Q1 2026 Torrid Holdings Inc Earnings Call
Chinwe Abaelu: today to discuss our financial results for the first quarter of fiscal 2025, which we released this afternoon and can be found on our website at investors.torrid.com.
To the first quarter of fiscal 2025, which we released this afternoon and can be found on our website at investors Dot torrid Dot com.
Chinwe Abaelu: With me on the call today are Lisa Harper, Chief Executive Officer of Torrid, Paula Dempsey, Chief Financial Officer.
Speaker Change: With me on the call today are Lisa Hopper, Chief Executive Officer of tour it.
Speaker Change: Paula Dempsey Chief Financial Officer.
Chinwe Abaelu: Ashlee Wheeler, our Chief Strategy and Planning Officer, is also present and will be participating in the Q&A session.
Actually Wheeler: Actually Wheeler, our chief strategy and planning officer is also present and will be participating in the Q&A session.
Chinwe Abaelu: Before we get started, I would like to remind you of the company's Safe Harbor language, which I'm sure you're familiar with. Management may make forward-looking statements, including guidance and underlying assumptions. Forward-looking statements may include, but are not limited to, statements containing the words expect, believe, plan, anticipate, will, may, should, estimate, and other words and terms of similar meaning. All forward-looking statements are based on current expectations and assumptions as of today, June 5, 2025. These statements are subject to risks and uncertainties that could cause actual results to differ materially. For further discussion of risks related to our business...
Actually Wheeler: Before we get started I would like to remind you of the Companys Safe Harbor language, which I'm sure you're familiar with.
Actually Wheeler: Management may make forward looking statements, including guidance and underlying assumptions.
Speaker Change: Forward looking statements may include but are not limited to statements containing the words expect believe plan anticipate will may should estimate and other words in terms of similar meaning.
Speaker Change: All forward looking statements are based on current expectations and assumptions as of today June 5th 2025.
Actually Wheeler: These statements are subject to risks and uncertainties that could cause actual results to differ materially.
Actually Wheeler: For further discussion of risks related to our business see all filings with the SEC.
Chinwe Abaelu: CL filings with the SEC.
Chinwe Abaelu: This call will contain non-GAAP financial measures such as adjusted EBITDA. Reconciliations to these non-GAAP measures to the most comparable GAAP measures are included in the earnings release furnished to the SEC and available on our website.
Speaker Change: This call will contain non-GAAP financial measures such as adjusted EBITDA.
Speaker Change: Patients to these non-GAAP measures to the most comparable GAAP measures are included in the earnings release furnished to the SEC and available on our website with that I will turn the call over to Lisa.
Lisa Harper: With that, I will turn the call over to Lisa. Thank you, Chinwe. Hello, everyone, and thanks for joining us today. I'm excited to update you on the progress we're making across our strategic business initiative, namely, enhancing our product assortment, driving customer growth, and executing our store optimization. I am also pleased to report that we delivered on our first quarter sales and EBITDA guidance.
Lisa: Thank you Chen Wei Hello, everyone and thanks for joining us today.
Lisa: I'm excited to update you on the progress, we're making across our strategic business initiatives, namely enhancing our product assortments driving customer growth and executing our store optimization plan.
Lisa: Also pleased to report that we delivered on our first quarter sales and EBITDA guidance.
Lisa Harper: Now an update on our strategic business initiative. The performance of our sub-brands continue to reinforce our belief that the strategy is working. Festy, Belle Isle, Nightfall, and Retro Chic have all had multiple deliveries at this point, and they are overachieving our expectations. from two to six times what we had originally planned. These sub-brands are designed and marketed for distinctive lifestyles, targeting a broader range of plus-size consumers. And they are revolutionizing our collections to embrace diverse fashion sensibilities and deliver truly differentiated ops. This calculated expansion has attracted new clientele and has deepened relationships with our current customers, driving increased spending across our portfolio.
Lisa: Now an update on our strategic business initiatives.
Lisa: The performance of our sub brands continue to reinforce our belief that the strategy is working.
Lisa: T Belisle nightfall and retro chic have all had multiple deliveries at this point and they are over treating our expectation from.
Lisa: From two to six times, what we had originally planned.
Lisa: These sub brands are designed and marketed for distinctive lifestyle targeting a broader range of plus sized consumers and they are revolutionizing our collections to embrace diverse fashion sensibilities and deliver truly differentiated option.
Lisa: This calculated expansion has attracted new clientele and us deepen relationships with our current customers driving increased spending across our portfolio.
Lisa Harper: Importantly, our sub-brands are attracting new and younger customers, reactivating lapsed customers, while also creating a halo effect for our mainline Torrid office. With a margin structure higher than our core Torrid product, we are doubling down on our efforts to further expand our strategy with planned launches of new sub-brands throughout the year, while also increasing the delivery frequency on existing sub-brands from the current 6 to 8 times a year to 12 times annually, growing their penetration from approximately 10% this year to up to 30% of our portfolio in 2026. We will continue to fund the growth of our sub-brands through reductions and less productive toward SKUs, enabling us to deliver compelling, high-margin products.
Speaker Change: Importantly, our sub brands are attracting new and younger customers reactivating lapsed customers, while also creating a halo effect for our mainline toward offerings.
Speaker Change: With our margin structure higher than our core toward product, we are doubling down on our efforts to further expand our strategy with planned launches of new sub brands throughout the year, while also increasing the delivery frequency on existing sub brands from the current six to eight times a year to 12 times.
Speaker Change: Really growing their penetration from approximately 10% this year.
Speaker Change: To up to 30% of our portfolio in 2026.
Speaker Change: We will continue to fund the growth of our sub brands through reductions and less productive towards skewed, enabling us to deliver compelling high margin product.
Speaker Change: Okay.
Lisa Harper: Now shifting to our channel optimization initiative. Our customers continue to send a strong message that they prefer an online experience, which better supports our internal marketplace strategy that showcases the entire breadth of our source. Our website experience is powerful, and the perceived value to the customer is high across this channel. She loves that she can see and explore everything we offer, view outfitting options, and see herself. This is supported by our consistent sizing expertise and overall customer satisfaction, which continues to drive our industry-leading low return rate. Our online sales demand continues to grow and is approaching 70% of total sales.
Speaker Change: Now shifting to our channel optimization initiatives, our customers continue to send a strong message that they prefer an online experience, which better supports our internal marketplace strategy that showcases the entire breadth of our assortment.
