Torrid (CURV)

Women’s plus-size apparel retailer Torrid Holdings (NYSE:CURV) missed Wall Street’s revenue expectations in Q1 CY2025, with sales falling 4.9% year on year to $266 million. Next quarter’s revenue guidance of $257.5 million underwhelmed, coming in 8% below analysts’ estimates. Its GAAP profit of $0.06 per share was $0.02 above analysts’ consensus estimates.

Company Overview

Promoting a message of body positivity and inclusiveness, Torrid Holdings (NYSE:CURV) is a plus-size women’s apparel and accessories retailer.

Apparel sales are not driven so much by personal needs but by seasons, trends, and innovation, and over the last few decades, the category has shifted meaningfully online. Retailers that once only had brick-and-mortar stores are responding with omnichannel presences. The online shopping experience continues to improve and retail foot traffic in places like shopping malls continues to stall, so the evolution of clothing sellers marches on.

Retail competitors offering some selection of plus-size women’s apparel and accessories include department stores such as Macy’s (NYSE:M) and Kohl’s (NYSE:KSS) as well as off-price concepts such as TJX (NYSE:TJX) and Ross Stores (NASDAQ:ROST).

A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years.

With $1.09 billion in revenue over the past 12 months, Torrid is a small retailer, which sometimes brings disadvantages compared to larger competitors benefiting from economies of scale and negotiating leverage with suppliers.

As you can see below, Torrid’s 1.8% annualized revenue growth over the last six years (we compare to 2019 to normalize for COVID-19 impacts) was sluggish as it didn’t open many new stores.

This quarter, Torrid missed Wall Street’s estimates and reported a rather uninspiring 4.9% year-on-year revenue decline, generating $266 million of revenue. Company management is currently guiding for a 9.5% year-on-year decline in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to remain flat over the next 12 months, a slight deceleration versus the last six years. This projection is underwhelming and suggests its products will see some demand headwinds.

Number of Stores

Torrid operated 632 locations in the latest quarter, and over the last two years, has kept its store count flat while other consumer retail businesses have opted for growth.

When a retailer keeps its store footprint steady, it usually means demand is stable and it’s focusing on operational efficiency to increase profitability.

Same-Store Sales

The change in a company's store base only tells one side of the story. The other is the performance of its existing locations and e-commerce sales, which informs management teams whether they should expand or downsize their physical footprints. Same-store sales provides a deeper understanding of this issue because it measures organic growth at brick-and-mortar shops for at least a year.

Torrid’s demand has been shrinking over the last two years as its same-store sales have averaged 7% annual declines. This performance isn’t ideal, and we’d be concerned if Torrid starts opening new stores to artificially boost revenue growth.

In the latest quarter, Torrid’s same-store sales fell by 3.5% year on year. This decrease was an improvement from its historical levels. It’s always great to see a business’s demand trends improve.

At StockStory, we prefer high gross margin businesses because they indicate pricing power or differentiated products, giving the company a chance to generate higher operating profits.

Torrid’s unit economics are higher than the typical retailer, giving it the flexibility to invest in areas such as marketing and talent to reach more consumers. As you can see below, it averaged a decent 36.4% gross margin over the last two years. That means for every $100 in revenue, $63.63 went towards paying for inventory, transportation, and distribution.

This quarter, Torrid’s gross profit margin was 38.1%, down 3.1 percentage points year on year and missing analysts’ estimates by 5%. Zooming out, the company’s full-year margin has remained steady over the past 12 months, suggesting it strives to keep prices low for customers and has stable input costs (such as labor and freight expenses to transport goods).

Torrid was profitable over the last two years but held back by its large cost base. Its average operating margin of 4.7% was weak for a consumer retail business.

Looking at the trend in its profitability, Torrid’s operating margin might fluctuated slightly but has generally stayed the same over the last year. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

In Q1, Torrid generated an operating margin profit margin of 6%, down 3.3 percentage points year on year. Since Torrid’s operating margin decreased more than its gross margin, we can assume it was less efficient because expenses such as marketing, and administrative overhead increased.

Revenue trends explain a company’s historical growth, but the change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Torrid’s full-year EPS dropped significantly over the last three years. In a mature sector such as consumer retail, we tend to steer our readers away from companies with falling EPS because it could imply changing secular trends and preferences. If the tide turns unexpectedly, Torrid’s low margin of safety could leave its stock price susceptible to large downswings.

In Q1, Torrid reported EPS at $0.06, down from $0.12 in the same quarter last year. Despite falling year on year, this print easily cleared analysts’ estimates. Over the next 12 months, Wall Street expects Torrid to perform poorly. Analysts forecast its full-year EPS of $0.10 will hit $0.13.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

Torrid has shown decent cash profitability, giving it some flexibility to reinvest or return capital to investors. The company’s free cash flow margin averaged 2.4% over the last two years, slightly better than the broader consumer retail sector.

Taking a step back, we can see that Torrid’s margin was unchanged over the last year, showing it recently had a stable free cash flow profile.

Torrid burned through $20.56 million of cash in Q1, equivalent to a negative 7.7% margin. The company’s cash flow turned negative after being positive in the same quarter last year, prompting us to pay closer attention. Short-term fluctuations typically aren’t a big deal because investment needs can be seasonal, but we’ll be watching to see if the trend extrapolates into future quarters.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Torrid historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 12.1%, somewhat low compared to the best consumer retail companies that consistently pump out 25%+.

Torrid reported $23.69 million of cash and $448.6 million of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $98.02 million of EBITDA over the last 12 months, we view Torrid’s 4.3× net-debt-to-EBITDA ratio as safe. We also see its $26.93 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We liked how Torrid beat analysts’ EPS expectations this quarter. On the other hand, its revenue guidance for next quarter missed. Overall, this was a mixed quarter. The stock traded up 4.2% to $5.20 immediately after reporting.

Updated: June 14, 2025 at 10:34 PM EDT

We think that the latest earnings result is only one piece of the bigger puzzle. If you’re deciding whether to own Torrid, you should also grasp the company’s longer-term business quality and valuation.

We see the value of companies helping consumers, but in the case of Torrid, we’re out. To kick things off, its revenue growth was uninspiring over the last six years, and analysts expect its demand to deteriorate over the next 12 months. And while its projected EPS for the next year implies the company’s fundamentals will improve, the downside is its declining EPS over the last three years makes it a less attractive asset to the public markets. On top of that, its shrinking same-store sales tell us it will need to change its strategy to succeed.

Torrid’s P/E ratio based on the next 12 months is 40.3x. This multiple tells us a lot of good news is priced in - we think there are better stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $5.20 on the company (compared to the current share price of $5.10).