Torrid Holdings Inc.
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Item 1. Business.
Overview
Torrid Holdings Inc. (“Torrid,” “we,” “us,” “our,” the “Company”) is a direct-to-consumer brand in North America dedicated to offering a diverse assortment of stylish apparel, intimates, and accessories skillfully designed for curvy women. Specializing in sizes 10 to 30, our primary focus is on providing fashionable, comfortable, and affordable options that meet the unique needs of our customers. Our extensive collection features high quality merchandise, including tops, bottoms, denim, dresses, intimates, activewear, footwear, and accessories. Our products are exclusive to us, and each product is meticulously crafted to cater to the needs of the curvy woman, empowering her to love the way she looks and feels. Our collections are artfully curated to suit all aspects of our customers’ lives, including casual weekends, work, dressy and special occasions. Understanding the importance of affordability, we aim to keep our prices reasonable without compromising on quality. This allows us to build a meaningful connection with our customers, distinguishing us from other brands that often overlook plus- and mid-size consumers. Our brand experience and product offerings establish us as a differentiated and reliable choice for plus- and mid-size customers, which we believe sets us apart in the market. We strive to be everything our customer needs in her closet, consistently delivering products that make her feel confident and stylish.
The Torrid Approach
We have developed a proprietary approach to designing stylish, commercially relevant apparel and intimates that resonates with a diverse range of customers and appeals broadly to their sense of style. Our loyal customer base provides us with valuable insights that enable us to refine our products and experience. This creates a self-reinforcing cycle that solidifies our leadership in the plus- and mid-size apparel markets.
Our diverse assortment caters to the curvy woman’s unique needs, offering:
•A tailored fit she rarely has access to that meets all of her individual style aspirations;
•A rigorous design process where every single article of clothing is fitted on a real woman, and not simply “grading up” non-plus-size apparel;
•A proprietary sizing process constantly updated through continuous customer feedback and data, until we fit to perfection; and
•An expanded brand that provides a fusion of trendy and on-point style with exceptional tailoring that satisfies the unique needs of the curvy woman.
Product
Product Offering
We offer a comprehensive product line that inspires our customers with new and exciting options for her entire closet. Our assortment spans tops, bottoms, denim, dresses, intimates, activewear, footwear and accessories that we believe embody the attitude and style that enable our customers to comfortably and confidently dress like their non-plus-size friends. Combined with an unparalleled fit, we believe our products make us a destination for our customers to shop for every occasion, from casual to dressy, and everything in between.
While we aim to bring her current styles and trends, we also bring her offerings built on a foundation of timeless year-round styles and colors (“Basics”) that are constantly replenished. Our core offerings include products that are on-trend interpretations of our Basics merchandise (“Core”) that we update with new fabrics, prints, embellishments or features. For example, the Harper Blouse represents a Basics item with Core iterations that feature different lengths and sleeve designs. Our trend-driven items incorporate fresh styles available in the broader market to excite and engage our customer but are bought narrowly and reordered as demand dictates to minimize inventory risk.
Our focus on bottoms and intimates, both attractive growth categories where technical expertise is critical, drives customer loyalty and serves as an entry point to the Torrid brand. Our intimates line is designed to inspire confidence and allows our customer to move in effortless comfort throughout her day while feeling confident and sexy. We offer a full range of bra frames, sizes and solutions, continually testing new innovations. Over the course of approximately two decades, Torrid has developed the requisite design and engineering expertise for the highly technical bra category through a rigorous in-house research and development process.
Torrid Holdings Inc. | FY 2025 Form 10-K | 1
Product Design and Development
We are dedicated to creating youthful, sexy and commercially relevant products that cater specifically to the woman in our size range. Our in-house design, development and merchandising teams work tirelessly to bring our vision to life under our portfolio of brands, including Torrid®, Torrid Curve®, CURV®, and Lovesick®. Our products are exclusive to us and provide a consistent quality and fit that we believe she cannot find elsewhere. Our product development is led by a team of highly skilled designers, artists and product engineers. Our core competency is our differentiated, market-leading fit that we achieve through the following strategies:
•Laser focus on fit across our entire organization;
•Differentiated technical fit created through building and continuously refining a database of fit specifications derived from testing, measuring and cataloging garments on our fit models;
•Proprietary fabrics specifically engineered to enhance the fit;
•Fit all of our products on fit models and our staff, not mannequins; and
•We often test new fabrics, new silhouettes and new product lines on our staff and community of loyal customers before launch.
Additionally, we employ a data-driven approach to design and product development, proactively and quickly incorporating sales and operational performance information alongside customer feedback from thousands of product reviews, and our ongoing dialogue with customers through social media and customer surveys.
Merchandise Planning
Our strategy is built around a consistent and stable base of Core products that provide our customer with year-round style. At the same time, we introduce new lines of merchandise approximately 16 times per year, thus providing a consistent flow of fresh merchandise to keep our customer engaged, encourage repeat business and attract new customers.
We regularly use the depth and breadth of our data to assess sales, market trends and new product development to inform purchasing decisions. As a result, we have the flexibility to react quickly to product performance, make in-season inventory purchasing adjustments where possible and to respond to the latest sales trends by ordering or re-ordering as appropriate. Further, we utilize a read-and-react testing approach, with small purchase quantities, to introduce our new product offering, minimizing fashion risk. This strategy also allows us to mitigate inventory risk, particularly for new products or styles, while simultaneously providing our customers access to current fashion.
Customers
Our typical customer is an employed, youthful woman between the ages of approximately 30 and 44 years old with above-average annual household income, and wears sizes 10 to 30 (average of size 18). Approximately half of our customers are under 40 years old and the ethnic composition of our customer base largely parallels that of the U.S. population. She leads a busy life, is short on time and wants a curated presentation of quality apparel, intimates and accessories that are on trend and fit her well.
Torrid Loyalty and Torrid Credit Card Programs
We drive customer loyalty and engagement through our three-tier loyalty program, Torrid Rewards. Members earn one point for every dollar spent and receive a reward for every 250 points collected. The program is tiered by annual customer spend and offers incremental perks with each tier. Torrid Insider members are those who spend up to $499 annually, while members of Torrid Loyalist spend $500+ annually and Torrid VIP spend $1,000+ annually. We inspire loyalty by continuously engaging with our loyalty members through birthday gifts, social media, dedicated customer service lines and exclusive events. Members of the top two tiers of our loyalty program, Torrid VIP and Loyalist, are our most loyal customers who purchase from us more often and spend significantly more than the average customer, accounting for an outsized share of net sales.
Additionally, we provide our customers with access to our Torrid Credit Card Program through which customers receive points, discounts and other perks. Torrid Credit Card holders are among our most loyal and valuable customers. Our credit card program encourages customer loyalty, serves as a valuable source for data and allows us to further invest in marketing efforts while limiting exposure to incremental credit risk as our bank partner substantially manages all administrative processes, including underwriting, and bears a portion of the credit balance risk.
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Torrid Rewards and our Torrid Credit Card program provide us with a strong ability to attribute sales and behavioral data to individual customers, which informs our decision-making process.