Speaker Change: Our website experience is powerful and the perceived value to the customer is high across this channel.
Speaker Change: He loves that she can see and explore everything we offer.
Speaker Change: Few outfitting options and see herself.
Speaker Change: This is supported by our consistent sizing expertise and overall customer satisfaction, which continues to drive our industry, leading low return rates.
Speaker Change: Our online sales demand continues to grow and is approaching 70% of total sales.
Lisa Harper: We expect web demand to reach a low to mid 70% penetration in 2026. As part of our digital transformation long term, we see the business model evolving to an approximate demand mix of 75% online and 25% in store.
Speaker Change: We expect web demand to reach a low to mid 70% penetration in 2026.
Speaker Change: As part of our digital transformation long term, we see the business model evolving to an approximate demand mix of 75% online and 25% in store.
Lisa Harper: This brings me to an update on the optimization of our retail footprint. As we mentioned on our Q4 call, we closed 35 stores in 2024, and we were targeting 40 to 50 closures in 2025, with the potential for additional closures as approximately 60% of our store fleet is up for lease renewals this year. With our customers increasingly preferring to shop our online experience, we are accelerating our fleet optimization efforts with a plan to now close approximately 60 stores in the first half of this year. We believe we have an opportunity to close up to an additional 120 stores in the back half of this year, bringing the total number of targeted closures for the year to approximately 180.
Speaker Change: This brings me to an update on the optimization of our retail footprint as.
Speaker Change: As we mentioned on our Q4 call. We closed 35 stores in 2024, and we were targeting 40% to 50 closures in 2025 with the potential for additional closures as approximately 60% of our store fleet is up for lease renewals this year.
Speaker Change: With our customers increasingly preferring to shop, our online experience, we are accelerating our fleet optimization efforts with a plan to now close approximately 60 stores in the first half of this year.
Speaker Change: We believe we have an opportunity to close up to an additional 120 stores in the back half of this year, bringing the total number of targeted closures for the year to approximately 180.
Lisa Harper: Paula will provide more detail on the net impact of these closures. But importantly, given many of these stores have lower productivity, and we continue to experience sales and customer retention rates from closed doors of approximately 60%. The projected impact to net sales is expected to be negligible. With the annualization of these closures, we would expect to see from 150 to 250 basis points of EBITDA margin benefit, net of increased marketing investment. We are planning to allocate a portion of the cost savings from the store closures to customer acquisition marketing, as well as a more expansive effort to retain and transfer existing customers to the web or neighboring stores.
Speaker Change: Paula will provide more detail on the net impact of these closures, but importantly, given many of these stores have lower productivity and we continue to experience sales and customer retention rates from closed stores of approximately 60%.
Speaker Change: The projected impact to net sales is expected to be negligible.
Speaker Change: With the annualized <unk> of these closures, we would expect to see from a 150 to 250 basis points of EBITDA margin benefit net of increased marketing investment.
Speaker Change: We are planning to allocate a portion of the cost savings from the store closures to customer acquisition marketing as well as a more expansive effort to retain and transfer existing customers to the web our neighboring stores.
Lisa Harper: As a reminder, 95% of our customers are in our loyalty program. So we have a large amount of data on their shopping Our physical stores will continue to represent an important touch point to complement our omni-channel go-to-market strategy. They serve as community hubs and immersive brand building experience. introducing customers to our brand and sub-brands, offering the dressing room experience, and acting as service centers for purchases made online or in-store. Most importantly, our passionate sales associates bring the brand to life, delivering personalized service that deepens customer connection and drives long-term loyalty. As we mentioned on the Q4 call, we see opportunities to enhance the expression of our brand in stores to better align with the online experience, and we remain committed to refreshing 135 stores in the third quarter.
Speaker Change: As a reminder, 95% of our customers.
Speaker Change: And our loyalty program. So we have a large amount of data on their shopping patterns.
Speaker Change: Our physical stores will continue to represent an important touch point to complement our omnichannel go to market strategy.
Speaker Change: They serve as community hubs and immersive brand building experiences.
Speaker Change: Introducing customers to our brand and sub brands offering the dressing room experience enacting of service centers for purchases made online or in stores.
Speaker Change: Most importantly, our passionate sales associates, bringing the brand to life delivering personalized service that deepens customer connection and drive long term loyalty.
Speaker Change: As we mentioned on the Q4 call, we see opportunities to enhance the expression of our brand and stores to better align with the online experience and we remain committed to refreshing 135 stores in the third quarter.
Lisa Harper: These are low capital investments with an expected fast return.
Speaker Change: These are low capital investments with an expected fast return.
Lisa Harper: In summary, the optimization of our retail store fleet represents a strategic shift to better align our distribution with customer demand, which is expected to dramatically enhance our customer experience and deliver healthier sales growth while improving our overall profitability and cash Now to tariff.
Speaker Change: In summary, the optimization of our retail store fleet represents a strategic shift to better align our distribution with customer demand, which is expected to dramatically enhance our customer experience and deliver healthier sales growth, while improving our overall profitability and cash flow.
Speaker Change: Now to tariffs.
Lisa Harper: Let me start with the punchline. Our current exposure to China-sourced goods will be in the low single digits for the balance of the year, down from the mid-teens. Improving our sourcing has been a key area of focus for several years, and I'm proud of the robust sourcing infrastructure we have in place today. Our team has worked to reduce our exposure to China by diversifying into other countries and cultivating strong relationships with a broad range of vendor partners who in many cases have developed manufacturing capabilities in multiple countries. In addition to shifting production out of China, our tariff mitigation playbook also includes sharing the increased costs with our vendor partners, exploring cost-saving fabric opportunities, such as using Egyptian denim instead of Turkish denim.
Speaker Change: Let me start with the punch line, our current exposure to China sourced goods will be in the low single digits for the balance of the year down from the mid teens.
Speaker Change: Improving our sourcing has been a key area of focus for several years and I'm proud of the robust sourcing infrastructure, we have in place today.
Speaker Change: Our team has worked to reduce our exposure to China by diversifying into other countries and cultivating strong relationships with a broad range of vendor partners, who in many cases had developed manufacturing capabilities in multiple countries.
Speaker Change: In addition to shifting production out of China, our tariff mitigation playbook also includes sharing the increased cost with our vendor partners.
