Torrid Holdings (CURV): Strategic Turnaround Amid Margin Pressures—Is This the Buy Point?

In an era where traditional brick-and-mortar retailers grapple with declining foot traffic and margin erosion, Torrid Holdings (CURV) has embarked on a high-stakes reinvention. The company’s 2025 strategic playbook—centered on store closures, digital acceleration, and sub-brand diversification—has sparked debate among investors: Is CURV’s current valuation a compelling entry point, or does it reflect unresolved structural challenges?

Strategic Reinvention: From Store Closures to Digital Dominance

Torrid’s aggressive store optimization strategy has been a defining feature of its 2025 turnaround. The company closed 57 underperforming stores in Q2 FY2025 alone, with a target of shuttering 180 locations by the end of the fiscal year [1]. These closures are not merely cost-cutting measures but part of a broader reallocation of resources toward digital operations, which now account for nearly 70% of total demand [2]. This shift aligns with broader retail trends, as e-commerce continues to outpace physical retail growth.

However, the margin implications of this transition are nuanced. While store closures have reduced fixed costs and inventory levels (down 19% year-to-date), they have also contributed to a 7.7% year-over-year sales decline in Q2 FY2025 [3]. Gross profit margins, which stood at 38.7% in Q2 FY2024, fell to 35.6% in the same period of 2025, reflecting softer holiday sales and increased promotional activity [4]. Yet, management has emphasized that these short-term pains are necessary for long-term gains, particularly as higher-margin sub-brands like Festi, Belle Isle, and Retro Chic gain traction. These sub-brands are projected to represent 25%-30% of the product assortment by FY2026, with margins significantly outpacing core categories [5].

Capital Allocation: Buybacks and Debt Reduction

Torrid’s capital allocation strategy in 2025 has prioritized shareholder returns and balance sheet strength. The company repurchased $20 million in shares during the first half of the year, utilizing 6 million shares at $3.50 per share, with $45 million remaining in its $100 million buyback authorization [6]. This approach contrasts with its 2024 focus on inventory reduction and operational efficiency, signaling a shift toward value creation through direct equity returns.

Debt reduction has also been a key pillar. With adjusted EBITDA guidance revised to $80–$90 million for FY2025 [7], Torrid aims to leverage improved cash flow to delever its balance sheet. This strategy is critical given the company’s exposure to macroeconomic headwinds, including tariffs on China-sourced goods. By pausing its footwear business (100% sourced from China) and diversifying supply chains, Torrid has sought to insulate margins from external shocks [8].

Margin Pressures and the Path to EBITDA Expansion

Despite these efforts, margin pressures persist. The 6.9% decline in comparable sales during Q3 FY2025 underscores the fragility of Torrid’s customer base, particularly in a high-inflation environment [9]. Management, however, remains optimistic about EBITDA margin expansion, projecting 150–250 basis points of improvement by FY2026. This optimism is grounded in two factors:
1. Sub-brand scalability: Higher-margin offerings are expected to drive incremental profitability without cannibalizing core sales.
2. Operational leverage: Store closures and digital acceleration are anticipated to reduce SG&A expenses as a percentage of revenue.

The revised FY2025 guidance—net sales of $1.015 billion to $1.030 billion and adjusted EBITDA of $80–$90 million—reflects a cautious but achievable path to stabilization [10]. For investors, the key question is whether these metrics will translate into sustainable growth or merely delay inevitable structural decline.

Is This the Buy Point?

Torrid’s current valuation, with a market cap of approximately $500 million, offers a compelling risk-rebalance. The stock trades at a discount to its 2024 EBITDA multiple of 8.5x, despite a clearer path to margin expansion in 2026. However, the company’s reliance on digital sales and sub-brand growth introduces execution risk. Success hinges on its ability to retain customers post-store closures and scale higher-margin offerings without overextending marketing spend.

For long-term investors, the buy point may lie in Torrid’s strategic clarity and disciplined capital allocation. The company has demonstrated a willingness to make tough decisions—whether closing underperforming stores or exiting unprofitable businesses—which bodes well for its 2026 outlook. Yet, near-term volatility is likely, given the macroeconomic and competitive headwinds facing the retail sector.

Source:
[1] Torrid Holdings Closes 57 Stores in Q2 [https://www.aol.com/finance/torrid-holdings-closes-57-stores-002140523.html]
[2] Earnings call transcript: Torrid Holdings Q2 2025 sees ... [https://www.investing.com/news/transcripts/earnings-call-transcript-torrid-holdings-q2-2025-sees-sales-dip-stock-rises-93CH-4225712]
[3] Torrid Reports 7.7% Sales Drop in Q2 [https://www.mitrade.com/insights/news/live-news/article-8-1097012-20250905]
[4] Breaking Down Torrid Holdings Inc. (CURV) Financial Health: Key Insights [https://dcfmodeling.com/blogs/health/curv-financial-health?srsltid=AfmBOorrslDIFaYwn8DCcusLrh3I6S8KYek3G04yfgmFfG4XX67vKMxW]
[5] EARNINGS_CALL_TRANSCRIPT [https://finance.yahoo.com/quote/CURV/earnings/CURV-Q2-2026-earnings_call-353865.html]
[6] Torrid(CURV.US) Q2 2025 Earnings Conference [https://news.futunn.com/en/post/61699156/earnings-call-summary-torrid-curvus-q2-2025-earnings-conference]
[7] Torrid Reports Second Quarter Fiscal 2024 Results [https://investors.torrid.com/news/news-details/2024/Torrid-Reports-Second-Quarter-Fiscal-2024-Results/default.aspx]
[8] Torrid Holdings Closes 57 Stores in Q2 [https://www.aol.com/finance/torrid-holdings-closes-57-stores-002140523.html]
[9] Earnings call transcript: Torrid Holdings Q2 2025 sees ... [https://www.investing.com/news/transcripts/earnings-call-transcript-torrid-holdings-q2-2025-sees-sales-dip-stock-rises-93CH-4225712]
[10] Torrid Reports 7.7% Sales Drop in Q2 [https://www.mitrade.com/insights/news/live-news/article-8-1097012-20250905]