Unified Commerce Platform
Through our unified commerce platform, which includes our e-Commerce and retail stores, we deliver a seamless brand experience to our customers wherever and whenever she chooses to shop. We are agnostic to the channel where our customers choose to shop, as we are highly profitable across both e-Commerce and store channels. We deliver a consistent brand message by coordinating our strategies across channels, which we believe influences our customers’ buying decisions. This customer-centric strategy enhances customer acquisition, retention and customer lifetime value. Our e-Commerce and store channels complement and drive traffic to one another, creating more loyal omni-channel customers.
e-Commerce
Our e-Commerce channel is central to our unified commerce platform. Our online platform provides customers with a highly engaging shopping experience featuring access to our full product assortment, an aesthetically rich and easily navigable website, and seamless ordering and fulfillment. Additionally, we successfully use our e-Commerce platform to expand our selection of styles, colors and merchandise meaningfully beyond what is available in our stores, making the online shopping experience highly engaging and additive to our in-store experience. Our website and mobile app feature updates on new collections, guidance on how to wear and put together outfits and a selection of web-only exclusives, all of which facilitate customer engagement and interaction.
We aim to be wherever she is and make the transaction process as convenient as possible. As a result, a majority of our e-Commerce orders and a material portion of all orders are placed directly from her phone. The functionality and features of our mobile app enable us to deliver enhanced personalization such as allowing her to find her recommended size while suggesting complementary items to expedite purchase decisions and increase frequency and order size.
Stores
Even as we optimize our store footprint, we continue to believe that our stores are highly valuable strategic assets that play an important role in our customer acquisition strategy as many of our new customer relationships begin in our stores. We believe our remaining stores are located in the most impactful locations and enhance brand awareness, drive traffic to our e-Commerce platform and encourage customers to shop across multiple channels of our unified commerce platform. We provide a sophisticated presentation of products that has an emphasis on outfits, which presents creative styling ideas to our customer and encourages incremental spend. Our stores include large, comfortable fitting rooms with features, such as cooling fans, that are specifically suited for our customers’ needs. Additionally, our stores offer customers the opportunity to connect with a like-minded community, through exclusive in-store events and interactions with our store associates, who act as brand ambassadors and are often customers themselves.
As of January 31, 2026, we operated 483 stores in the U.S., Puerto Rico and Canada. Our stores are located primarily in premium malls, shopping plazas, lifestyle centers and outlet locations. Our stores are designed to deliver an immersive fit discovery experience and serve as desirable customer destinations. Our average store size is approximately 3,200 square feet.
People and Culture
Our management is committed to attracting, developing and retaining talent, and supporting a company culture of belonging where our associates and customers feel valued. Our work environment is open and collaborative with an organizational structure that facilitates efficient decision making. Many of our employees are also customers who believe in our mission to empower curvy women to love the way they look and feel. We strive to promote a welcoming and inclusive culture throughout our Company.
Torrid Holdings Inc. | FY 2025 Form 10-K | 3
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Financial statements
data from SEC XBRL filings. Values are as-reported; restatements supersede originals. Values reported in .
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion summarizes the significant factors affecting the consolidated operating results, financial condition, liquidity and cash flows of our Company as of and for the periods presented below. The following discussion and analysis should be read in conjunction with the consolidated financial statements and the related notes thereto included elsewhere in this Form 10-K. This discussion contains forward-looking statements that are based on the beliefs of our management, as well as assumptions made by, and information currently available to, our management. Actual results could differ materially from those discussed in or implied by forward-looking statements as a result of various factors, including those discussed below and elsewhere in this Form 10-K, particularly in the section entitled “Risk Factors.”
Overview
We are a direct-to-consumer brand in North America dedicated to offering a diverse assortment of stylish apparel, intimates, and accessories skillfully designed for the curvy woman. Specializing in sizes 10 to 30, our primary focus is on providing fashionable, comfortable, and affordable options that meet the unique needs of our customers. Our extensive collection features high quality merchandise, including tops, bottoms, denim, dresses, intimates, activewear, footwear, and accessories. Our products are exclusive to us and each product is meticulously crafted to cater to the needs of the curvy woman, empowering her to love the way she looks and feels. Our collections are artfully curated to suit all aspects of our customers’ lives, including casual weekends, work, dressy and special occasions. Understanding the importance of affordability, we aim to keep our prices reasonable without compromising on quality. This allows us to build a meaningful connection with our customers, distinguishing us from other brands that often overlook plus- and mid-size consumers. Our brand experience and product offerings establish us as a differentiated and reliable choice for plus- and mid-size customers, which we believe sets us apart in the market. We strive to be everything our customer needs in her closet, consistently delivering products that make her feel confident and stylish.
We have implemented a retail store optimization strategy to better align our distribution with the demands of our customers who have increasingly demonstrated a preference for our online experience. We believe this strategy will enhance our customer experience, significantly reduce our cost structure, and improve working capital and cash flow generation, allowing us to reinvest more aggressively in customer reactivation and acquisition initiatives to support long-term revenue growth. We closed 151 stores in fiscal year 2025 and intend to target up to 40 additional store closures in fiscal year 2026.
Key Financial and Operating Metrics
We use the following metrics to assess the progress of our business, inform how we allocate our time and capital, and assess the near-term and longer-term performance of our business.
| Fiscal Year Ended | |||||||||||||||||
| January 31, 2026 | February 1, 2025 | February 3, 2024 | |||||||||||||||
Active customers (in thousands, as of end of period)(A) | 3,441 | 3,656 | 3,761 | ||||||||||||||
Net sales per active customer(A) | $ | 291 | $ | 302 | $ | 306 | |||||||||||
Comparable sales(B) | (7) | % | (5) | % | (12) | % | |||||||||||
| Number of stores (as of end of period) | 483 | 634 | 655 | ||||||||||||||
Net (loss) income (in thousands) | $ | (7,034) | $ | 16,318 | $ | 11,619 | |||||||||||
Adjusted EBITDA(C) (in thousands) | $ | 63,577 | $ | 109,120 | $ | 106,219 | |||||||||||
(A)Active customers and net sales per active customer calculated on a preceding four quarters basis.
(B)The computation of fiscal year 2024 comparable sales compares sales in fiscal year 2024 to sales in the 52-week period ended February 3, 2024. The computation of fiscal year 2023 comparable sales compares sales in fiscal year 2023 to sales in the 53-week period ended February 4, 2023.
(C)Refer to “Results of Operations” for a reconciliation of net (loss) income to Adjusted EBITDA.
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Active Customers. We define an active customer as a distinct, identifiable customer who has completed at least one purchase transaction either in-store or online in the preceding four quarters. We are able to identify the vast majority of our customers primarily through our robust loyalty program, which gives us access to extensive customer and sales data. We have improved our customer tracking capabilities and have maintained the proportion of our net sales attributable to active customers over time. The proportion of net sales, excluding PLCC Funds (as defined below), that we are able to attribute to active customers was 97% for each of fiscal years 2025, 2024 and 2023. We view the number of active customers as a key indicator of our performance, the reach of our e-Commerce and stores platform, the value proposition and consumer awareness of our brand and our customers’ desire to purchase our products.
Net Sales per Active Customer. We define net sales per active customer for any given period as the net sales in the preceding four quarters, divided by the total number of active customers at the end of that period. We view net sales per active customer as a key indicator of our customers’ purchasing patterns, including their initial and repeat purchase behavior, and we continue to closely monitor this metric each year.
