CURV Q3 Deep Dive: Merchandise Missteps, Store Closures, and Strategy Reset Dominate Quarter

Women’s plus-size apparel retailer Torrid Holdings (NYSE:CURV) fell short of the markets revenue expectations in Q3 CY2025, with sales falling 10.8% year on year to $235.2 million. The company’s full-year revenue guidance of $998.5 million at the midpoint came in 2.2% below analysts’ estimates. Its non-GAAP loss of $0.06 per share was significantly below analysts’ consensus estimates.

Is now the time to buy CURV? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

Torrid’s third quarter was marked by a notable revenue shortfall and a negative market reaction, with management attributing underperformance primarily to merchandising missteps in its tops category. CEO Lisa Harper acknowledged these errors, stating that "this was a merchandising miss that was, obviously, very disappointing and frustrating for the organization for the quarter." Additional headwinds included a pause in the shoe business due to tariffs and higher promotional activity, which pressured margins. Management also cited reduced purchase frequency from the most loyal customers in the tops department, intensifying the impact of these merchandising challenges.

Looking ahead, Torrid’s guidance reflects a cautious outlook, as management does not anticipate a meaningful recovery in the tops or shoes categories in the near term. Harper explained, "We don't anticipate a substantive recovery in either tops or shoes for the balance of this quarter," though improvements are expected as core products are reintroduced. The company is focused on rebuilding its opening price point strategy and executing store closures to optimize expenses, with CFO Paula Dempsey highlighting that "substantial EBITDA margin expansion" is expected in the next year as cost reductions from store closures are annualized.

Key Insights from Management’s Remarks

Management attributed the quarter’s results to significant product assortment issues, especially in tops, as well as temporary challenges in shoes and jackets, while also pointing to early benefits from store optimization.

• Tops assortment missteps: CEO Lisa Harper emphasized that the largest driver of underperformance was a failure to stock core, solution-based tops, accounting for about half of the revenue miss. The absence of key fabrications and styles led to increased promotions and pressured average unit retail (AUR).
• Shoe category impact: Approximately 40% of the revenue miss stemmed from a pause in the shoe business due to tariffs. Management is reintroducing shoes and boots and expects gradual recovery in this category as new inventory arrives.
• Elevated promotional activity: The company increased promotions, particularly online, as it attempted to clear missed top assortments. While this helped exit the season with clean inventory, it negatively affected gross margins.
• Store closure optimization: Torrid closed 95 stores year-over-year and is on track to close up to 180 total this year. CFO Paula Dempsey reported over $18 million in cost reductions so far, with more savings expected as these closures are annualized.
• Sub-brand and category resilience: Despite the challenges in tops and shoes, sub-brands like Festi, Nightfall, and Retro performed well, as did categories such as denim and dresses, which maintained positive sales and innovation momentum.

Drivers of Future Performance

Torrid’s outlook is shaped by a renewed focus on core product assortment, continued store optimization, and the pace of recovery in key categories.

• Core assortment restoration: Management is reintroducing essential tops and expanding opening price point products, aiming for these to represent about 30% of sales in the first quarter. Harper described this initiative as critical to regaining lost frequency among loyal customers.
• Store closure cost savings: The ongoing closure of highly unproductive stores is expected to improve expense flexibility and drive substantial EBITDA margin expansion in the next year, as fixed costs like payroll and occupancy are reduced.
• Competitive and seasonal headwinds: While management views many challenges as internal, they also acknowledged increased consumer choice in tops during the quarter due to seasonal shifts and broader market offerings, suggesting continued risk if assortment issues are not addressed.

Catalysts in Upcoming Quarters

In coming quarters, the StockStory analyst team will focus on (1) the effectiveness and speed of Torrid’s remerchandising efforts in the tops and shoes categories, (2) realization of cost savings and flexibility from store closures, and (3) the ability of core and sub-brand innovations to drive customer frequency and retention. Monitoring how quickly consumer engagement rebounds in tops will be a key indicator of operational turnaround.

Torrid currently trades at $1.15, down from $1.28 just before the earnings. In the wake of this quarter, is it a buy or sell? Find out in our full research report (it’s free for active Edge members).

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