Torrid Holdings Inc. Q4 FY2025 earnings call

• Channel optimization: Completed 85% of 180 structurally unproductive store closures by Q4 2025 (151 stores), with 11 more closed in Q1 2026, on track to finalize full plan by first half of 2026. Store closures' retention metrics meet or exceed models, with customers shifting to nearby stores and online, improving four-wall profitability. • Product platform: Entered 2026 with five sub-brands live, 80% of assortment planning and buying decisions data-informed. Sub-brands drove ~$70M in sales in 2025, projected 60% growth in 2026. Intimate apparel business showed momentum, with Curve relaunched and new bras to launch in 2026. Refocused product assortment on core franchises, fabrications, and silhouettes, reintroducing essential fabrications like SuperSoft and launching knit dressing capsule collection. Restructured footwear sourcing strategy and assortment mix for stronger attachment rates and improved profitability. • Pricing platform: Opening price point strategy exceeding expectations, representing ~30% of total assortment and nearly 40% in stores, balancing customer demand for accessible price points with margin discipline and product quality, driving conversion and UPT. • Customer file growth focus: 2026 priority is accelerating customer file growth through retention, reactivation, and acquisition. Strategies include doubling down on lapsed customer reactivation, more informed customer segmentation and personalization across marketing channels, strengthening marketing and analytic infrastructure, and evolving loyalty program.

For 2025, net sales reached $1,000,000,000 and adjusted EBITDA was $63,600,000. Q4 net sales were $236,200,000 and adjusted EBITDA was $5,100,000. Sub-brands generated over $70,000,000 in sales in 2025 and are projected to grow 60% in 2026 to ~$110,000,000, accounting for ~7% of total net sales in 2025 and expected to be 12% in 2026. Dresses showed growth for four consecutive quarters. Knit tops turned around with positive comps in the latter half of Q4. Jeans and activewear gained momentum. Footwear was reintroduced with success, though had negative comp impacts in prior periods. OPP now represents ~30% of total assortment and nearly 40% in stores, driving conversion and UPT in both channels.

• Full-year 2026: Expect net sales of $940,000,000 to $960,000,000 and adjusted EBITDA of $65,000,000 to $75,000,000, representing margin expansion of up to 140 basis points vs fiscal 2025. Capital expenditures expected in range of $8,000,000 to $10,000,000. • First quarter 2026: Expect sales of $236,000,000 to $244,000,000 and adjusted EBITDA of $14,000,000 to $18,000,000. EBITDA expansion reflects optimized cost structure and operating savings flowing through P&L. Offset by lower sales base reducing gross margin dollars and resetting incentive compensation program as headwinds.

Q: Was hoping to hear a little bit more about the learnings from the first year of sub-brands at 12% of sales next year. I think at one point, you had talked about it being 25% to 30% of the assortment. Is that still the right number?

A: We are still very happy with the progress in that business. We have made a decision to be more conservative about the growth cycle of that business. Some of the brands are incredibly strong. We think that it will expand a little bit more in the front half than the back half, really because we will be lapping in the back half a full presentation of all brands, and we launched them sequentially in the first half of last year. I think I had said earlier in the mid-twenties as a mix. I think we will be more in the mid-teens as we play. We are still very happy with how they are performing, and we will be testing some additional store-in-store opportunities as well as potential pop-ups later this year for sub-brands.

Q: And maybe just on the retention and lapsed customer reactivation, what have you learned about the reasons why some of these customers have not stayed with the brand? And maybe just elaborate more on the communications that you are going forth with now to reactivate those lapsed customers.

A: We have heard time and time again from lapsed customers that one of the primary reasons for spending less is economic pressure and price, which we have addressed through opening price point. We are seeing incredible response to that. We are seeing it as a vehicle to reactivate customers through a more approachable value pricing as well as acquire new customers that way. We are seeing it drive frequency among existing customers as well. Beyond that, we recognize with the 7,000,000 customers in our lapsed file who are marketable through our owned channels, we have enormous opportunity through more advanced targeted segmentation and personalization of messaging, using product affinity as a starting point as well as other demographic and price preference signals among that population to get them back into the brand.

Q: Can you talk a little bit about the cadence that you saw of sales during the holiday season, quarter-to-date what it looks like, any thoughts on how the shaping of this year is going with tariff expenses, what you have built into the model on margins with the puts and takes, and lastly, the return of footwear—how you expect that to come back, impact on margins? And are there other categories, Lisa, that you are looking to that could be sales drivers going forward?

A: I am going to do this backwards, and I am going to take the category conversation, and then I will talk about tariffs and categories, and then I will let Ashlee go through the rhythm of the business. We do have, obviously, tariff pressure in the first quarter, as everyone does, and we think we have managed this well, even with other types of supply chain challenges. From a category basis, the shoes are—just to remind you, when the tariffs came, we were running a pretty much, I would say, even EBITDA business in shoes from that specific shoe business, but we had a very high level of attachment to it. So we were keen on reengineering it to make sense both from a margin perspective as well as the customer acquisition modality and attachment to other types of products. We tested the new vendor structure and the new look and feel and quality of the product in November, and it was a resounding success. We are very happy with the results. We have some inventory coming in in the first half of the year, but we still have substantive headwinds, I would say, in the first quarter and second quarter related to footwear. We will be back in stock in the June–July time period, and we expect to have a benefit in that business in the back half. The way that we have tested it and the way that we are rolling it out allows us to expand margin in footwear as well as recapture the associated sales from customers who come to the brand through footwear. Other categories that we see expanding, outside of the OPP—which actually touches many of the categories of the business—I think denim, non-denim, tops, dresses, and sweaters in the back half. The other categories would be active. We have a fleece program rolling out that we think will be very advantageous, and then the expansion of OPP in some of these broader categories as we move forward. Ashlee will go through the business rhythm.