Comparable Sales. We define comparable sales for any given period as the sales of our e-Commerce operations and stores that we have included in our comparable sales base during that period. We include a new store in our comparable sales base after it has been open for 15 full fiscal months. If a store is closed during a fiscal year, it is only included in the computation of comparable sales for the full fiscal months in which it was open. We also determine when certain store remodels and relocations are reintegrated into our comparable sales base. The computation of fiscal year 2024 comparable sales compares sales in fiscal year 2024 to sales in the 52-week period ended February 3, 2024. The computation of fiscal year 2023 comparable sales compares sales in fiscal year 2023 to sales in the 53-week period ended February 4, 2023. Partial fiscal months are excluded from the computation of comparable sales. We apply current year foreign currency exchange rates to both current year and prior year comparable sales to remove the impact of foreign currency fluctuation and achieve a consistent basis for comparison. Comparable sales allow us to evaluate how our unified commerce business is performing exclusive of the effects of non-comparable sales and new store openings.
Number of Stores. Store count reflects all stores open at the end of a reporting period.
Adjusted EBITDA. Adjusted EBITDA is a supplemental measure of our operating performance that is neither required by, nor presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and our calculation thereof may not be comparable to similarly titled measures reported by other companies. Adjusted EBITDA represents GAAP net income (loss) plus interest expense less interest income, net of other (income) expense, plus provision for less (benefit from) income taxes, depreciation and amortization (“EBITDA”), and share-based compensation, noncash deductions and charges and other expenses. We believe Adjusted EBITDA facilitates operating performance comparisons from period to period by isolating the effects of certain items that vary from period to period without any correlation to ongoing operating performance. We also use Adjusted EBITDA as one of the primary methods for planning and forecasting the overall expected performance of our business and for evaluating on a quarterly and annual basis actual results against such expectations. Further, we recognize Adjusted EBITDA as a commonly used measure in determining business value and, as such, use it internally to report and analyze our results and as a benchmark to determine certain non-equity incentive payments made to executives.
Adjusted EBITDA has limitations as an analytical tool. This measure is not a measurement of our financial performance under GAAP and should not be considered in isolation or as an alternative to or substitute for net income, income from operations or any other performance measures determined in accordance with GAAP or as an alternative to cash flows from operating activities as a measure of our liquidity. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. Among other limitations, Adjusted EBITDA does not reflect:
•interest expense;
•interest income, net of other (income) expense;
•(benefit from) provision for income taxes;
•depreciation and amortization;
•share-based compensation;
Torrid Holdings Inc. | FY 2025 Form 10-K | 40
•noncash deductions and charges; and
•other expenses.
Factors Affecting Our Performance
We believe that our performance and future success depend on a number of factors that present significant opportunities for us but also pose risks and challenges, including those discussed below and elsewhere in this Form 10-K and in the section titled “Risk Factors.”
Customer Acquisition and Retention. Our success is impacted not only by efficient and profitable customer acquisition, but also by our ability to retain customers and encourage repeat purchases. It is important to maintain reasonable costs for these marketing efforts relative to the net sales and profit we expect to derive from customers. Failure to effectively attract customers on a cost-efficient basis would adversely impact our profitability and operating results. Requirements for consumer disclosures regarding privacy practices and application tracking transparency framework that requires opt-in consent for certain types of tracking has increased the difficulty and cost of acquiring and retaining customers. These changes may adversely affect our results of operations.
Customer Migration from Single to Omni-channel. We have a history of converting customers from single-channel customers to omni-channel customers, defined as active customers who shopped both online and in-store within the last 12 months. Customers that shop across multiple channels purchase from us more frequently and spend approximately 3.5 times more per year than our single-channel customer.
Overall Economic Trends. Our results of operations during any given period are often impacted by the overall economic conditions in the markets in which we operate. Consumer purchases of clothing generally remain constant or may increase during stable economic periods and decline during recessionary periods, inflationary periods and other periods when disposable income is adversely affected. Recent historic high rates of inflation have led to a softening of consumer demand. We have encountered inflation on our wages, transportation and product costs, and a material increase in these costs without any meaningful offsetting price increases may reduce our future profits. Government actions in various countries relating to tariffs, particularly countries in the East and Southeast Asia region, have introduced significant uncertainty to the current U.S. trade environment resulting in increased cost of goods sold and impacted gross margins. Beginning in early 2025, the U.S. government announced a series of broad import tariff increases, including new and expanded duties on goods imported from major sourcing countries that collectively supply a significant portion of our imports. The tariff environment has remained highly fluid, with executive orders, temporary pauses, partial reversals, and ongoing negotiations between the U.S. and its trading partners creating continuing uncertainty. On February 20, 2026, the U.S. Supreme Court issued a ruling striking down certain tariffs previously imposed under the IEEPA and following the Supreme Court’s decision, the U.S. presidential administration announced its intention to invoke other laws to collect tariffs and announced new tariffs on imports from all countries, in addition to any existing non-IEEPA tariffs. The degree of our exposure is dependent on (among other things) the countries in which the merchandise is manufactured, rates imposed, and timing of the tariffs. Higher tariffs may adversely impact our results.
Demographic Changes. The growth of our business is impacted, in part, by the size of the plus- and mid-size population. Slower or negative growth in this demographic, specific to certain geographic markets, income levels, the increasing use of GLP-1 medications or overall, could adversely affect our results of operations.
Growth in Brand Awareness. We intend to continue investing in our brand, with a specific focus on growing brand awareness, customer engagement, and conversion through targeted investments in performance and brand marketing. We have made significant historical investments to strengthen the Torrid brand through our marketing efforts, brand partnerships, events and expansion of our social media presence. If we fail to cost-effectively promote our brand or convert impressions into new customers, our net sales growth and profitability may be adversely affected.
Torrid Holdings Inc. | FY 2025 Form 10-K | 41
Inventory Management. Our strategy is built around a base of core products that provide our customer with year-round style. At the same time, we introduce new lines of merchandise approximately 16 times per year, thus providing a consistent flow of fresh merchandise to keep our customer engaged, encourage repeat business and attract new customers. We employ a data-driven approach to design and product development, proactively and quickly incorporating sales and operational performance information alongside customer feedback from thousands of product reviews. We engage in ongoing dialogue with customers through social media and customer surveys. Although we intend to continue to tightly manage our inventory levels, shifts in these levels may result in fluctuations in the amount of regular price sales, markdowns, and merchandise mix, as well as gross margin.
Investments. We have invested significantly to strengthen our business, including augmenting leadership across our organization and enhancing our infrastructure and technology in order to realize growth. We anticipate that a significant portion of our operating expenses will be attributable to our spending on advertising and marketing and hiring additional personnel primarily in marketing, product design and development, merchandising, technology, operations, customer service and general and administrative functions. We are strategically working to rebalance our store footprint, aiming for an optimal split among malls, outdoor centers and online. We will also continue to make investments to improve the customer experience both in-store and online. We believe that such investments will increase the number and loyalty of our customers and, as a result, yield positive financial performance in the long term.