Speaker Change: Boring cost savings fabric opportunities such as using adoption done instead of Turkish than them.
Lisa Harper: and strategically and selectively making low single-digit price adjustments where we see a value proposition opportunity. As it stands today, after these actions, we expect the net impact of tariffs to be approximately $20 million for the remainder of the year, calculated based on current tariff rates. which we will offset primarily through discretionary expense reductions, store optimization, and prioritization of projects across the business.
Speaker Change: And strategically and selectively making low single digit price adjustments, where we see a value proposition opportunity.
Speaker Change: As it stands today. After these actions we expect the net impact of tariffs to be approximately $20 million for the remainder of the year calculated based on current tariff rates.
Speaker Change: Which we will offset primarily through discretionary expense reductions store optimization and prioritization of projects across the business.
Lisa Harper: We have also made this strategic decision to temporarily pause and reevaluate shoe offerings, which are 100% sourced out of China. This strategy shift will result in a neutral EBITDA impact in 2025 and an expected revenue loss of approximately $40 to $45 million. On a go-forward basis, we are actively exploring opportunities to reenter the shoe category in a way that adds profitability and aligns with our broader sourcing strategy. Looking ahead, our goal is to keep any individual country, Vietnam included, to under 20% of apparel sourcing penetration.
Speaker Change: We've also made the strategic decision to temporarily pause and reevaluate shoe offerings, which are 100% sourced out of China.
Speaker Change: This strategy shift will result in a neutral EBITDA impact in 2025, and an expected revenue loss of approximately $40 million to $45 million.
Speaker Change: On a go forward basis, we are actively exploring opportunities to reenter the shoe category in a way that adds profitability and aligns with our broader sourcing strategy working.
Speaker Change: Looking ahead, our goal is to keep any individual country Vietnam included to under 20% of apparel sourcing penetration.
Lisa Harper: Turning to marketing, our strategy this quarter focused on creating momentum through bold storytelling, elevated community engagement, and agile execution. We leaned heavily into messaging around newness, supported by more frequent site refresh. This not only resonated with customers, but helped set the stage for strong performance during our Torrid Cash and after-party event. While consumer sensitivity to promotions remain elevated in the current macro environment, our strategic messaging helped capture demand and drug conversion during key moments.
Speaker Change: Turning to marketing our strategy this quarter focused on creating momentum through bold storytelling elevated community engagement and agile execution.
Speaker Change: We leaned heavily into messaging around newness supported by more frequent site refreshes.
Speaker Change: This not only resonated with customers, but help set the stage for strong performance during our toward cash and after party events.
Speaker Change: While consumer sensitivity to promotions remain elevated in the current macro environment, our strategic messaging help capture demand and drove conversion during key moments.
Lisa Harper: One of the most exciting highlights of the quarter was our Coachella activation under the FESTI by Torrid sub-branch. The campaign sparked remarkable engagement. generating millions of impressions and expanding our social following significantly in just one week. Beyond the numbers, it demonstrated the power of showing up in cultural moments where plus-sized women are often underrepresented. Response from our community was overwhelmingly positive, reaffirming our strategy to lead with authenticity. we saw meaningful success in evolving our approach across channels. In digital, we prioritized spend toward customer acquisition, which contributed to solid performance in both new and reactivated customer segments.
Speaker Change: One of the most exciting highlights of the quarter was our coachella activation under the FSD by towards sub brand.
Speaker Change: The campaign sparked remarkable engagement generating millions of impressions and expanding our social following significantly in just one week.
Speaker Change: Beyond the numbers it demonstrated the power of showing up and cultural moments where size women are often under represented three.
Speaker Change: The response from our community was overwhelmingly positive reaffirming our strategy to lead with authenticity.
Speaker Change: We saw meaningful success in evolving our approach across channels and digital we prioritize spend towards customer acquisition, which contributed to solid performance in both new and reactivated customer segments.
Lisa Harper: SMS and PUSH campaigns benefited from thoughtful timing and dynamic content leading to successful PUSH revenue during the quarter. In email, we tested new creative formats and editorial storytelling, such as day-to-night looks and curated collections, which performed well and confirmed the value of continually refreshing our content pipeline. Across paid and owned channels, we continued balancing performance with brand building. Testing new creative formats and placements to drive long term value while maintaining short term efficiency. Our loyalty program played a critical role with strategic bonus points events and targeted rewards helping drive frequency retention and cross category migration.
Speaker Change: S and push campaigns benefited from thoughtful timing and dynamic content, leading to successful push revenue during the quarter.
Speaker Change: And email, we tested new creative formats, and editorial storytelling, such as day to night looks and curated collections, which performed well and confirm the value of continually refreshing our content pipeline.
Speaker Change: Across paid and owned channels, we continued balancing performance with brand building testing, new creative formats and placements to drive long term value, while maintaining short term efficiency.
Speaker Change: Our loyalty program played a critical role with strategic partners points events and targeted rewards, helping drive frequency retention and cross category migration towards.
Lisa Harper: Torrid Cash, in particular, was a strong traffic and revenue driver during the quarter. And our after-party events sustained momentum with additional customer engagement.
Speaker Change: Toward cash in particular was strong traffic and revenue driver during the quarter and our after party event sustained momentum with additional customer engagement.
Lisa Harper: Lastly, our mobile app reached a new revenue high, supported by timely push notifications, exclusive offers, and seamless loyalty integration. The app continues to grow as a key touchpoint for high value customers and plays an important role in omni channel retention. Our marketing performance this quarter reflected a disciplined, creative, and community-first approach. We remain focused on amplifying what works while continuing to evolve with our customers, stay culturally relevant, and drive sustainable growth ahead.
Speaker Change: Lastly, our mobile App reached a new revenue high supported by timely push notifications exclusive offers and seamless loyalty integration.
Speaker Change: <unk> continues to grow with a key touch point for high value customers and plays an important role in Omnichannel retention.
Speaker Change: Our marketing performance this quarter reflected a disciplined creative and community first approach we remain focused on amplifying what works, while continuing to evolve with our customers stay culturally relevant and drive sustainable growth ahead.
