Merchandising flubs, tariffs hurt Torrid in Q3

Dive Brief:Torrid executives on Wednesday blamed merchandising missteps and tariffs for the plus retailer’s Q3 performance. Net sales fell nearly 11% year over year to $235.2 million, and comps fell more than 8%.Gross margin declined to 34.9% from 36.1% last year, and net loss widened more than fivefold to $6.4 million.The retailer this year so far has closed 74 stores, and reiterated plans to close about 180 in 2025, part of an effort to rationalize its footprint. As of Q3 Torrid runs 560 locations.Dive Insight:Torrid’s Q3 declines were largely within its control, and CEO Lisa Harper sought to assure investors that the retailer is on top of things.“We are clearly disappointed with our overall performance this quarter,” she said on a conference call with analysts. “Despite some areas of strength, it was more than offset by missteps in our overall assortment mix that we are addressing head on with decisive corrective actions.”Tops drove about half of the sales miss and jackets about 10%, executives said — a consequence of bringing in more fashion-forward styles at the expense of core styles that many loyal customers say they want. The decision to pause its footwear offer in order to avoid tariffs cost the company $2.5 million more in lost sales than expected, another 40% contribution to the Q3 sales decline.“The timing amplified the impact as October represents our peak boot selling season, which historically drives some of our highest attachment rates of the year,” Harper said.To correct its mistakes, Torrid has overhauled its footwear sourcing and SKU mix to address tariff risks but is working to bring the category back to about $40 million next year, she said.The trouble obscured some success in the quarter, particularly that new sub-brands, a key component of its turnaround, are set to bring in about $80 million in sales this year, she said. The brands are also “attracting new, reactivating lapsed and increasing spend among our high-value customers,” according to Harper.But, due to internal and external factors, it’s hard to know how effective Torrid’s strategy will ultimately be, according to William Blair analysts led by Dylan Carden.“We believe Torrid still has a long road ahead to work through all the change occurring in the model, where we could see continued rockiness, while any greater falloff in the broader demand environment remains a key risk,” Carden said in a Thursday client note.