Seasonality. While seasonality frequently impacts businesses in the retail sector, our business is generally not seasonal. Accordingly, our net sales do not fluctuate as significantly as those of other brands and retailers from quarter to quarter and any modest seasonal effect does not significantly change the underlying trends in our business. Additionally, we do not generate an outsized share of our net sales or Adjusted EBITDA during the holiday season. Typically, our Adjusted EBITDA generation is strongest in the first half of the year as we benefit from more favorable product margins, lower advertising and lower shipping expenses relative to the second half of the year. The lack of net sales seasonality provides structural cost advantages relative to peers, including reduced staffing cyclicality and seasonal distribution capacity needs.
Impact of Infectious Disease Outbreaks. Infectious disease outbreaks may cause general business disruption worldwide which could directly or indirectly impact our business, results of operations, cash flows, and financial condition. This could have a negative impact on our business including, but not limited to, closure requirements with respect to some or all of our physical locations, changes in consumer behavior, difficulties attracting and retaining employees and supply chain disruptions.
Components of Our Results of Operations
Net Sales. Net sales reflects our revenues from the sale of our merchandise, shipping and handling revenue received from e-Commerce sales, royalties, profit-sharing and marketing and promotional funds from the use of private label credit cards (“PLCC Funds”), and gift card breakage income, less returns, discounts and loyalty points/awards. Revenue from our stores is recognized at the time of sale and revenue from our e-Commerce channel is recognized upon shipment of the merchandise to the customer; except in cases where the merchandise is shipped to a store and revenue is recognized when the customer retrieves the merchandise from the store. Net sales are impacted by the size of our active customer base, product assortment and availability, marketing and promotional activities and the spending habits of our customers. Net sales are also impacted by the migration of single-channel customers (i.e., customers shopping only in-store or online) to omni-channel customers (i.e., customers shopping both in-store and online), who on average spend significantly more than single-channel customers in a given year.
Gross Profit. Gross profit is equal to our net sales less cost of goods sold. Our cost of goods sold includes merchandise costs, freight, inventory shrinkage, payroll expenses associated with the merchandising department, distribution center expenses and store occupancy expenses, including rent, common area maintenance charges, real estate taxes and depreciation. Merchandising payroll costs and store occupancy costs included within cost of goods sold are largely fixed and do not necessarily increase as volume increases. We review our inventory levels on an ongoing basis in order to identify slow-moving merchandise and generally use markdowns to clear that merchandise. The timing and level of markdowns are driven primarily by customer acceptance of our merchandise. The primary drivers of our merchandise costs include the raw materials, labor in the countries where we source our merchandise, customs duties, and logistics costs.
Selling, General and Administrative Expenses. Selling, general and administrative expenses include all operating costs not included in cost of goods sold or marketing expenses.
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Marketing Expenses. We continue to make investments in marketing in an effort to grow and retain our active customer base and increase our brand awareness. Marketing expenses consist primarily of (i) targeted online performance marketing costs, such as retargeting, paid search/product listing advertising, and social media advertisements, (ii) store and brand marketing, public relations and photographic production designed to acquire, retain and remain connected to customers and (iii) payroll and benefits expenses associated with our marketing team.
Interest Expense. Interest expense consists primarily of interest expense and other fees associated with our ABL Facility (as defined below) and Amended Term Loan Credit Agreement (as defined below).
Provision for (Benefit from) Income Taxes. Our provision for (benefit from) income taxes consists of an estimate of federal and state income taxes based on enacted federal and state tax rates, as adjusted for allowable credits, deductions and uncertain tax positions.
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Results of Operations
Our fiscal year ends on the Saturday nearest to January 31 and each fiscal year is generally comprised of four 13-week quarters (although in years with 53 weeks, the fourth quarter is comprised of 14 weeks). Fiscal years 2025 and 2024 were 52-week years and fiscal year 2023 was a 53-week year. Fiscal years are identified according to the calendar year in which they begin. For example, references to “fiscal year 2025” or similar references refer to the fiscal year ended January 31, 2026. A discussion regarding our results of operations for fiscal year 2025 compared to fiscal year 2024 is presented below. A discussion regarding our results of operations for fiscal year 2024 compared to fiscal year 2023 can be found under Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in our Annual Report on Form 10-K for the fiscal year ended February 1, 2025, filed with the SEC on April 1, 2025.
Fiscal Year 2025 Compared to Fiscal Year 2024
The following table summarizes our consolidated results of operations for the periods indicated (dollars in thousands):
| Fiscal Year Ended | |||||||||||||||||||||||
| January 31, 2026 | % of Net Sales | February 1, 2025 | % of Net Sales | ||||||||||||||||||||
Net sales | $ | 1,000,092 | 100.0 | % | $ | 1,103,737 | 100.0 | % | |||||||||||||||
| Cost of goods sold | 652,130 | 65.2 | 690,266 | 62.5 | |||||||||||||||||||
| Gross profit | 347,962 | 34.8 | 413,471 | 37.5 | |||||||||||||||||||
| Selling, general and administrative expenses | 269,182 | 26.9 | 302,032 | 27.4 | |||||||||||||||||||
| Marketing expenses | 57,378 | 5.7 | 54,231 | 4.9 | |||||||||||||||||||
| Income from operations | 21,402 | 2.2 | 57,208 | 5.2 | |||||||||||||||||||
| Interest expense | 31,844 | 3.2 | 35,633 | 3.2 | |||||||||||||||||||
| Interest income, net of other (income) expense | (882) | (0.1) | (28) | 0.0 | |||||||||||||||||||
| (Loss) income before income taxes | (9,560) | (0.9) | 21,603 | 2.0 | |||||||||||||||||||
| (Benefit from) provision for income taxes | (2,526) | (0.3) | 5,285 | 0.5 | |||||||||||||||||||
| Net (loss) income | $ | (7,034) | (0.6) | % | $ | 16,318 | 1.5 | % | |||||||||||||||
The following table provides a reconciliation of net (loss) income to Adjusted EBITDA for the periods presented (in thousands):
| Fiscal Year Ended | |||||||||||
| January 31, 2026 | February 1, 2025 | ||||||||||
| Net (loss) income | $ | (7,034) | $ | 16,318 | |||||||
| Interest expense | 31,844 | 35,633 | |||||||||
| Interest income, net of other (income) expense | (882) | (28) | |||||||||
| (Benefit from) provision for income taxes | (2,526) | 5,285 | |||||||||
Depreciation and amortization(A) | 34,618 | 35,721 | |||||||||
Share-based compensation(B) | 5,208 | 7,634 | |||||||||
Noncash deductions and charges(C) | 347 | 347 | |||||||||
Other expenses(D) | 2,002 | 8,210 | |||||||||
| Adjusted EBITDA | $ | 63,577 | $ | 109,120 | |||||||
(A)Depreciation and amortization excludes amortization of debt issuance costs and original issue discount that are reflected in interest expense.
(B)Share-based compensation in fiscal years 2025 and 2024 includes $0.3 million and $3.0 million, respectively, for awards that will be settled in cash as they are accounted for similar to awards settled in shares in accordance with ASC 718, Compensation—Stock Compensation.
(C)Noncash deductions and charges includes noncash losses on property and equipment disposals and the net impact of noncash rent expense.
(D)Other expenses include severance costs for certain key management positions, certain transaction and litigation fees (including certain settlement costs), and the reimbursement of certain management expenses, primarily for travel, incurred by Sycamore on our behalf, which are not considered to be part of our core business.
