 $101–$107 Lowered
Capital Expenditures ($MM)FY2024$20–$25 $20–$25 Maintained
Store Openings (count)FY202412–16 12–16 Maintained
Store Closures (count)FY202410–15 30–40 Increased closures

Management reiterated a fleet optimization goal to move toward a 50/50 mix of outdoor centers/malls; closures are expected to drive 80–100 bps EBITDA margin expansion in FY2025 .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
Product newness/assortmentQ2: Regular-price comp +6.4%; GM +323 bps on higher regular-price mix .Fall core lacked newness; launching sub-brands (Festi 12/27 in ~250 stores; Nightfall; Retro Chic). “More newness in next 6 months than in past 6 years.” .Intensifying product refresh
Clearance moderationQ2: Markdown comps down ~50% (strategy shift) .Clearance comp (47%); headwind expected to ease to (25–30%) in Q4 and flatten in Q1’25 .Improving mix trajectory
Gross marginQ1: 41.3% (+360 bps) ; Q2: 38.7% (+323 bps) .36.1% (+285 bps) YoY; mix and COGS help despite softer sales .Still up YoY; sequentially lower
Store optimizationQ2: planned closures 10–15; openings 12–16 .Plan 30–40 closures FY2024; targeting 80–100 bps FY2025 EBITDA lift .Accelerated closures
Macro/Weather—Hurricanes during Torrid Cash and pre-election hesitancy weighed; ~100 bps hit to full-price comp .Transitory headwinds
Marketing/InfluencersQ2 model search drove +8% reactivations, +7% new customers .Larger influencer push; modest increase in marketing % of sales; front-load spend for acquisition .Scaling acquisition
Supply chain diversification—Decreasing China-sourced product to mid-teens; retooling sourcing with new concepts .De-risking

Management Commentary

  • “We have more newness coming in the next 6 months than we have had in the past 6 years.”
  • “Hurricanes impacted our full price comps by 100 basis points for the quarter... customers behaved very differently in October... improvement post election.”
  • “We remain on track to close a total of 30 to 40 stores by the end of fiscal 2024... estimate 80 to 100 basis points of EBITDA margin expansion in fiscal 2025.”
  • “Regular price sales comp increased 1% year-over-year while total comp was down 6.5%, attributable to a 47% decline in clearance sales... yielded over 285 bps improvement in gross margin.”

Q&A Highlights

  • 2025 EBITDA margin expansion even if comps are slower to recover: Management sees room to expand margins via fleet optimization and operational efficiencies, independent of comp growth; still expects positive comps in 2025 with newness .
  • Macro vs micro drivers: October traffic shifted from positive to sharply negative; normal promo elasticity broke down; post-election recovery observed; assortment missteps (core lacked innovation) acknowledged and being addressed .
  • Assortment and pricing: Sub-brands will span mixed price points; blend expected to be similar overall while broadening reach; focus on elevating Intimates with dedicated leadership .
  • Marketing strategy: Heavier use of influencers; slight increase in marketing as % of sales; front-loaded spend to accelerate acquisition/activation alongside new product drops .
  • Clearance normalization: Clearance headwind expected to lessen in Q4 and flatten by Q1’25 as inventory normalization laps; management confident the strategic pullback leads to a healthier model .

Estimates Context

  • Wall Street consensus estimates (S&P Global) were not retrievable today due to access limits; as a result, consensus comparison is unavailable. Instead, we benchmarked results against company-issued guidance. Q3 actuals missed prior guidance for both net sales ($263.8M vs $280–$285M) and Adjusted EBITDA ($19.6M vs $23–$26M), and the company lowered Q4 and FY2024 outlooks (see Guidance Changes) .

Key Takeaways for Investors

  • Q3 miss and broad guidance cuts reset near-term expectations; the narrative into year-end is prudent guidance and execution on holiday while newness scales in late Q4 and 1H’25 .
  • Mix/COGS tailwind persists: gross margin up 285 bps YoY on lower costs and less clearance; as clearance normalizes, the margin framework remains supportive despite softer revenue .
  • 2025 setup hinges on product newness cadence (Festi/Nightfall/Retro Chic) and marketing activation; Black Friday/Cyber validated consumer response to fresh product at better margins .
  • Fleet optimization is a tangible 2025 EBITDA lever (80–100 bps) with limited revenue impact expected given e-commerce and proximate-store transfer; monitor closure execution and DTC channel momentum .
  • Inventory and liquidity are in good shape to “chase” winners (inventory down 19% YoY; $44M cash; ~$152M liquidity), reducing execution risk on scaling sub-brands .
  • Watch macro sensitivity: management cited hurricanes and election hesitancy; any traffic normalization plus newness should aid comps, but volatility remains a risk .
  • Near-term trading frame: the stock narrative is likely driven by evidence of improved traffic/comp on newness drops, clarity on clearance normalization into Q1’25, and confidence in 2025 EBITDA margin expansion from fleet actions .