Torrid Holdings: EPS Surpasses Expectations Amid Revenue Challenges

In the ever-evolving landscape of retail, Torrid Holdings (NYSE:CURV) has managed to deliver a surprising financial performance for the full year 2025. Despite a 4.2% decline in revenue and a 5.0% drop in like-for-like sales, the company's earnings per share (EPS) beat analyst expectations by a significant 15%. This performance underscores the company's strategic initiatives and operational efficiency, even in the face of challenging market conditions.



Strategic Initiatives and Operational Efficiency

Torrid Holdings' 40% increase in net income, from US$11.6 million to US$16.3 million, is a testament to the company's ability to navigate a tough retail environment. The profit margin increased from 1.0% in FY 2024 to 1.5% in FY 2025, driven by lower expenses. This improvement in profitability is a clear indication that the company has successfully implemented cost-cutting measures and improved its operational efficiency.

The 15% EPS beat against analyst expectations further highlights the company's strategic initiatives. The EPS increased from US$0.11 in FY 2024 to US$0.16 in FY 2025, demonstrating that the company has been able to generate more earnings per share despite a decline in revenue. This achievement is largely due to product innovation in the core assortment and strong customer response to the launch of high-growth, higher margin sub-brands.

Lisa Harper, the Chief Executive Officer of Torrid Holdings, emphasized the company's strategic priorities for the coming years: enhancing the product assortment, driving customer growth, and executing a store optimization plan. The company's commitment to modernizing and evolving its core Torrid offerings, along with its ongoing store optimization strategy, is expected to create a halo effect across the business, driving customer engagement and incremental lifestyle purchases.

Addressing Revenue Challenges

The 4.2% decline in revenue and 5.0% drop in like-for-like sales can be attributed to several factors. The company's net sales decreased by 6.1% to $275.6 million in the fourth quarter of fiscal 2024 compared to the previous year. This decline was primarily driven by lower sales, as indicated by the 90-bps decline in gross profit margin to 33.6% from 34.5% in the previous year. Additionally, comparable sales decreased by 0.8% in the fourth quarter, further contributing to the overall revenue decline.

To address these challenges, Torrid Holdings has outlined several strategic priorities for the coming years. The company plans to modernize and evolve its core Torrid offerings while also growing its high-growth, higher margin sub-brands. This strategy aims to create a halo effect across the business, driving customer engagement and incremental lifestyle purchases.

Furthermore, the company's store optimization strategy includes balancing the fleet, enhancing store economics, refreshing store environments, and aligning sales channels more closely with customer demand. This approach is expected to accelerate customer growth and improve overall sales performance. The company's strong financial condition, with year-end cash of $48.5 million and liquidity of $158.0 million, provides the flexibility to navigate the current dynamic macro environment and invest in areas that will fuel long-term profitable growth.

Looking Ahead

While Torrid Holdings has outperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock? The company's earnings outlook, including current consensus earnings expectations for the coming quarter(s) and how these expectations have changed lately, will be crucial in determining the stock's performance.

Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions.

Ahead of this earnings release, the estimate revisions trend for Torrid Holdings is unfavorable. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #4 (Sell) for the stock. So, the shares are expected to underperform the market in the near future.



Conclusion

Torrid Holdings' full-year 2025 earnings report is a mixed bag of challenges and opportunities. While the company has successfully increased its net income and EPS, the decline in revenue and like-for-like sales presents significant hurdles. However, the company's strategic initiatives and operational efficiency provide a solid foundation for future growth. Investors should closely monitor the company's earnings outlook and earnings estimate revisions to make informed investment decisions.