Lisa Harper: Let me wrap up with a brief review of our first quarter results. As I mentioned, our performance for the quarter was in line with expectations for both net sales and EBITDA. We registered next sales of $266 million and EBITDA of $27.1 million at the high end of our guidance. Our comparable sales were down 3.5%. Although consumers remain price and value conscious, our customers are responding well to newness highlighted by the sub-brand. As I noted earlier, our online demand once again outpaced stores, and we are encouraged to see a high percentage of customers who made a sub-brand product purchase are also picking up items from our core line.
Speaker Change: Let me wrap up with a brief review of our first quarter results as I mentioned, our performance for the quarter was in line with expectations for both net sales and EBITDA.
Speaker Change: We registered net sales of 266 million and EBITDA of $27 1 million at the high end of our guidance.
Speaker Change: Our comparable sales were down three 5%.
Speaker Change: Although consumers remain price and value conscious our customers are responding well to newness highlighted by the sub brand as I noted earlier, our online demand once again outpaced stores and we are encouraged to see a high percentage of customers, who made a sub brand product purchase are also picking up line items from our core <unk>.
Speaker Change: <unk>.
Lisa Harper: Overall, apparel performance in Q1 showed encouraging signs of momentum as the quarter progressed. While February proved to be the most challenging month, we meaningfully improved in March with further stabilization in April. We saw strength in key categories, including dresses, denim, and non-denim bottoms, each of which delivered positive comps for the quarter, reflecting strong consumer response to refreshed assortments and TrendsRight products. We remain in a strong financial position, ending the quarter with $23.7 million in cash, and we have access to $117.3 million of additional liquidity from our revolving credit facility. Our inventory position and composition are in excellent shape.
Speaker Change: Overall apparel performance in Q1 showed encouraging signs of momentum as the quarter progressed, while February proved to be the most challenging months, we meaningfully improved in March with further stabilization in April we saw strength in key categories, including dresses denim and non denim bottoms, each of which delivered positive comps for the.
Speaker Change: Quarter, reflecting strong consumer response to refreshed assortments and trend right product.
Speaker Change: We remain in a strong financial position ending the quarter with $23 7 million in cash and we have access to $117 3 million of additional liquidity from our revolving credit facility.
Speaker Change: Our inventory position and composition are in excellent shape, and we are managing all aspects of the business with a prudent approach to the controllable while playing offence focused on profitable growth.
Lisa Harper: And we are managing all aspects of the business with a prudent approach to the controllables while playing offense focused on profitable.
Lisa Harper: In closing, I'd like to recognize our exceptional Torrid team, their relentless commitment to elevating our merchandise, driving innovation, streamlining operations has been transformative. We've made remarkable strides in our strategic initiative, establishing the foundation for sustainable, profitable growth with an eye towards creating value for all of our stakeholders.
Speaker Change: In closing I'd like to recognize our exceptional towards team their relentless commitment to elevating our merchandize driving innovation and streamlining operations has been transformative.
Speaker Change: We've made remarkable strides in our strategic initiatives, establishing the foundation for sustainable profitable growth with an eye towards creating value for all of our stakeholders.
Chinwe Abaelu: With that, I'll turn it over to. Thank you, Lisa.
Paula Dempsey: With that I'll turn it over to Paula.
Paula Dempsey: Thank you Lisa good afternoon, everyone and thank you for joining us today.
Paula Dempsey: Good afternoon, everyone. And thank you for joining us today. I will walk through our first quarter financial performance, discuss progress against our strategic priorities, and share our outlook and guidance for fiscal 2025, along with how we're positioning the business for long term value creation. We delivered results in line with expectations for both net sales and adjusted EBIT and Q1. After a slow start to the quarter in February, we saw improving sales momentum as the quarter progressed. Importantly, we began to realize tangible benefits from our store optimization initiative launched last year, which supported a reduction in SG&A and reinforced our focus on profitability and disciplined cost control.
Paula Dempsey: I will walk through our first quarter financial performance discuss progress against our strategic priorities and share our outlook and guidance for fiscal 2025, along with how we're positioning the business for long term value creation.
Paula Dempsey: We delivered results in line with expectations for both net sales and adjusted EBITDA in Q1.
Paula Dempsey: After a slow start to the quarter in February we saw improving sales momentum as the quarter progressed importantly, we began to realize tangible benefits from our store optimization initiatives launched last year.
Paula Dempsey: Which supported a reduction in SG&A and reinforced our focus on profitability and disciplined cost control.
Paula Dempsey: Net sales for the first quarter were $266 million compared to $279.8 million in the prior year. Comparable store sales declined 3.5%, reflecting continued pressure in our physical retail location, partially offset by strength in our digital channel. Our performance reflects the continued evolution of our consumer shopping behavior, and we remain focused on adapting accordingly. Growth profit was $101.4 million, down from $115.4 million last year, with growth margin declining 320 basis points to 38.1%. The decline in margin rate was driven by planned promotional initiatives to improve conversion rates. We maintain an effective approach to expense management. SG&A was favorable by $6.5 million, resulting in $70 million in Q1, compared to $76.5 million in the prior year.
Paula Dempsey: Net sales for the first quarter were 266 million compared to $279 8 million in the prior year.
Paula Dempsey: Comparable store sales declined three 5%, reflecting continued pressure in our physical retail locations, partially offset by strength in our digital channel.
Paula Dempsey: Our performance reflects the continued evolution of our consumer shopping behavior, and we remain focused on adapting accordingly.
Paula Dempsey: Gross profit was $101 4 million down from $115 4 million last year with gross margin declining 320 basis points to 38, 1%.
Paula Dempsey: The decline in margin rate was driven by planned promotional initiatives to improve conversion rates.
Paula Dempsey: We maintained an effective approach to expense management.
Paula Dempsey: SG&A was favorable by six and a half million dollars, resulting in $70 million in Q1 compared to $76 5 million in the prior year.
Paula Dempsey: As a percentage of sales, SG&E leveraged 100 basis points to 26.3 versus last year. This expense discipline remains a critical lever as we navigate the current environment. The year-over-year favorability in SG&A was driven by our store optimization efforts, as well as prioritization of company-wide projects and contract renegotiation. We strategically increased marketing investments to $15.4 million from $12.8 million a year ago, deploying funds to support the launch and awareness of our new sub-branch. This reflects a strategic shift toward customer acquisition and brand building designed to drive long-term customer file growth. In the first quarter, we saw steady customer acquisition and reactivation momentum on the web, achieving positive results, which we believe are due to our marketing strategy shift.
