Torrid Holdings Inc. Q2 FY2025 earnings call

• Sub-brands: 5 new sub-brands are resonating, expected to be 25%-30% of assortment next year, driving attachment rates and customer reactivation. • Store optimization: On track to close up to 180 stores in fiscal 2025, reallocating resources, with retention trends outperforming fiscal 2024. • Marketing: Increased marketing spend by $5 million in the back half of 2025, launching digital model search event on September 9, and influencer-based campaigns. • Margin expansion: Expect 150-250 basis points of adjusted EBITDA margin expansion in 2026, with free cash flow to reduce debt and repurchase shares.

Net sales for the second quarter were $262.8 million. Comp sales declined 6.9%. Gross profit was $93.5 million, gross margin 35.6%. EBITDA was $21.5 million, adjusted EBITDA margin 8.2%. Strength in bottoms (denim and non-denim), dresses, and swim; tops were soft. Sub-brands are resonating, expected to be 25%-30% of assortment next year, contributing higher margins due to limited promotions and higher full price sell-through.

• Full-year net sales expected $1.015 billion to $1.030 billion. • Third quarter net sales expected $235 million to $245 million. • Full-year adjusted EBITDA expected $80 million to $90 million. • Third quarter adjusted EBITDA expected $16 million to $21 million. • Anticipate up to $10 million in incremental margin headwinds from tariff changes, with 80% of $15 million total tariff impact mitigated.

• Consumer sensitivity and value orientation in the current environment. • Macro-economic pressures affecting discretionary spending on clothing. • Tariff impacts, with up to $10 million in incremental headwinds to margins, and total tariff impact expected $15 million.

Q: How would you characterize the health of your customer and the appetite for newness infused into the business?

A: Existing customers' health is strong; sub-brands are resonating, with sub-brands expected to be 10% of business this year and 25%-30% next year. We're bringing new and younger customers, and increased marketing spend aligns with store closures.

Q: What do you expect the sub-brand mix to go to over time?

A: Sub-brands could be up to 25%-30% of the business next year, with potential for pop-ups, stand-alones, or store conversions for expansion.

Q: How did the business perform exiting Q2 through August?

A: Softer performance during peak holiday periods, but strong June semiannual sale; consumer remains value-oriented, with promotional activity to drive conversion.

Q: Any customer pushback on price increases?

A: Tariff-related price increases are de minimis; we have an opportunity with opening price point product, aiming for 25% of apparel sales to be opening price point next year.