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Dive Brief:
Torrid could shrink its brick-and-mortar footprint by close to 30% in 2025, the plus-size apparel retailer said Thursday. The retailer runs 632 stores, after closing two in Q1; about 60% of its fleet is up for lease renewals this year.
Plans are to shutter as many as 180 locations this year. The downsizing will be significantly larger than in 2024, and more than originally planned. A year ago the retailer ran 658 stores and so far closed 26 of them, and in March was targeting just 40 to 50 closures.
The retailer ultimately expects stores to serve up just a quarter of total sales, CEO Lisa Harper told analysts Thursday. E-commerce is close to 70% of total sales now and is expected to reach “low-to-mid 70%” next year, she said.
Dive Insight:
Torrid’s store-closure plans overshadowed other aspects of its Q1 report, including the impact of tariffs and its lowered revenue guidance. The company revised its sales outlook after pausing its footwear business, expected to hurt sales by $40 million to $45 million this year.
“The bigger headline here for us is that management is taking a broader cut to store closures, which we believe is a positive step in freeing up capital to invest in new product and marketing to support clear momentum in its online channel,” William Blair analysts Dylan Carden and Anna Linscott said in a Friday client note.
There’s little risk to the plan, given that closing a store hasn’t affected sales much, Harper said Friday. These are locations with lower productivity, and sales customer retention rates from shuttered locations are about 60%, she said. The company expects 150 to 250 basis points of EBITDA margin benefit from the closures, after spending on “acquisition, marketing, as well as a more expansive effort to retain and transfer existing customers to the web or neighboring stores,” she said.
Most of the closures will likely occur in Q4, so benefits to comps, gross margin and profitability should show up in the first half of next year, according to William Blair.
Despite physical stores’ declining importance to sales in the aggregate, they remain “an important touchpoint,” Harper said. Torrid plans to refresh 135 stores in Q3, which she called “low-capital investments with an expected fast return.”
Stores “serve as community hubs and immersive brand-building experiences, introducing customers to our brand and sub-brands, offering the dressing room experience, and acting as service centers for purchases made online or in stores,” she said. “Most importantly, our passionate sales associates bring the brand to life, delivering personalized service that deepens customer connection and drives long-term loyalty.”
The store-closure plans came as Torrid reported Q1 sales and profit declines. Net sales fell nearly 5% year over year to $266 million, as comps dropped 3.5%. Gross margin contracted to 38.1% from 41.3% last year, mostly due to sales declines, promotions and corporate investments. Net income shrank by more than half to about $6 million.
Torrid’s exposure to China-sourced goods will be in the low-single digits for the balance of the year, down from the mid-teens. Once that’s accomplished, tariffs, if they remain unchanged, are expected to cost the retailer $20 million, Harper said. Plans are to mitigate that dollar for dollar via expense reductions, Chief Financial Officer Paula Dempsey told analysts.