Torrid Holdings Inc. Q4 FY2024 earnings call

Product Direction

• 2025 is focused on broadening assortments to cater to a wider range of fashion aesthetics. New sub-brands like Festi, Nightfall, and Retro Chic launched with positive response; Festi offers boho trends, Nightfall is edgy dark fashion, and Retro Chic is vintage inspired. Core Torrid assortment is being modernized.

Marketing

• Engaged influencers embodying Torrid's lifestyle, brought back Torrid Casting Call with over 11,000 applications last year and planning more events this year. Elevated storytelling online with richer content and influencer collaborations, and in stores with tools like RFID technology and enhanced training.

Store Optimization

• Closed 35 stores in fiscal 2024 and targeting 40-50 closures in 2025. Nearly 60% of leases set to expire or have kick-out clauses this year. Historical data shows up to 70% customer retention when stores close, with plans to shift demand to nearby locations or digital channels.

For the fourth quarter, Torrid generated sales of $275.6 million. In apparel, there was a positive Q4 comp driven by strength in denim, non-denim bottoms, sweaters, and dresses. Inventory ended the year at $148.5 million, a 4% increase from the previous year but an 18% reduction on a two-year basis. Sub-brands are expected to comprise approximately 7% to 10% of total receipt investment for fiscal 2025, self-funded by reducing depth across less productive choices and a more strategic replenishment approach.

Fiscal 2025 Guidance

• Full-year sales expected to range between $1.080 billion and $1.100 billion.
• Adjusted EBITDA projected to range between $100 million and $110 million.
• Capital expenditures forecasted to be between $15 million and $20 million.

First Quarter 2025

• Sales expected to range between $264 million and $274 million.
• Adjusted EBITDA anticipated between $24 million and $28 million, with marketing investments shifted from Q4 to first-half of 2025.

Risks

• Uncertain consumer and macro environment which could impact business performance.
• Potential impact of tariffs and macroeconomic volatility on sourcing and overall business operations, with no hedging on additional tariffs at this time.

Q: Brooke Roach asked about the health of the Torrid consumer and the contribution from scaling recently successful sub-brands.

A: Lisa Harper responded that the fundamental strength of the Torrid customer is intact, with positive traffic trends, and sub-brands are driving incremental traffic and showing potential for comp contribution.

Q: Dylan Carden inquired about prolonged store closures and customer retention rates.

A: Paula Dempsey and Ashlee Wheeler discussed that store review is opportunistic with 60% of leases expiring, and up to 70% of customers can be retained over multiple years, with plans to test new store formats in outdoor centers.

Q: Katie Delahunt asked about tariff impact in guidance and the macro environment's embedding.

A: Lisa Harper mentioned sourcing flexibility across multiple countries and Paula Dempsey stated guidance is prudent due to macro volatility but improvements in demand have been seen.

Q: Corey Tarlowe asked about promotions and the impact of new sub-brands on inventory.

A: Paula Dempsey and Ashlee Wheeler talked about promotional moderation, sub-brands representing close to 10% of business and receipt investment, and inventory expected to be relatively flat year-over-year.

Q: Dana Telsey asked about store number target and gross margin/SG&A cadence.

A: Paula Dempsey discussed ongoing analysis of store fleet to align with demand, and Lisa Harper mentioned future sub-brand launches like Lovesick, True by Torrid, and Studio collections.