Paula Dempsey: As a percentage of sales SG&A, Deleveraged 100 basis points to 26, 3% versus last year.
Paula Dempsey: This expense discipline remains a critical lever as we navigate the current environment.
Paula Dempsey: The year over year favorability in SG&A was driven by our store optimization efforts as well as prioritization of company wide projects and contract renegotiations.
Paula Dempsey: We strategically increased marketing investments to $15 4 million from $12 8 million a year ago.
Paula Dempsey: Deploying funds to support the launch and awareness of our new sub brands.
Paula Dempsey: This reflects a strategic shift towards customer acquisition and brand building designed to drive long term customer file growth.
Paula Dempsey: In the first quarter, we saw a steady customer acquisition and reactivation of momentum on the web achieving positive results, which we believe are due to our marketing strategy shift.
Paula Dempsey: We delivered net income of $5.9 million, or $0.06 per share, compared to a net income of $12.2 million, or $0.12 per share in the prior year. I just said EBITDA was $27.1 million, representing a 10.2% margin versus $38.2 million and 13.7% last year. The year-over-year EBITDA cadence was anticipated, reflecting our decision to increase the allocation of marketing investments to earlier in the year to support our sub-brand momentum. We ended the quarter with a healthy liquidity position. Cash and cash equivalents stood at $23.7 million, up from $20.5 million in the prior year, and we had no borrowings outstanding under our revolving credit facility.
Paula Dempsey: We delivered net income of $5 9 million or <unk> <unk> per share compared to net income of $12 2 million or <unk> 12 per share in the prior year.
Paula Dempsey: Adjusted EBITDA was $27 1 million, representing a 10, 2% margin versus $38 2 million and 13, 7% last year.
Paula Dempsey: The year over year, EBIT cadence was anticipated, reflecting our decision to increase the allocation of marketing investments to earlier in the year to support our sub brand momentum.
Paula Dempsey: We ended the quarter with a healthy liquidity position.
Paula Dempsey: Cash and cash equivalents stood at $23 7 million up from $20 5 million in the prior year and we had no borrowings outstanding under our revolving credit facility.
Paula Dempsey: Total liquidity, including available borrowing capacity, remains strong at $141 million. Additionally, we continue to strengthen our balance sheet by reducing total debt from the prior year by $16.2 million to $284.5 million. Inventory totaled $149.6 million, a 3.3% increase versus last year, primarily due to in-transit timing. We're managing inventory with precision and expect to see temporary fluctuations throughout the year. However, we expect year-end comparable store inventory to be lower by mid to high single digit percentages, and with store closures expect our total inventory to be down meaningfully more. As Lisa discussed earlier, as part of our continued strategy to align our demand channels, we're making decisive progress on our store fleet optimization.
Paula Dempsey: Total liquidity, including available borrowing capacity remains strong at 141 million <unk>.
Paula Dempsey: Additionally, we continued to strengthen our balance sheet by reducing total debt from the prior ear just by $16 2 million to $284 5 million.
Paula Dempsey: Inventory totaled $149 6 million, a three 3% increase versus last year, primarily due to in transit timing.
Paula Dempsey: We're managing inventory with precision and expect to see temporary fluctuations throughout the year.
Paula Dempsey: However, we expect year end comparable store inventory to be lower by mid to high single digit percentages and with store closures expect our total inventory to be down meaningfully more.
Paula Dempsey: As Lisa discussed earlier as part of our continued strategy to align our demand channels, we are making decisive progress on our store fleet optimization.
Paula Dempsey: With over 60% of our store leases up for renewal in 2025, we're accelerating our store closure efforts, and we'll have approximately 60 stores closed by the end of Q2, and as many as 180 stores over the full year. Most of these additional 120 closures are anticipated towards the end of fiscal year, taking advantage of lease expiration dates and therefore will require little if any incremental cost to exit. The stores we have identified for closure are underperforming relative to our fleet, with an average of approximately $350,000 in annual sales. They are primarily situated in less attractive or lower performing areas.
Lisa: With over 60% of our store leases up for renewal in 2025, we're accelerating our store closure efforts and we will have approximately 60 stores closed by the end of Q2 and as many as 180 stores over the full year.
Paula Dempsey: Most of them. These additional 120 closures are anticipated towards the end of fiscal year.
Paula Dempsey: Taking advantage of lease expiration dates and therefore will require little if any incremental cost to exit.
Paula Dempsey: The stores, we have identified for closure are underperforming relative to our fleet with an average of approximately $350000 in annual sales.
Paula Dempsey: They are primarily situated in less attractive or lower performing areas. We expect the net sales impact from these store closures to be minimal and.
Paula Dempsey: We expect the net sales impact from these store closures to be minimal. And we plan to offset it through more targeted marketing investments and enhancements to our customer retention strategy. Historically, we have retained approximately 60% of our customers post closure, a trend that has held true with our most recent closure. Going forward, our enhanced approach includes a multi-touch communication plan with both email and SMS outreach before and after closure, along with incentive to transition customers to a nearby store or to our digital platform. Additionally, our SOAR optimization strategy will significantly reduce our cost structure and improve working capital, allowing us to reinvest more aggressively in customer reactivation and acquisition initiatives to support long-term revenue growth.
Paula Dempsey: And we plan to offset it through more targeted marketing investments and enhancements to our customer retention strategy.
Paula Dempsey: Historically, we have retained approximately 60% of our customers post closure.
Paula Dempsey: Trend has held true with our most recent closures.
Paula Dempsey: Going forward, our enhanced approach includes a multi touch communication plan with both email and SMS outreach before and after closure along with incentives to transition customers to a nearby store or tour and digital platform.
Paula Dempsey: Additionally, our store optimization strategy, we will significantly reduce our cost structure and improve working capital, allowing us to reinvest more aggressively in customer reactivation and acquisition initiatives to support long term revenue growth.
Paula Dempsey: Turning to our updated guidance for fiscal 2025. We're revising our revenue outlook to reflect the strategic decision to pause our footwear business. This will result in a revenue impact of approximately $40 to $45 million. this year. We now expect full year net sales in the range of $1.030 billion to $1.055 billion. We remain committed to delivering healthy profitability and expect our adjusted EBITDA to range from $95 million to $105 million for the full year, which includes the net impact of tariff headwinds and our mitigation efforts. We expect to mitigate approximately $20 million of tariff impacts through $20 million in expense reductions for the year.