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Net Sales
Net sales for fiscal year 2025 decreased $103.6 million, or 9.4%, to $1,000.1 million from $1,103.7 million for fiscal year 2024. This decrease was primarily driven by a decrease in sales transactions and sales transaction values. The total number of stores we operate decreased by 151 stores, or 23.8%, to 483 stores at the end of fiscal year 2025, from 634 stores at the end of fiscal year 2024, primarily due to the implementation of our retail store optimization strategy.
Gross Profit
Gross profit for fiscal year 2025 decreased $65.5 million, or 15.8%, to $348.0 million, from $413.5 million for fiscal year 2024. Gross profit as a percentage of net sales decreased 2.7% to 34.8% in fiscal year 2025 from 37.5% in fiscal year 2024. The decrease in gross profit was primarily driven by a decrease in net sales. The decrease in gross profit as a percentage of net sales was primarily driven by a decrease in net sales, increased merchandising payroll costs and store depreciation expense, and the deleverage of store occupancy costs as a result of lower net sales. In addition, new and increased tariffs on goods from the countries where we manufacture our merchandise had a negative impact on our gross profit for fiscal year 2025.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for fiscal year 2025 decreased $32.9 million, or 10.9%, to $269.2 million, from $302.0 million for fiscal year 2024. The decrease was primarily due to a $14.4 million decrease in store and e-Commerce payroll costs, a $6.3 million decrease in performance bonuses, a $5.6 million decrease in other store operating costs, a $4.1 million decrease in headquarters general and administrative expenses, and a $2.4 million decrease in share-based compensation. Selling, general and administrative expenses as a percentage of net sales decreased 0.5% to 26.9% in fiscal year 2025 from 27.4% in fiscal year 2024. The decrease was primarily driven by decreased store and e-Commerce payroll costs, performance bonuses, other store operating costs, and share-based compensation, partially offset by the deleverage of headquarters general and administrative expenses as a result of lower net sales.
Marketing Expenses
Marketing expenses for fiscal year 2025 increased $3.1 million, or 5.8%, to $57.4 million, from $54.2 million for fiscal year 2024. Marketing expenses as a percentage of net sales increased 0.8% to 5.7% in fiscal year 2025 from 4.9% in fiscal year 2024. The increase in both marketing expenses and marketing expenses as a percentage of net sales was primarily driven by increased retargeting, photographic production, social media spend, and payroll expenses associated with our marketing team, partially offset by decreased spend on our model search campaign.
Interest Expense
Interest expense was $31.8 million for fiscal year 2025, compared to $35.6 million for fiscal year 2024. The decrease was primarily due to a decrease in the variable interest rate and a lower balance on the Amended Term Loan Credit Agreement resulting from principal payments.
Benefit from/Provision for Income Taxes
The benefit from income taxes for fiscal year 2025 was $2.5 million and the provision for income taxes for fiscal year 2024 was $5.3 million. Our effective tax rate was 26.4% for fiscal year 2025 and 24.5% for fiscal year 2024. The increase in the effective tax rate for fiscal year 2025 as compared to fiscal year 2024 was primarily due to a decrease in our uncertain tax benefits and increases in the amount of non-deductible compensation for covered employees and non-deductible share-based compensation for fiscal year 2025.
Liquidity and Capital Resources
Cash Sources
Our business relies on cash flows from operations as our primary source of liquidity. We do, however, have access to additional liquidity, if needed, through borrowings under our ABL Facility.
Torrid Holdings Inc. | FY 2025 Form 10-K | 45
As of January 31, 2026, we had $20.0 million in cash and cash equivalents and $303.4 million of outstanding indebtedness, net of unamortized original issue discount and financing costs, of which $31.0 million consists of borrowings on our ABL Facility, which is accruing interest at an underlying variable rate of 7%, and $272.4 million consists of term loans under the Amended Term Loan Credit Agreement, which is accruing interest at an underlying variable rate of 9%. As of January 31, 2026, we had access to $64.9 million in additional liquidity from our ABL Facility, net of outstanding letters of credit.
ABL Facility
In May 2015, we entered into a credit agreement for a senior secured asset-based revolving credit facility (as amended and restated in October 2017 and as amended in June 2019, September 2019, June 2021, April 2023, and August 2025) with Bank of America, N.A., as agent, and the lenders party thereto (the “ABL Facility”). Under the ABL Facility, the aggregate commitments available are $150.0 million (subject to a borrowing base) and we have the right to request additional commitments up to $50.0 million plus the aggregate principal amount of any permanent principal reductions we may take (subject to customary conditions precedent). In August 2025, the maturity date of the principal amount of the outstanding loans was extended from June 14, 2026 to the earlier of (i) August 1, 2030 and (ii) the date that is 91 days prior to the maturity of any material indebtedness (as defined in the ABL Facility). The ABL Facility currently would mature 91 days prior to June 14, 2028, the maturity date of the Amended Term Loan Credit Agreement.
The ABL Facility requires us to maintain a fixed charge coverage ratio (as defined by the ABL Facility) of at least 1.00 to 1.00 when a covenant compliance event occurs. A covenant compliance event occurs if we fail to maintain certain specified availability (as defined by the ABL Facility) of at least the greater of 10% of the loan cap, as defined by the ABL Facility, and $7.0 million. If we fail to maintain the fixed charge coverage ratio defined by the ABL Facility, the lenders may declare the unpaid principal amount of all outstanding loans and all interest accrued and unpaid thereon to be immediately due and payable, among other remedies available to the lenders. The ABL Facility contains a number of other covenants that, among other things and subject to certain exceptions, will restrict our ability and the ability of our subsidiaries to: incur additional indebtedness; pay dividends on our capital stock or redeem, repurchase or retire our capital stock or our other indebtedness; make investments, loans and acquisitions; engage in transactions with our affiliates; sell assets, including capital stock of our subsidiaries; alter the business we conduct; consolidate or merge; and incur liens.
As of January 31, 2026, we did not trigger a covenant compliance event and were compliant with our covenants under the ABL Facility.
Amended Term Loan Credit Agreement
In June 2021, we entered into a term loan credit agreement (as amended in May 2023) with Bank of America, N.A., as agent, and the lenders party thereto (the “Amended Term Loan Credit Agreement”). The Amended Term Loan Credit Agreement provides for term loans in an initial aggregate amount of $350.0 million and has a maturity date of June 14, 2028. The Amended Term Loan Credit Agreement is subject to fixed mandatory quarterly principal amortization payments until the maturity date of approximately $4.4 million.
The Amended Term Loan Credit Agreement also contains a number of covenants that, among other things and subject to certain exceptions, will restrict our ability and the ability of our subsidiaries to: create, incur or assume liens on our assets or property; incur additional indebtedness; issue preferred or disqualified stock; consolidate or merge; sell assets; pay dividends or make distributions, make investments, or engage in transactions with our affiliates.
As of January 31, 2026, we were compliant with our covenants under the Amended Term Loan Credit Agreement.
Refer to “Note 10—Debt” in our consolidated financial statements included elsewhere in this Form 10-K for more information on the components of our debt.
