CURV Q2 Deep Dive: Store Closures and Sub-Brand Expansion Shape Outlook

Women’s plus-size apparel retailer Torrid Holdings (NYSE:CURV) beat Wall Street’s revenue expectations in Q2 CY2025, but sales fell by 7.7% year on year to $262.8 million. On the other hand, next quarter’s revenue guidance of $240 million was less impressive, coming in 7.2% below analysts’ estimates. Its GAAP profit of $0.02 per share was in line with analysts’ consensus estimates.

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StockStory’s Take

Torrid’s second quarter was marked by a negative market reaction, as investors responded to ongoing sales declines and a cautious assessment of near-term demand. Management pointed to continued softness in store traffic and increased promotional activity, attributing performance to the impact of store closures and weaker sales in certain apparel categories. CEO Lisa Harper acknowledged, “We continue to see customer sensitivity and value orientation given the current environment,” while noting that bottoms and dresses outperformed, offset by underperformance in tops. Management’s tone was pragmatic, focusing on operational execution amid a challenging retail backdrop.

Looking forward, Torrid’s updated guidance reflects management’s expectation for ongoing macroeconomic headwinds and a deliberate shift in strategic priorities. The company is accelerating its store optimization strategy, reallocating resources to digital marketing and sub-brand growth, and anticipates higher marketing spend to drive customer acquisition. Harper explained, “We plan to utilize the growing free cash flow to reduce debt and repurchase shares,” while highlighting that the expansion of higher-margin sub-brands and the rollout of value-focused apparel are central to supporting margin recovery and renewed growth.

Key Insights from Management’s Remarks

Management credited the quarter’s results to lower store traffic, the strategic rollout of new sub-brands, and the impact of tariffs and promotional activity. Significant operational changes are underway to address evolving customer preferences and profitability challenges.

• Sub-brand performance: New lifestyle sub-brands launched over the past year are resonating with customers, with management reporting strong engagement and higher product margins. Sub-brands are expected to reach 25% to 30% of Torrid’s assortment next year, driving higher full-price sell-through and reduced reliance on promotions.
• Store optimization strategy: The company is closing underperforming stores, aiming to close up to 180 locations this year. Management is reallocating resources to digital channels, with digital sales now representing nearly 70% of total demand. Customer retention following store closures is tracking ahead of historical rates, aided by proactive outreach.
• Increased marketing investment: Torrid is shifting marketing spend toward digital and influencer-driven campaigns, with incremental investments aimed at customer acquisition and awareness. Marketing as a percentage of sales will rise to approximately 6% for the year, supporting both sub-brand growth and retention efforts.
• Tariff and promotional headwinds: Elevated tariffs created margin pressure, with management estimating a $15 million impact this year—of which 80% has been mitigated through sourcing adjustments. The company responded to value-oriented consumer behavior with additional promotions, which are expected to persist in the near term.
• Product mix evolution: Strength in bottoms, dresses, and swimwear was offset by softness in graphic tees and crop tops. Management is addressing short-term misses in tops and plans to expand value-oriented “opening price point” products to 25% of the assortment next year, targeting price-sensitive customers.

Drivers of Future Performance

Management expects near-term headwinds from promotional activity and tariffs, but is focused on sub-brand expansion, digital channel growth, and cost optimization to support margin recovery and customer growth.

• Sub-brand and value assortment expansion: Torrid is accelerating sub-brand launches and plans for sub-brands to comprise up to 30% of the assortment next year. In parallel, 25% of sales are expected to come from opening price point (value-focused) products, addressing demand from more price-sensitive customers and broadening the brand’s appeal.
• Store closures and digital shift: The closure of approximately 180 stores this year is intended to improve profitability by reducing fixed costs and shifting demand to digital channels. Management aims to redeploy cost savings into marketing and customer acquisition, with digital sales expected to remain the primary channel for growth.
• Margin recovery and marketing: Management targets 150 to 250 basis points of adjusted EBITDA margin expansion in 2026, net of increased marketing spend. While tariffs and continued promotional activity remain headwinds, proactive sourcing and operational changes are expected to partially offset these pressures.

Catalysts in Upcoming Quarters

In the quarters ahead, our analyst team will monitor (1) the pace at which sub-brands gain share within Torrid’s assortment and drive margin improvement, (2) execution of the store closure plan and its impact on digital customer retention, and (3) the effectiveness of increased digital marketing in attracting and retaining customers. Progress on expanding value product lines and managing tariff impacts will also be critical to watch.

Torrid currently trades at $2.08, down from $2.39 just before the earnings. At this price, is it a buy or sell? Find out in our full research report (it’s free).

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