Paula Dempsey: Turning to our updated guidance for fiscal 2025.
Paula Dempsey: We're revising our revenue outlook to reflect the strategic decision to pause our footwear business.
Paula Dempsey: This will result in a revenue impact of approximately $40 million to $45 million.
Paula Dempsey: This year.
Paula Dempsey: We now expect full year net sales in the range of 1.030 billion to 1.055 billion.
Paula Dempsey: We remain committed to delivering healthy profitability and expect our adjusted EBIT to range from 95 million to $105 million for the full year, which includes the net impact of tariff headwinds and our mitigation efforts.
Paula Dempsey: We expect to mitigate approximately $20 million of tariff impact through $20 million in expense reductions for the year.
Paula Dempsey: Half of these reductions will come from our store optimization project, while the remainder will come from discretionary spending and reprioritization of internal projects. Our quarterly sequence will be slightly different from the past years. Over the years, we realized 60 to 65 percent of our full year adjusted EBITDA in the first half of the year. In fiscal 2025, we expect our quarterly adjusted EBITDA to be more evenly spread due to a shift in marketing spend from the second half into the first half of the year to support the launch of the subgrants, while cost reductions are expected to have a more significant impact in the second half of the year, leading to a more balanced strategy for profitability across the quarters.
Paula Dempsey: Half of these reductions will come from our store optimization project, while the remainder will come from discretionary spending and re prioritization of internal projects.
Paula Dempsey: Our quarterly sequence will be slightly different from the past years over the years, we realized 60% to 65% of our full year adjusted EBITDA in the first half of the year.
Paula Dempsey: In fiscal 2025, we expect our quarterly adjusted EBIT to be more evenly spread due to a shift in marketing spend from the second half into the first half of the year to support the launch of the sub brands.
Paula Dempsey: Cost reductions are expected to have a more significant impact in the second half of the year, leading to a more balanced strategy for profitability across the quarters.
Paula Dempsey: Capital expenditures are expected to be in the range of $10 million to $15 million, focused on technology, digital experience, store refreshes, and fulfillment capabilities to support our omni-channel growth strategy. For the second quarter, we expect net sales of $250 to $265 million and adjusted EBITDA between $18 and $24 million. This includes the projected tariff impact of approximately $5 million.
Paula Dempsey: Capital expenditures are expected to be in the range of $10 million to $15 million focused on technology digital experience store refreshes and fulfillment capabilities to support our omnichannel growth strategy.
Paula Dempsey: For the second quarter, we expect net sales of.
Paula Dempsey: $250 million to $265 million and adjusted EBIT between 18 and $24 million.
Paula Dempsey: This includes the projected tariff impact of approximately $5 million.
Paula Dempsey: Looking ahead to fiscal 2026, while we're not issuing formal guidance at this time, we believe it is important to share early visibility into the expected benefits of our 2025 sales channel realignment action. As I mentioned earlier, the stores identified for closure generate an average annual sales of approximately $350,000, significantly lower than our fleet average. As a result, we expect minimal impact to the top line both during the closure process and in future years. Historically, we retain roughly 60% of sales and customers following a store closure, driven by the strength of our loyalty program, which includes 95% of our customer base.
Paula Dempsey: Looking ahead to fiscal 2020, while we're not issuing formal guidance at this time, we believe it is important to share early visibility into the expected benefits of our 2025 sales channel realignment actions.
Paula Dempsey: As I mentioned earlier the stores identified for closure and generate an average annual sales of approximately 350000 significantly below our fleet average.
Paula Dempsey: As a result, we expect minimal impact to the topline both during the closure process and in future years.
Paula Dempsey: Historically, we retain roughly 60% of sales and customers. Following a store closure driven by the strength of our loyalty program, which includes 95% of our customer base.
Paula Dempsey: This high enrollment rate enables us to effectively redirect sales to nearby locations or our digital platform. Take into account the net financial impact of these closures, together with incremental reinvestment into marketing and store experience, we expect a benefit of 150 to 250 basis points of EBITDA margin expansion in fiscal 2026 and beyond, supporting enhanced profitability and sustainable top-line growth. This initiative also advances our fleet rebalancing strategy, shifting the mix from 65 percent enclosed malls and 35 percent outdoor centers to approximately 55 and 45 percent respectively. As we have shared in previous calls, outdoor centers typically deliver stronger productivity for our brand.
Paula Dempsey: This high enrollment rate enabled us to effectively grid direct sales to nearby locations or our digital platform.
Paula Dempsey: Taking into account the net financial impact of these closures together with the incremental reinvestments into marketing and store experience. We expect a benefit of 150 to 250 basis points of EBITDA margin expansion in fiscal 2026, and beyond supporting enhanced profitability and sustainable topline.
Paula Dempsey: Growth.
Paula Dempsey: This initiative also advances our fleet rebalancing strategy shifting the mix from 65% enclosed malls and 35% outdoor centers, approximately 55% and 45% respectively.
Paula Dempsey: As we have shared in previous calls outdoor centers typically deliver stronger productivity for our brand.
Paula Dempsey: In closing, we're operating with discipline and a clear strategic framework, tightly controlling what we can while positioning the business to win in a fast-evolving retail environment. Our priorities remain optimizing our footprint, investing in high ROI growth levers, and strengthening our financial foundation. We are confident that our focused execution and strategic decisions today will support sustained profitable growth over the long term.
Paula Dempsey: In closing, we're operating with discipline and a clear strategic framework tightly controlling what we can while positioning the business to win in a fast evolving retail environment, our priorities remain optimizing our footprint investing in high ROI growth levers and strengthening our financial Foundation.
Paula Dempsey: We are confident that our focused execution and strategic decisions today will support sustained profitable growth over the long term.
Chinwe Abaelu: With that, I'll turn the call back to the operator for Q&A. Thank you.
Paula Dempsey: With that I'll turn the call back to the operator for Q&A.
Paula Dempsey: Thank you.
Chinwe Abaelu: We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue.
Speaker Change: Now be conducting a question and answer session.
Speaker Change: I would like to ask a question. Please press star one on your telephone keypad.
Speaker Change: Confirmation home.
Speaker Change: As in the question queue, you May press star two to remove yourself from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.
