Torrid Holdings Inc. Q1 FY2025 earnings call

• Sub-brand performance: Sub-brands like Festi, Belle Isle, etc., are overachieving, attracting new and younger customers, reactivating lapsed customers, and creating a halo effect for mainline Torrid. Plan to launch new sub-brands and increase delivery frequency of existing ones.
• Channel optimization: Customers prefer online experience; web demand expected to reach low to mid-70% penetration in 2026, with business model evolving to ~75% online and 25% in-store.
• Store optimization: Accelerating store closures, with plan to close ~60 stores in first half and ~180 in total for the year. Net sales impact from closures expected to be negligible. Physical stores remain important touchpoints but aligning with online experience.
• Tariffs: Exposure to China-sourced goods in low single digits now, down from mid-teens. Paused shoe offerings 100% sourced from China, resulting in ~$40 to $45 million revenue loss in 2025.
• Marketing: Focused on bold storytelling, community engagement, agile execution. Digital marketing prioritized for customer acquisition, SMS/push campaigns, email testing, etc. Mobile app reached new revenue high.

Net sales for the first quarter were $266 million. Comparable store sales declined 3.5%. Online sales demand continues to grow and is approaching 70% of total sales. Sub-brands like Festi, Belle Isle, Nightfall, and Retro Chic are overachieving expectations, with their margin structure higher than core Torrid product. Revenue contribution of sub-brands is around 10% this year, with a goal to reach up to 30% of the portfolio in 2026.

• Revised full-year net sales outlook: $1.03 billion to $1.055 billion due to pausing footwear business with ~$40 to $45 million revenue impact. Adjusted EBITDA range: $95 million to $105 million. Q2 net sales guidance: $250 million to $265 million, adjusted EBITDA: $18 million to $24 million, with ~$5 million tariff impact. Fiscal 2026 expected to see 150 to 250 basis points of EBITDA margin expansion from store optimization and reinvestments.

• Tariff uncertainties: Exposure to China-sourced goods could impact, though efforts made to diversify sourcing. - Consumer sensitivity to promotions: Macro environment affects conversion rates. - Store closure execution: Ensuring minimal net sales impact while redirecting customers to online or nearby stores.

Q: Talk about the cadence of newness for the second half, especially for sub-brand launches.

A: Another new sub-brand Lovesick launching in August, StudioLuxe in September. Existing sub-brands Belle Isle, Festi, Nightfall, Retro Chic to be delivered monthly in fourth quarter.

Q: Trends in new customers following sub-brand purchase, shopping behavior across assortment.

A: New customers are younger, existing customers have increased lifetime value. 90% of sub-brand purchasers add core Torrid products to basket. Demand predominates online over stores.

Q: 2Q sales growth deceleration, impact of pausing shoe business.

A: Pausing shoe business sourced from China, lower margin, impacts ~$40 to $45 million in sales for the year, reflected in 2Q guidance.

Q: Promotional strategy and online vs retail promotional channels.

A: Continuing promotional events like Torrid Cash, responding to consumer value orientation. Online and retail promotional channels coexist, with events planned as historically.

Q: Acceleration in closures, reasons and 75%/25% channel split.

A: Customer preference for online, higher online acquisition of customers, reallocating resources to digital investment. Thinning out existing markets, retaining ~60% of customers and sales post-closure, reallocating fixed expenses to profitability and digital investment.