Torrid Holdings Inc. | FY 2025 Form 10-K | 46
Cash Uses
Our primary cash needs are for merchandise inventories, payroll, rent for our stores, headquarters and distribution center, capital expenditures associated with opening new stores and updating existing stores, logistics and information technology. We also need cash to fund our interest and principal payments on the Amended Term Loan Credit Agreement and ABL Facility and make discretionary repurchases of our common stock. The most significant components of our working capital are cash and cash equivalents, merchandise inventories, prepaid expenses and other current assets, accounts payable, accrued and other current liabilities and operating lease liabilities. We believe that cash generated from operations and the availability of borrowings under our ABL Facility or other financing arrangements will be sufficient to meet working capital requirements and anticipated capital expenditures for at least the next 12 months. There can be no assurance, however, that our business will generate sufficient cash flows from operations or that future borrowings will be available under our ABL Facility or otherwise to enable us to service our indebtedness, or to make capital expenditures in the future. Our future operating performance and our ability to service or extend our indebtedness will be subject to future economic conditions and to financial, business and other factors, many of which are beyond our control.
Share Repurchase
On June 23, 2025, we entered into a stock repurchase agreement with Sycamore, whereby we agreed to purchase $20.0 million of shares of our common stock in a private transaction at a price per share equal to $3.32 (which was equal to the price paid by the underwriters, net of underwriting discounts and commissions, in Sycamore’s concurrent sale of shares of our common stock in a public offering). Accordingly, we repurchased 6,030,908 shares of common stock, which are being held as treasury stock.
Material Cash Requirements
The following table summarizes current and long-term material cash requirements as of January 31, 2026 (in thousands):
| Payments Due by Period | |||||||||||||||||||||||||||||
| Total | <1 Year | 1-3 Years | 3-5 Years | Thereafter | |||||||||||||||||||||||||
Amended Term Loan Credit Agreement Obligations(1) | $ | 275,625 | $ | 17,500 | $ | 258,125 | $ | — | $ | — | |||||||||||||||||||
Interest Expense on Amended Term Loan Credit Agreement Obligations(1)(2) | 57,215 | 25,264 | 31,951 | — | — | ||||||||||||||||||||||||
| Purchase Obligations | 210,164 | 210,164 | — | — | — | ||||||||||||||||||||||||
Letters of Credit and Other Obligations(3) | 56,064 | 38,260 | 17,354 | 450 | — | ||||||||||||||||||||||||
Operating Lease Obligations(4) | 175,312 | 41,369 | 53,863 | 30,947 | 49,133 | ||||||||||||||||||||||||
| Total | $ | 774,380 | $ | 332,557 | $ | 361,293 | $ | 31,397 | $ | 49,133 | |||||||||||||||||||
(1)Amounts assume that the Amended Term Loan Credit Agreement is paid upon maturity and does not consider any variable mandatory principal prepayments or optional principal prepayments which we may make in the future. See “Note 10—Debt” contained in the consolidated financial statements and notes, included elsewhere in this Form 10-K for additional disclosure related to our debt obligations.
(2)Assumes an interest rate of approximately 9% per annum, consistent with the interest rate at January 31, 2026. See “Note 10—Debt” contained in the consolidated financial statements and notes, included elsewhere in this Form 10-K for additional disclosure related to our debt obligations.
(3)Amounts listed above do not include cash obligations related to relocation expenses in connection with the involuntary separation of certain employees due to the uncertainty regarding the amount of such expenses.
(4)Includes estimated annual future minimum occupancy payments under operating leases including minimum base rents, common area maintenance charges and heating, ventilation and cooling charges, for lease terms that include periods covered by options to extend some of our leases, as we are reasonably certain to exercise those options. Options to terminate our leases have not been included in any lease terms as we are not reasonably certain to exercise those options. See “Note 11—Leases” contained in the consolidated financial statements and notes, included elsewhere in this Form 10-K for additional disclosure related to operating lease obligations.
In the material cash requirements table above, we have not included: (i) the amounts outstanding on the ABL Facility of $31.0 million, plus accrued interest thereon, due to the uncertainty regarding the timing of future borrowings and repayments, (ii) any income tax audit settlement payments due in less than one year as we do not have any open income tax audits as of January 31, 2026 or any material gross unrecognized tax benefits for which the statutes of limitations are expected to expire in fiscal year 2026, and (iii) cash settlements to the respective tax authorities related to noncurrent unrecognized tax benefits of $0.8 million due to the uncertainty regarding the timing of future cash outflows of such settlements.
Torrid Holdings Inc. | FY 2025 Form 10-K | 47
Cash Flow Analysis
A summary of operating, investing and financing activities are shown in the following table (in thousands):
| Fiscal Year Ended | |||||||||||||||||
| January 31, 2026 | February 1, 2025 | February 3, 2024 | |||||||||||||||
| Net cash (used in) provided by operating activities | $ | (13,013) | $ | 77,390 | $ | 42,771 | |||||||||||
| Net cash used in investing activities | $ | (8,852) | $ | (14,392) | $ | (26,002) | |||||||||||
| Net cash used in financing activities | $ | (7,176) | $ | (24,500) | $ | (18,517) | |||||||||||
Net Cash Used In/Provided By Operating Activities
Operating activities consist primarily of net income adjusted for noncash items, including depreciation and amortization and share-based compensation, the effect of working capital changes and taxes paid.
Net cash used in operating activities during fiscal year 2025 was $13.0 million compared to net cash provided by operating activities of $77.4 million for fiscal year 2024. The decrease in net cash provided by operating activities during fiscal year 2025 was primarily as a result of decreases in accounts payable, accrued expenses and other current liabilities, and net income, partially offset by a decrease in inventory. The decreases in accounts payable and accrued expenses and other current liabilities were primarily driven by a decrease in inventory purchases before the current period end compared to the prior period end and a decrease in accrued payroll and related expenses.
Net cash provided by operating activities during fiscal year 2024 was $77.4 million compared to $42.8 million during fiscal year 2023. The increase in cash provided by operating activities during fiscal year 2024 was primarily as a result of an increase in net income of $4.7 million, and increases in accounts payable and accrued expenses, due to higher inventory purchases, performance bonuses and legal fees compared to prior year, and an increase in other current liabilities. The increase in cash provided by operating activities was partially offset by decreases in income taxes payable, inventory write-downs and deferred compensation.
Net Cash Used In Investing Activities
Typical investing activities consist primarily of capital expenditures for growth (new store openings, relocations and major remodels), store maintenance (minor store remodels and investments in store fixtures), and infrastructure to support the business related primarily to information technology, our headquarters facility and our West Jefferson, Ohio distribution center.
Net cash used in investing activities was $8.9 million and $14.4 million in fiscal years 2025 and 2024, respectively. The decrease in net cash used in investing activities was primarily a result of a decrease in capital expenditures due to fewer new store openings and remodels, partially offset by an increased investment in store fixtures and equipment during fiscal year 2025, compared to fiscal year 2024.
Net cash used in investing activities was $14.4 million and $26.0 million in fiscal years 2024 and 2023, respectively. The decrease in cash used in investing activities was primarily as a result of a decrease in capital expenditures related to the opening of new stores and investment in our West Jefferson, Ohio distribution center during fiscal year 2024, compared to fiscal year 2023.
Net Cash Used In Financing Activities
Financing activities consist primarily of (i) borrowings and repayments related to our ABL Facility, (ii) borrowings and repayments related to the Amended Term Loan Credit Agreement and (iii) repurchases and retirement of our common stock.