Chinwe Abaelu: You may press star two to remove yourself from. for participants using the speaker equipment. It may be necessary to pick up the handset before pressing the. One moment, please, while we poll for...
Speaker Change: One moment, please while we poll.
Speaker Change: Four questions.
Lorraine Hutchinson: Our first question comes from the line of Lorraine Hutchinson with Bank of America. Please proceed with your question.
Speaker Change: Our first question comes from the line of Lorraine Hutchinson with Bank of America. Please proceed with your question.
Ashlee Wheeler: Hi, this is Marion for Lorraine. Could you talk a little bit about how we should think about for the second half. Hi. The Cadence of Newness for Products. Yeah, just in terms of like your sub-brand launches, just how we should think about that for the remainder of the year. Right. We have another new sub-brand launching in August. which is lovesick, which is geared toward a younger customer at a slightly lower price point. And then we have Studio Lux that will launch in September, which is a higher-end kind of desk-to-drinks concept. We then, in the back half of the year, accelerate the timing of our launches for the existing brands, Belle Isle, Festy, Nightfall, and Retro Chic.
Speaker Change: Hi, This is Mary on for Lorraine.
Speaker Change: Can you talk a little bit about how we should think about the cadence of newness for the second half.
Vicki: Hi, Vicki.
Vicki: <unk> of newness for our product.
Vicki: Yes, just in terms of like your sub brand launches just how we should share that for the remainder of the year.
Vicki: Right, we have another new sub brand launching in August.
Speaker Change: Which is lovesick, which is geared toward a younger customer.
Speaker Change: Slightly lower price point.
Speaker Change: And then we have a studio locks that will launch in September which is a higher.
Speaker Change: Higher end kind of dust to drinks concept.
Speaker Change: We then in the back half of the year accelerate the timing of our launches for the existing brands Belle Isle.
Speaker Change: First D nightfall and retro chic so by the end of the year, we will be delivering I would say into fourth quarter will be to delivering all of those brands on a monthly basis.
Ashlee Wheeler: So by the end of the year, we'll be delivering, I would say into fourth quarter, we'll be delivering all of those brands on a monthly basis. Thank you.
Speaker Change: Thank you.
Speaker Change: Thank you.
Brooke Roach: Our next question comes from the line of Brooke Roach with Goldman Sachs. Please proceed with your question.
Speaker Change: Our next question comes from the line of Bruce <unk> with Goldman Sachs. Please proceed with your question.
Savannah Summer: Hi.
James: Hi, This is James.
Savannah Summer: This is Savannah Summer on for Brooke Roach. Thank you so much for taking our question. It's great to see the momentum with the sub-brands. You've discussed them as being an avenue for new customer acquisition, and I'm curious if you could discuss what trends you've been seeing with these new customers following Are you seeing them shop across the broader assortment and other sub-brands? Is there any unique differences in shopping behavior by channel or category to call out?
James: Thank you so much for taking my question.
James: It's great to see the momentum with the sub brands.
Speaker Change: You've discussed it's been an avenue.
Speaker Change: And I'm curious if you could discuss what trends you've been seeing with customers following their initial purchase.
Speaker Change: <unk> seen them shop across the broader assortment in other sub brands and is there any differences in shopping behavior by channel or category to call out versus your legacy customer. Thank you.
Ashlee Wheeler: Hi, this is Ashlee. We are seeing really positive movement in the customer file related to these sub-brands, acquiring and reactivating new and younger customers than our average age in our existing file. Additionally, we're seeing really positive movement among existing customers. with an increased lifetime value attached to them. So really seeing incremental purchase behavior from that group, as well as really high transaction size. We're seeing a very high attachment rate as well. So about 90% of the time, those that are participating in the sub-brands are adding other core Torrid product to their basket. And I would add that it is performing substantially higher online than in stores.
Ashley: Hi, This is Ashley.
Speaker Change: We are seeing really positive movement in the customer file related to these sub brands acquiring and reactivating, new and younger customers and then our.
Speaker Change: Average age in our existing file.
Ashley: Additionally, we are seeing really positive movement among existing customers with an increased.
Ashley: Lifetime value attached to them, so really seeing incremental purchase behavior from that group as well as really high transaction size.
Ashley: We're seeing a very high attachment rate as well so about 90% of the time those that are participating in a sub brands are adding other core Tory product to their basket.
Ashley: And I would add that it is performing substantially higher online than in stores, Although we've distributed bell.
Ashlee Wheeler: Although we've distributed Bellisle particularly to 350 stores and FestVita an average of about 200 to 250 stores, we continue to see a predominance of the demand coming from the digital channel. So we think it's important to continue to bring newness to the store environment, but we're certainly, I think, by reaching a broader audience, reactivating the broader audience, and bringing younger customers into the brand, seeing a predominance even more than our average breakout toward the digital channel.
Speaker Change: Belle Isle, particularly the 350 stores and first data an average of about 200 to 250 stores.
Ashley: We continue to see a predominance of that.
Ashley: The demand coming from the from the digital channel. So we think it's important to continue to bring newness to the store environment, but we're certainly I think by reaching a broader audience reactivating, a broader audience and bringing younger customers into the brand seeing a predominance even more than our average breakout.
Ashley: Towards the digital channel.
Ashley: Okay.
Speaker Change: Great. Thanks, so much for the color I'll pass it on.
Savannah Summer: Thank you.
Speaker Change: Thank you.
Alex Straton: Our next question comes from the line of Alex Straton with Morgan Stanley, please proceed with your question. Hi, this is Kay Dionne for Alex. Thank you for taking our question.
Speaker Change: Our next question comes from the line of Alex <unk> with Morgan Stanley. Please proceed with your question.
Katie: Hi, This is Katie on for Alex. Thank you for taking our question.
Kay Dionne: I just wanted you to look at 2Q specifically, you know, I think at the midpoint of your guidance, it implies a sizable sales growth deceleration. Is there anything going on there? And does that reflect quarter to date trends? Or what should we know there?
Katie: I just wanted to sort of look at Q2, specifically I think at the midpoint of your guidance. It implies a sizable sales growth deceleration is there anything going on there and does that reflect core GE trends or what should we know there.
Paula Dempsey: Hi, this is Paula. How are you?
Speaker Change: Hi, This is Paula how are you yeah. So as we had discussed earlier on our on our call we are.