Q: Good afternoon, and thank you for taking our question. Lisa, I was hoping we could dive a little bit deeper into your marketing plans for the year, specifically around pricing, promo, and loyalty. What is changing in the loyalty program as you look to reactivate lapsed customers and increase dollars per spend on active customers today? And how does that tie into your plans for Torrid Cash and marketing?

A: Great. We have talked a lot about price, beyond the opening price point. As we survey our customers, more than half of our customers articulate that one of their reasons for lapsing would be their personal financial situation and that they would like to see more price parity in terms of both channel and opening price point in our core businesses. We have talked a lot about that, and that is moving forward. I would say the biggest shift that we will see this year in promotion is that we are putting less pressure on Torrid Cash redemption. That has been dwindling over time, and we have reset our expectations for the redemption in those categories. We will be able to pull back on our reliance on that piece. I think the other piece for us for the customers is price-point messaging versus percentage-off messaging, and I think all of those things are working well. We also have a lot more multiples in our promos right now—multiples in bralettes and knits and woven tops—those types of things that have tested very well for us and are exceeding our expectations. So promos will shift out of much reliance on Torrid Cash, a bit more into everyday opening price point opportunities and price parity between channels, which we also think is important. Loyalty has been pretty consistent for us. What we are looking to build in the loyalty piece is a bit more frequency. Retention is not as much of an issue there as we think we have opportunity in driving a bit more frequency among those loyalty customers with better segmentation. We just did a special sale for them a couple of weeks ago that we delivered in a very different way than we normally deliver. It was very well received, and the conversion on that was quite good. We are testing different tactics to highlight their loyalty levels and giving them more attention. We have also reinstituted the Icon level of our loyalty program, which is the top of those customers, so that we ensure that we continue to get very robust feedback from the loyalty customers. Some of the decisions that we have made are very much driven by the feedback that we get from our customers with every level of communication, every touch point that we have. I would say that we feel like there is a grassroots version of marketing that will augment what we do in more of the paid spend, and I will let Ashlee talk a little bit more about that.

Q: Great. And then just one follow-up for Paula. As you look on a multiyear basis, do you think that double-digit EBITDA margins are achievable? And if so, how should we be thinking about the core drivers of achieving that recovery in margin rate?

A: Hi, Brooke. Yes, I do believe so. Our plan has up to 150 basis points of EBITDA margin increase in fiscal 2026, and that is really through leveraging our SG&A platform. As we progress throughout the year, we are going to see that leverage increase more and more. Even with the Q1 guidance that we have provided, you will see us starting to leverage SG&A, and at the end of the year, you are going to see that gap increase and, therefore, drive that to the bottom-line profitability. So yes, 150 basis points of leverage this year is very much a possibility, and for that to continue to grow in the next few years is probably a good assumption.

Q: Great, thanks. Lisa, I guess high-level strategic question. 2025 sort of felt like a defensive year, closing stores. What do you think more is left on the defensive side of the equation as opposed to when do you feel like you can really get to playing offense? And is that the way to think about what 2026 should be? And I have a follow-up.

A: Hi, Corey. I do think about us pivoting into a more offense-oriented approach. I think what we have done to restructure the channel expense base, to expand product, and now refine—what we are talking about in terms of segmentation and refocus on owned and organic marketing efforts—is a great opportunity for us and should expand the customer file this year. We are also seeing the reinvigoration of the loyalty interest in the business through sub-brands. We are seeing those aspects of the business. I feel great about product. OPP is working very, very well and will expand. Sub-brands are working well and expanding. We have cut a substantive amount of fixed expense from underperforming stores. The stores that are open right now are exceeding our expectations in terms of their performance. We are starting to see that turn and have actually put a little bit more pressure on store sales as we move through the year, which we think is a better mix in terms of the margin opportunity there. My message overall is intended to share that we have accomplished this store closure very effectively and executed that very well. We have integrated and introduced OPP through multiple categories of the business and are pleased with how that is working. Our store profitability is improving. We are bringing back footwear. We are expanding other categories of the business. We do feel like we are in the position to start reaping the benefits of this as we move through the year.

Q: Hi. Can you guys hear me?

A: Yes.

Q: Awesome. I just want to ask a general question about your consumer. How are they behaving? How have they changed over the last six months? Are you expecting anything from refunds? Any changes in the performance of different demographics?

A: Performance within the customer file from a demographic basis has been very consistent. We have seen consumer behavior, or our customers' behavior, be very consistent as well. As Lisa talked about earlier, when we survey customers, the most frequent response we get is related to price or economic pressures that she is feeling, and we have been able to answer that with opening price point in a very effective way.

Q: Gotcha. So on the refunds, do you expect that to lift any of your OPP sales or anything on that front that you are embedding in the outlook?

A: We are encouraged with the trends of the business we are seeing now. Whether or not that is related to tax refunds, I cannot say for certain, but we are encouraged by the trends that we are seeing in the business so far this quarter.

Q: I would say we do not have anything outsized embedded into the guidance related to accelerated tax refunds.