Net cash used in financing activities was $7.2 million and $24.5 million for fiscal years 2025 and 2024, respectively. The decrease in net cash used in financing activities is primarily due to an increase in net borrowings related to the ABL Facility, partially offset by the repurchase of our common stock.
Torrid Holdings Inc. | FY 2025 Form 10-K | 48
Net cash used in financing activities was $24.5 million and $18.5 million for fiscal years 2024 and 2023, respectively. The increase in net cash used in financing activities is primarily as a result of a $6.2 million increase in net payments on the ABL Facility.
Critical Accounting Estimates
Our discussion of results of operations and financial condition is based upon the consolidated financial statements included elsewhere in this Form 10-K, which have been prepared in accordance with GAAP. The preparation of financial statements in conformity with GAAP requires management to make estimates and certain assumptions about future events that affect the classification and amounts reported in our consolidated financial statements and accompanying notes, including revenue and expenses, assets and liabilities, and the disclosure of contingent assets and liabilities. These estimates and assumptions are based on our historical results as well as management’s judgment. Although management believes the judgment applied in preparing estimates is reasonable based on circumstances and information known at the time, actual results could vary materially from estimates based on assumptions used in the preparation of our consolidated financial statements.
The most significant accounting estimates involve a high degree of judgment or complexity. Management believes the estimates and judgments most critical to the preparation of our consolidated financial statements and to the understanding of our reported financial results include those made in connection with revenue recognition, including accounting for estimated merchandise returns and loyalty program expenses; estimating the value of inventory; determining operating lease liabilities; and estimating share-based compensation expense. Management evaluates its policies and assumptions on an ongoing basis. Our significant accounting estimates related to these accounts in the preparation of our consolidated financial statements are described below (see Note 2 to our consolidated financial statements included elsewhere in this Form 10-K for additional information regarding our significant accounting policies).
Revenue Recognition
We recognize revenue when our performance obligations under the terms of a contract or an implied arrangement with a customer are satisfied, which is when the merchandise is transferred to the customer and the customer obtains control of it. The amount of revenue we recognize reflects the total consideration we expect to receive for the merchandise, which is the transaction price. For arrangements that contain multiple performance obligations, we allocate the transaction price to each performance obligation on a relative stand-alone selling price basis.
At our retail store locations, we satisfy our performance obligation and recognize revenue at the point in time when a customer takes possession of the merchandise and tenders payment at the point-of-sale register. For e-Commerce sales shipped to a customer from our distribution center, or from a retail store location (ship from store), we satisfy our performance obligation and recognize revenue upon shipment, which is the point in time the customer obtains control of the merchandise after payment has been tendered. Income we receive from customers for shipping and handling is recognized as a component of revenue upon shipment of merchandise to the customer. We satisfy our performance obligation and recognize revenue from e-Commerce sales shipped to a retail store location from our distribution center, or fulfilled from merchandise already located at a retail store location (buy-online-pickup-in-store), at the point in time when the customer retrieves the merchandise from within the retail store location or at a retail store curbside.
We are required to estimate certain amounts included in a contract or an implied arrangement with a customer which add variability to the transaction price. Under certain conditions, we are obligated to accept customer returns for most of our merchandise. Sales returns reduce the revenue we expect to receive for merchandise and therefore add variability to the transaction price. Based on historical return pattern experience, we reasonably estimate the amount of merchandise expected to be returned and exclude it from revenue. We record a reserve for merchandise returns at the time revenue is recognized based on prior returns experience and expected future returns in accordance with our return policy and discretionary returns practices. We monitor our returns experience and resulting reserves on an ongoing basis and we believe our estimates are reasonable. We do not believe there is a reasonable likelihood that there will be a material change in the assumptions used to calculate the allowance for sales returns. However, if actual sales returns are significantly different than the estimated allowance, our results of operations could be materially affected.
Torrid Holdings Inc. | FY 2025 Form 10-K | 49
We satisfy our performance obligation and recognize revenue from gift cards and store merchandise credits at the point in time when the customer presents the gift cards and store merchandise credits for redemption. Gift card breakage is income recognized due to the non-redemption of a portion of gift cards sold by us for which a liability was recorded in prior periods. We recognize estimated gift card breakage over time as a component of net sales in proportion to the pattern of rights exercised by the customer as reflected in actual gift card redemption patterns over the period. Based upon historical experience, we estimate the value of outstanding gift cards that will ultimately not be redeemed (breakage) nor escheated under statutory unclaimed property laws. This amount is recognized as revenue over the time pattern established by our historical gift card redemption experience. We monitor our gift card redemption experience and associated accounting on an ongoing basis. Our historical gift card redemption experience has not varied significantly from amounts historically recorded as breakage and we believe our assumptions are reasonable. While customer redemption patterns result in estimated gift card breakage, changes in our customers’ behavior could impact the amount that ultimately is unused and could affect the amount recognized as a component of net sales.
If a customer earns loyalty program points in connection with the sales transactions described above, then we have a remaining performance obligation and cannot recognize all the revenue. A portion of the revenue is allocated to the loyalty program points earned during the transaction. We satisfy our performance obligation and recognize revenue allocated to these loyalty program points and the resulting awards at the point in time when the awards are redeemed for merchandise, when we determine that they will not be redeemed, or when the awards and points expire. Under our loyalty program, customers accumulate points based on purchase activity and qualifying non-purchase activity. Upon reaching a certain point level, customers can earn awards that may only be redeemed for merchandise. Unredeemed points typically expire after 13 months without additional purchase activity and qualifying non-purchase activity. Unredeemed awards typically expire 45 days after issuance. We use historical redemption rates to estimate the value of future award redemptions and we recognize the estimated value of these future awards as a reduction of revenue in the consolidated statements of comprehensive (loss) income in the period the points are earned by the customer.
Inventory
Inventory consists of finished goods merchandise held for sale to our customers. Inventory is valued at the lower of moving average cost or net realizable value.
In the normal course of business, we record inventory reserves based on past and projected sales performance, as well as the inventory on hand. We make certain assumptions regarding net realizable value in order to assess whether our inventory is recorded properly at the lower of cost or net realizable value. These assumptions are based on historical average selling price experience, current selling price information and estimated future selling price information. The carrying value of inventory is reduced to estimated net realizable value when factors indicate that merchandise will not be sold on terms sufficient to recover its cost.
We monitor inventory levels, sales trends and sales forecasts to estimate and record reserves for excess, slow-moving and obsolete inventory. Accordingly, estimates of future sales prices requires management judgment based on historical experience, assessment of current conditions and assumptions about future transactions. In addition, we conduct physical inventory counts to determine and record actual shrinkage. Estimates for shrinkage are recorded between physical store counts, based on actual shrinkage experience. Actual shrinkage can vary from these estimates. We believe our assumptions are reasonable, and we monitor actual results to adjust estimates and inventory balances on an ongoing basis.
Leases
We consider an agreement to be or contain a lease if it conveys us with the right to control the use of an identified asset for a period of time in exchange for consideration. Based on these criteria, we have operating lease agreements for our retail stores, distribution center and headquarter office space; and vehicles and equipment; under primarily non-cancelable leases with terms ranging from approximately one to 16 years.
