Torrid’s third quarter was marked by a notable revenue shortfall and a negative market reaction, with management attributing underperformance primarily to merchandising missteps in its tops category. CEO Lisa Harper acknowledged these errors, stating that "this was a merchandising miss that was, obviously, very disappointing and frustrating for the organization for the quarter." Additional headwinds included a pause in the shoe business due to tariffs and higher promotional activity, which pressured margins. Management also cited reduced purchase frequency from the most loyal customers in the tops department, intensifying the impact of these merchandising challenges.

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While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.

Our Top 5 Analyst Questions From Torrid’s Q3 Earnings Call

• Janine Stichter (BTIG) asked about the specifics of product missteps and the impact on promotions. CEO Lisa Harper detailed that tops, shoes, and jackets drove the miss and said enhanced guardrails and assortment planning are being put into place. Wheeler added that increased promotions were directly tied to missing key entry price point items.
• Brooke Roach (Goldman Sachs) questioned changes in processes to ensure balance between fashion and basics, as well as customer demographic shifts. Harper outlined new assortment architecture embedding more opening price point products, while Wheeler noted loyal customer engagement fell primarily in tops, not in other categories.
• Corey Tarlowe (Jefferies) inquired about sub-brand momentum and leverage profile changes from store closures. Harper described continued strength in sub-brands and Dempsey explained that the closures will improve expense flexibility and drive EBITDA margin expansion.
• Alex Stratton (Morgan Stanley) sought clarity on expected EBITDA margin expansion and Q4 sales pressures. Dempsey reiterated margin expansion will come from store closures, with sales guidance reflecting persistent weakness in tops and shoes and typical seasonality.
• Dana Telsey (Telsey Advisory Group) asked whether merchandising challenges were internal or related to industry trends. Harper acknowledged the issues were mostly internal but noted seasonal market factors gave consumers more options for tops at competitors.

Catalysts in Upcoming Quarters

In coming quarters, the StockStory analyst team will focus on (1) the effectiveness and speed of Torrid’s remerchandising efforts in the tops and shoes categories, (2) realization of cost savings and flexibility from store closures, and (3) the ability of core and sub-brand innovations to drive customer frequency and retention. Monitoring how quickly consumer engagement rebounds in tops will be a key indicator of operational turnaround.

Torrid currently trades at $1.13, down from $1.28 just before the earnings. In the wake of this quarter, is it a buy or sell? See for yourself in our full research report (it’s free for active Edge members).

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