- Q3 Sales Decline Revenue fell to $235.2M (-8.3% YoY) due to tariff-related shoe category pause and tops/jackets missteps.
- Adjusted EBITDA Drop Declined to $9.8M (4.2% margin) vs. $19.6M (7.4% margin) in 2024, driven by lower sales and higher promotions.
- Footwear Strategy Reintroduced curated footwear, aiming to restore $40M in sales by 2026 with improved profitability.
- Store Optimization Closed 15 stores in Q3 (74 total YTD) to drive fixed cost reduction and EBITDA margin expansion in 2026.
- Full-Year Outlook Expects net sales of $995M–$1.002B and adjusted EBITDA of $59M–$62M, with 2026 margin expansion anticipated.
Category Performance and Strategic Adjustments
The quarter's performance was largely impacted by missteps in the tops and jackets categories, particularly in fashion-forward designs at the expense of core assortments. In response, the company has taken decisive action, including enhancing guardrails in the merchandising process and building a more robust assortment planning function. As Lisa Harper noted, they're embedding an opening price point strategy into their architecture, with around 30% of sales and assortment associated with these categories, aiming to strike a better balance in their product offerings.
Footwear and Sub-Brand Strategy
The company has reintroduced a carefully curated footwear assortment and expects to scale it back to historical sales levels of approximately $40 million in 2026 with improved profitability. The sub-brand strategy is on track to deliver approximately $80 million in sales this year. The denim, non-denim, dresses, and intimates categories met expectations, generating positive comparable growth, while the pause in the shoe category drove approximately 400 basis points of the overall decline in comparable sales.
Outlook and Valuation
For the full year, Torrid expects net sales in the range of $995 million to $1.002 billion and adjusted EBITDA in the range of $59 million to $62 million. The company expects substantial adjusted EBITDA margin expansion in fiscal 2026. With a current P/S Ratio of 0.13 and EV/EBITDA of 2.88, the stock appears to be pricing in significant challenges. Analysts estimate next year's revenue growth at -6.5%, indicating a continued challenging environment for the company. The ROE stands at 0.97%, and the Net Debt / EBITDA ratio is 1.45, indicating a leveraged position that could be challenging to navigate in the current operational context.