Torrid Holdings Inc. | FY 2025 Form 10-K | 50
Certain of our operating lease agreements contain one or more options to extend the leases at our sole discretion. However, the periods covered by the options to extend the leases of our retail stores, vehicles and equipment are not recognized as part of the associated right-of-use (“ROU”) assets and lease liabilities, as we are not reasonably certain to exercise the options. The periods covered by the options to extend the leases of our distribution center and headquarter office space are recognized as part of the associated ROU assets and lease liabilities, as we are reasonably certain to exercise the options. Some of our operating lease agreements contain options to terminate the lease under certain conditions.
The retail space leases provide for rents based upon the greater of the minimum annual rental amounts or a percentage of annual store net sales volume. Certain leases provide for increasing minimum annual rental amounts. We consider rents based upon a percentage of annual store net sales volume, and other rent-related payments that generally vary because of changes in facts and circumstances (other than due to the passage of time), to be variable lease payments. Variable lease payments associated with retail space leases are recognized as occupancy costs within cost of goods sold in the consolidated statements of comprehensive (loss) income in the period in which the obligation for those payments is incurred. We generally consider all other lease payments to be fixed in nature and the sum of all the discounted remaining fixed payments in the lease terms make up the lease liabilities in our consolidated balance sheet (if the lease terms are longer than 12 months).
We discount the fixed lease payments that make up the lease liabilities using an incremental borrowing rate (“IBR”), as the rates implicit in our leases are not readily determinable. The IBR is the rate of interest that we would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. The determination of the IBR for each lease term incorporates various inputs and assumptions including our publicly available credit rating, credit spreads of other publicly traded debt issued by companies with a similar credit rating to ours and a risk-free interest rate. All inputs and assumptions and corresponding IBRs are highly subjective.
We choose not to separate non-lease components (such as common area maintenance charges and heating, ventilation and air conditioning charges), from lease components (such as fixed minimum rent payments), and instead account for each separate lease component and the non-lease components associated with that lease component as a single lease component. We do not apply ASU 2016-02, Leases, and all related guidance (“ASC 842”) requirements to leases that have lease terms of 12 months or less upon commencement, and instead recognize short-term lease payments, if applicable, in the consolidated statements of comprehensive (loss) income on a straight-line basis over the lease term.
Share-Based Compensation
On June 22, 2021, in connection with our IPO, our Board adopted the Torrid Holdings Inc. 2021 Long-Term Incentive Plan (the “2021 LTIP”), for employees, consultants and directors. The 2021 LTIP provides for the grant of non-qualified stock options, stock appreciation rights, restricted stock and restricted stock units (“RSUs”) including performance-based restricted stock units (“PSUs”), stock awards, dividend equivalents, other stock-based awards, cash awards and substitute awards intended to align the interests of service providers, with those of our shareholders. The Company measures share-based compensation cost at the grant date based on the fair value of the award and recognizes share-based compensation cost as expense over the vesting period. As share-based compensation expense recognized in the consolidated statements of comprehensive (loss) income is based on awards ultimately expected to vest, the amount of expense has been reduced for actual forfeitures as they occur.
Stock options are valued utilizing a Black-Scholes options pricing model (“OPM”). The OPM used to value the stock options incorporates various assumptions, including dividend yield, expected volatility, risk-free interest rate and expected term of the stock options. The expected volatility is estimated based on the historical volatility of a select peer group of similar publicly traded companies for a term that is consistent with the expected term of the stock options. The risk-free interest rates are based on the U.S. Treasury constant maturity interest rate whose term is consistent with the expected term of the stock options. The expected term of the stock options represents the estimated period of time until exercise and is calculated using the simplified method which deems the term to be the average of the time-to-vesting and the contractual life of the options due to insufficient historical data.
The grant date fair value of restricted stock and RSUs is based on the closing price per share of our common stock on the grant date. We recognize compensation expense for time-based awards on a straight-line basis and for performance-based awards on the graded-vesting method over the vesting period of the awards.
Torrid Holdings Inc. | FY 2025 Form 10-K | 51
The fair value of PSUs is estimated at the grant date using a Monte Carlo simulation following a Geometric Brownian Motion which incorporates various assumptions, including dividend yield, expected volatility, risk-free interest rate and expected term of the PSUs. The expected volatility is estimated based on the historical volatility of a select peer group of similar publicly traded companies for a term that is consistent with the expected term of the PSUs. The risk-free interest rates are based on the U.S. Treasury constant maturity interest rate whose term is consistent with the expected term of the PSUs. The expected term of the PSUs represents the time period from the grant date and the full vesting date.
Restricted cash units (“RCUs”) are awarded to certain employees, non-employee directors and consultants and represent the right to receive a cash payment at the end of a vesting period, subject to the employee's continued employment or service as a director or consultant. In general, RCUs vest in equal installments each year over four years. RCUs are cash-settled with the value of each vested RCU equal to the lower of the closing price per share of our common stock on the vesting date or a specified per share price cap. We determined that RCUs are in-substance liabilities accounted for as liability instruments in accordance with ASC 718, Compensation—Stock Compensation, due to this cash settlement feature. RCUs are remeasured based on the closing price per share of our common stock at the end of each reporting period.
Recently Issued Accounting Pronouncements
Refer to “Note 3—Accounting Standards” in our consolidated financial statements included elsewhere in this Form 10-K for information regarding recently issued accounting pronouncements.
Recent insider activity
| Date | Insider | Role | Action | Shares | Price | Value |
|---|---|---|---|---|---|---|
| 2026-04-14 | Dempsey Paula | Chief Financial Officer | Sell | -42,785 | $2.06 | -$88,265 |
| 2026-04-13 | Wheeler Ashlee | Chief Commercial Officer | Sell | -30,013 | $1.98 | -$59,276 |
Source: SEC Form 4 filings.
Next expected filings
- ~2026-09-11 10-Q expected by 2026-09-12 (in 92 days)
- ~2026-12-10 10-Q expected by 2026-12-11 (in 182 days)
- ~2027-03-30 10-K expected by 2027-03-31 (in 292 days)
- ~2027-06-09 10-Q expected by 2027-06-10 (in 363 days)
Predicted from historical filing cadence; not an SEC commitment.
Recent SEC filings
- 2026-06-04 8-K Earnings Release; Financial Statements and Exhibits
- 2026-04-20 DEF 14A Proxy Statement
- 2026-04-03 8-K Officer/Director Change; Financial Statements and Exhibits
- 2026-03-31 10-K Annual Report
- 2026-03-19 8-K Earnings Release; Financial Statements and Exhibits
- 2025-12-10 10-Q Quarterly Report
- 2025-12-03 8-K Earnings Release; Financial Statements and Exhibits
- 2025-09-11 10-Q Quarterly Report
- 2025-09-04 8-K Earnings Release; Financial Statements and Exhibits
- 2025-08-04 8-K Material Agreement Entered; Material Financial Obligation; Financial Statements and Exhibits
- 2025-06-26 8-K Other Events; Financial Statements and Exhibits
- 2025-06-24 8-K Material Agreement Entered; Regulation FD Disclosure; Financial Statements and Exhibits
- 2025-06-09 10-Q Quarterly Report
- 2025-06-05 8-K Earnings Release; Financial Statements and Exhibits
- 2025-04-01 10-K Annual Report