Torrid Holdings Inc. 2027 Q2 Earnings Call

Thank you. Please begin. Good afternoon, everyone, and thank you for joining Torrid's call today to discuss our financial results for the second quarter of fiscal 2026, which we released this afternoon and can be found on our website at investors.torrid.com.

With me on the call today are Lisa Harper, Chief Executive Officer of Torrid, Ashlee Wheeler, our Chief Commercial Officer, and Paula Dempsey, the Chief Financial Officer. Before we get started, I would like to remind you of the company's Safe Harbor language, which I'm sure you're familiar with. Management may make forward-looking statements, including guidance and underlying assumptions. Forward-looking statements may include, but are not limited to, statements containing the word "expect," "believe," "plan," "anticipate," "will," "may," "should," "estimate," and other words and terms of similar meaning. All forward-looking statements are based on current expectations and assumptions as of today, September 3rd, 2026.

These statements are subject to risks and uncertainties that could cause actual results to differ materially. For further discussion of risks related to our business, see our filings with the SEC. With that, I'll turn it over to Lisa.

Thank you, Chinwe. Good afternoon, everyone, and thank you for joining us today as we discuss Torrid's financial results for the second quarter of fiscal 2026. With me on today's call are Ashlee Wheeler, our Chief Commercial Officer, and Paula Dempsey, our Chief Financial Officer. On today's call, I will review our second quarter performance, including the meaningful improvement we saw in the business as the quarter progressed. I will share an update on our primary focus for 2026, which is customer file growth through acquisition, reactivation, and retention. Ashlee will then share a detailed update on the marketing initiatives driving that progress, and Paula will close with the financials and our outlook for the remainder of the year.

For the second quarter, we reported net sales of $231.7 million and adjusted EBITDA of $23.3 million, or $12.1 million excluding the tariff refund benefit, in line with our guidance range. We are encouraged by the underlying trends we are seeing in the business and are maintaining our full year outlook while raising our reported guidance to reflect the tariff refunds received to date. This performance follows the transformative work completed in 2025 across channel optimization and assortment and pricing architecture. The disciplined execution of the business underpinned by our 2026 customer growth agenda is beginning to pay off, setting the stage for a return to comparable sales growth in the back half of the year and beyond. Total company comparable sales declined 6.3% in Q2. I want to spend a moment on the shape of the quarter because the headline number does not tell the full story.

June was genuinely a difficult month for us, and we know we are not alone in that experience. The macro backdrop in June was challenging, with elevated gas prices and other seasonal factors weighing in on discretionary spending. As I mentioned, the encouraging news is that the business meaningfully improved as the quarter progressed. July marked a significant pivot. We are seeing positive, consistent improvement in customer reactivation, customer acquisition in virtually every marketing channel we operate, along with momentum from our Casting Call community events, which we relaunched nationwide on July 2nd. Based on what we've seen so far in July and August, we believe the back half of the year is aligned with the trajectory we have been planning. Looking at category performance in Q2, we saw overall strength in knits and shorts.

Dresses, driven by the combination of mainline Torrid and sub-brands, active, graphic tees, all showed positive momentum. I'm pleased with the course corrections we've made from both the design and assortment balance perspective. We have also reintroduced the concept of Super Soft into our knit dressing, pairing a base knit with fashion items that change the end use of the product and create a versatile, lifestyle-driven dressing occasion. The customer response to the Super Soft fabric and product has been very positive, and it's a category we expect to continue growing and expanding. As we discussed previously, our restructured footwear sourcing strategy and assortment mix had created a first half comp headwind, and we are encouraged to see that headwind resolving. Footwear is performing ahead of our expectations and is also providing a nice tailwind from a margin and revenue standpoint as we enter the second half.

Turning to our sub-brand portfolio, performance continues to accelerate. Festi remains our strongest performing sub-brand, but we are seeing growing parity across the rest of the portfolio. We are also pleased to see Lovesick return to growth as it begins to anniversary its launch. Within TRU, our activewear concept, we have leaned further into a leisure aesthetic and introduced opening price point fleece into the assortment. Our sub-brand platform, Built to Scale, is delivering strong results with significant runway for growth. Year to date, sub-brands have delivered year-over-year growth of approximately 74%, and we remain on track to reach $110 million in 2026, which is 60% growth over 2025, and will represent approximately 12% of total net sales, compared to 7% last year. Turning briefly to our opening price point strategy, performance continues to meet our expectations, supporting both conversion and basket growth.

OPP now represents approximately 35% of our overall assortment and is strategically represented across all major apparel categories, supported by a cost-engineered sourcing model which yields healthy product margins. This quarter, we also introduced a new category we call internally Fashion at a Price, positioned as an accessible mid-tier price point, which is currently showing success in denim, fashion knits, woven tops, and sweaters. We are pleased to share that we have expanded our presence on third-party marketplaces. We are now live on Macy's since mid-July and have recently gone live on Target, and we will go live with Walmart later this year. In each case, we operate on a model where we own and fulfill our own inventory.

Marketplaces remain a relatively small part of our business today, but we see them as highly incremental as many of the customers we are reaching are new to file, reinforcing our belief that these partnerships support our broader customer acquisition strategy. As I mentioned on our Q1 call, we substantially completed our Store Footprint Optimization Project. Year to date, we have closed an additional six structurally unproductive locations, bringing the total to 177 closures since we initiated the program. Customer retention through this transition has remained strong, with our marketing efforts successfully redirecting traffic both online and to nearby stores. Equally important, the cost savings generated by the closure program are being reinvested directly and strategically into the initiatives designed to reignite growth in the customer file. We entered 2026 with a singular objective: to grow our customer file through acquisition, reactivation, and retention.

The marketing team, led by Ashlee, is the primary engine behind the progress, which she will speak to shortly. In summary, the trends we saw play out this quarter reinforce our 2026 strategy. Business meaningfully strengthened as the quarter progressed, with July marking a clear pivot. Our customers responding to the course corrections we have made in assortment and design, and the categories that weighed on us last year are now contributing to growth again. Our business model is Built to Scale this momentum. Opening price point continues to deliver the value she is looking for. Our sub-brand portfolio is scaling ahead of plan, and our expanding marketplace presence is bringing new customers to the file. At the same time, the discipline we have shown in store optimization is freeing up capital to reinvest directly into acquisition, reactivation, and retention, all key drivers to our future success.

In short, the foundation we built is translating into real momentum, and we are confident it sets us up for a return to comparable sales growth in the back half of this year and beyond. Now, let me pass it to Ashlee for a detailed update on the team's marketing and customer growth progress.

Thank you, Lisa. The second quarter, particularly July, was the pivot point we've been building toward all year, and I'm glad to walk through what's underneath it. As we've shared previously, the growth and improved quality of our customer file is our primary initiative for this year. With our product assortments modernized, sub-brands scaling, pricing architecture and channels optimized, and a brand positioning and mission consistently clear, what was needed was a structural rebuilding of our marketing engine. I will cover where that rebuild stands and the progress we are seeing. Comparable sales inflected positively in July, with all 11 of our marketing channels improving sequentially, and momentum has continued into August. When we look at our marketing channels cumulatively over the past few years, we dramatically shifted performance from double-digit declines to growth in marketing attributable revenue beginning in July.