Torrid Holdings' Strategic Turnaround: Can Store Closures and Digital Shift Drive Value Recovery?

In the turbulent landscape of modern retail, Torrid Holdings (CURV) has embarked on a high-stakes transformation. The company’s aggressive restructuring—centered on shuttering 180 stores (30% of its footprint) and accelerating digital investments—raises a critical question: Can these moves catalyze a sustainable recovery in a sector plagued by declining foot traffic and margin compression?

Store Closures: A Necessary but Painful Reset

Torrid’s decision to close nearly 180 locations in 2025 reflects a stark acknowledgment of shifting consumer behavior. According to a report by WBSM, the closures were accelerated due to "underperformance at certain locations" and a 6.9% comp sales decline in Q2 2025, driven by challenges in its footwear business and inventory management [1]. While store closures incur short-term costs—such as restructuring charges and a $15 million tariff impact in 2025 [2]—management argues they are essential for long-term cost optimization. By reducing fixed costs tied to physical locations, Torrid aims to redirect resources toward higher-margin digital operations, which now account for 70% of total demand [3].

However, the scale of closures raises execution risks. Closing 30% of stores in a single year is a bold move, but it could alienate loyal customers who value the in-store experience. CEO Lisa Harper’s assertion that physical stores remain "brand hubs" [3] suggests a hybrid strategy, yet the success of this approach hinges on maintaining brand visibility amid reduced retail presence.

Digital Acceleration: A Double-Edged Sword

Torrid’s pivot to digital is both a response to and a driver of its strategic shift. The company is investing heavily in digital marketing to boost customer acquisition and retention [2], a move that aligns with broader industry trends. Yet, digital expansion comes with its own challenges. For instance, Q2 2025 adjusted EBITDA margins fell to 8.2% from 12.2% in 2024, partly due to increased marketing spend [4]. While management projects 150–250 basis points of EBITDA margin expansion by 2026 through store closures and inventory productivity improvements [5], the path to profitability remains uncertain.

The digital-first model also exposes Torrid to competitive pressures. As stated in an earnings call transcript, the company faces a "shift in customer preferences toward more fashion-forward plus-size offerings" [6], a niche where rivals like Eloquii and Universal Standard are already entrenched. Differentiation in this space will require not just digital reach but also product innovation—a challenge Torrid is addressing through its sub-brand strategy.

Sub-Brand Expansion: A High-Margin Play

Torrid’s plan to expand five high-margin sub-brands, which are expected to represent 25–30% of its product assortment by 2026 [7], is a key lever for margin recovery. These sub-brands, targeting specific segments within the plus-size market, could enhance gross margins by reducing reliance on markdowns and broadening customer appeal. However, the success of this strategy depends on execution. Developing new brands requires significant R&D and marketing investment, and there’s no guarantee that these sub-brands will resonate with consumers in a saturated market.

Financial Realities and Shareholder Value

Despite the 7.7% year-over-year sales decline in Q2 2025 [8], Torrid has maintained its full-year EBITDA guidance of $80–$90 million [9], signaling confidence in its restructuring. Share repurchases and debt reduction are also part of the value-creation narrative, but these efforts must be balanced against operational risks. For example, the company’s Q2 comp sales drop was exacerbated by promotional strategies to clear inventory [10], a short-term fix that could erode margins further.

The Verdict: A Calculated Gamble

Torrid’s strategic overhaul is a calculated gamble. The store closures and digital shift address core structural issues in the retail sector, and the sub-brand strategy offers a path to margin expansion. However, the company’s ability to execute these plans—while navigating tariffs, inventory challenges, and competitive pressures—will determine its long-term viability.

For investors, the key question is whether Torrid can transform its cost base and digital capabilities quickly enough to offset declining sales. The projected 150–250 basis points of EBITDA margin expansion by 2026 [11] is ambitious but achievable if the company’s restructuring yields the anticipated cost savings. Yet, the path is fraught with risks, and the market’s reaction to these moves will likely be volatile.

Source:
[1] Torrid Updates Store Closing Plan to Include 180 Locations, https://wbsm.com/ixp/341/p/torrid-clothing-store-closing-locations/
[2] Earnings call transcript: Torrid Holdings Q2 2025 sees sales dip, stock rises, https://www.investing.com/news/transcripts/earnings-call-transcript-torrid-holdings-q2-2025-sees-sales-dip-stock-rises-93CH-4225712
[3] Torrid outlines 180 store closures and 25%-30% sub-brand ... https://seekingalpha.com/news/4492540-torrid-outlines-180-store-closures-and-25-percentminus-30-percent-sub-brand-mix-for-2026-amid
[4] Torrid Reports Second Quarter 2025 Results, https://www.businesswire.com/news/home/20250904734938/en/Torrid-Reports-Second-Quarter-2025-Results
[5] EARNINGS_CALL_TRANSCRIPT, https://finance.yahoo.com/quote/CURV/earnings/CURV-Q2-2026-earnings_call-353865.html
[6] 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
[7] Torrid outlines 180 store closures and 25%-30% sub-brand ... https://seekingalpha.com/news/4492540-torrid-outlines-180-store-closures-and-25-percentminus-30-percent-sub-brand-mix-for-2026-amid
[8] Torrid Reports 7.7% Sales Drop in Q2, https://www.mitrade.com/insights/news/live-news/article-8-1097012-20250905
[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 Second Quarter 2025 Results, https://www.businesswire.com/news/home/20250904734938/en/Torrid-Reports-Second-Quarter-2025-Results
[11] EARNINGS_CALL_TRANSCRIPT, https://finance.yahoo.com/quote/CURV/earnings/CURV-Q2-2026-earnings_call-353865.html