Paula Dempsey: Um, yeah, so as we had discussed earlier on our on our call, we are pausing right now, our shoe business, until further notice. So the majority of that business is currently sourced from from China, and that business tends to be lower So at this point, we're pausing it and just essentially re-evaluating other partners to support the re-entry into that business at a higher, more profitable margin. So that impacts about $40 million, $45 million in sales for the year kind of spread evenly through the balance of the year. That is correct. Got it.
Speaker Change: Pausing right now our shoe business.
Speaker Change: Until further notice so.
Speaker Change: The majority of that business is currently sourced.
Speaker Change: From from China, and that business tends to be lower margin. So at this point, we're pausing at and just essentially reevaluating other partners to support the reentry into that business at a higher more profitable.
Speaker Change: Margins.
Speaker Change: So that impacts about 40 million $45 million in sales for the year kind of spread evenly through the balance of that is correct.
Ashley: Got it thank you and I don't know if you can give me any color on quarter to date trends.
Kay Dionne: Thank you.
Ashlee Wheeler: And I don't know if you're giving any color on quarter day trends or if that's in line with your guidance there. Just think through through the guidance where we're continuing to see overall the choppy customer behavior, but it's going in both directions. We have some softer times and some stronger times. So we feel and are observing that she's buying slightly closer to need. And so seasonal categories are coming, their demand is coming in a little bit later. We can continue to see strength in our digital channel and look forward to really strong performance as we go through the back of the year with our semi-annual sale, our toward cash event, as well as our after party.
Ashley: That's in line with your guidance here.
Ashley: Yes think through through the guidance, where we're continuing to see overall choppy customer behavior, but.
Ashley: It's going in both directions, we have some softer than some stronger time. So we feel and are observing that should find slightly closer to need and so seasonal categories are coming there demand is coming in a little bit later.
Ashley: Turning to see strength in our digital channel and look forward to a really strong performance as we go through the back of the year with semiannual sale are toward cash event as well as our after party.
Kay Dionne: Thank you so much. Thank you.
Ashley: Great. Thank you so much.
Ashley: Thank you and as a reminder, if anyone has any questions that you May press star one on your telephone keypad to join the queue.
Chinwe Abaelu: And as a reminder, if anyone has any questions, you may press star one on your telephone keypad to join.
Dylan Carden: Our next question comes from the line of Dylan Carden with William Blair. Please proceed with your question. Appreciate it. I'm sure you covered this.
Speaker Change: Our next question comes from the line I'm doing partnered with William Blair. Please proceed with your question.
Speaker Change: I appreciate it I am sure you cover this apologies there is a lot going on Tonight, but the planned promotional.
Ashlee Wheeler: Apologies, there's a lot going on tonight, but the plan promotional or the use of promotion strategically through the quarter kind of mixed in with this flow of newness that you're seeing. Can you just remind us sort of the promotional strategy from here, should those things... exist or coexist, and is that more a reflection of the current market? And then as far as the online versus retail channels, online more promotional and more promotional.
Ashley: Use of promotions strategically through the quarter kind of mixed in with this flow of newness that you're seeing.
Ashley: Can you just remind us what are the promotional strategy from here.
Ashley: Should those things exist.
Ashley: We exist coexist and is it more reflection of the current market.
Ashley: And then as far as the online versus retail channels online more promotional on a more promotional channel. Thanks.
Ashlee Wheeler: Hi, this is Ashlee. So we are continuing to be, I would say, as promotional as we typically are. Our cadence of major events, like Toward Cash, as you mentioned, will be four times a year, as historically have been and as planned, to semi-annual sale events. And we're responding to, you know, general consumer, I would say, price consciousness or value orientation with promotional events, which she's been very, very responsive to. So that will continue. And that's implied in our, in our guidance.
Ashley: Hi, This is Ashley.
Speaker Change: So we are continuing to be I would say as promotional as we typically are.
Speaker Change: Our cadence of major events like toward cash as you mentioned will be four times a year as historically have been.
Ashley: As planned to semiannual sale events, and we're responding to general consumer I would say price consciousness, our value orientation with promotional events.
Ashley: She has been very very responsive to so that will continue and that's implied in our in our guidance.
Ashlee Wheeler: Okay, and then I'm just kind of curious, the acceleration enclosures. you know, what's behind that, how you're arriving at kind of the 75-25 split is the right level. Yeah, it can be any sort of thing. Sure, I think that... Dylan, the customer continues to tell us that she prefers to shop online. We have talk previously, we're in the mid 60s in terms of penetration. That penetration keeps growing. That business keeps comping online. We are now acquiring more customers online than we are in the store channel. So all of the trends, and I think we've supported this with marketing strategies, with investment in digital marketing, with the sub-brand strategy and the expansion of product categories.
Ashley: Okay.
Ashley: And then I'm just kind of curious the acceleration in closures.
Ashley:
Ashley: What's behind that how you're arriving at kind of the 70 525 split is the right level.
Ashley: Yeah can we sort of start there.
Ashley: Sure I think that.
Ashley: The customer continues to tell us that cheap refers to shop online.
Ashley: We have.
Ashley: <unk> previously were in the mid <unk> in terms of penetration that penetration keeps growing that business keeps comping online. We are now acquiring more customers online than we are in the store channel. So all of the trends and I think we have supported this with marketing strategies with investment in digital marketing.
Ashley: With the sub brand strategy and the expansion of product categories.
Ashlee Wheeler: I think the web experience for us is... dramatically powerful channel for storytelling for our customer. And as we do that she continues to migrate online. We still are seeing omnipower and we feel strongly that by Closing these underperforming stores will be able to move the fixed expenses associated with those stores. Some of that will go to a higher level of profitability for the company, and some of that will go toward the right-sizing of the digital investment that needs to happen to continue to drive this new customer to the brand. As we see the younger customers coming in, as we see the reactivated customers coming in, the experience for the breadth for the product categories, being able to visualize them, outfit them, tell the stories about them, I think the team has done a tremendous job in driving that visual representation of the brand, so it is the best expression of the brand.
Ashley: Thank you.
Ashley: Web experience for us is.
Ashley: Dramatically.
Ashley: Dramatically powerful channel her storytelling for our customer.
Ashley: And as we do that she continues to migrate online.
Ashley: We still are seeing omni power and we feel strongly that.
Ashley: Closing these underperforming stores, we'll be able to move the fixed expenses associated with those stores.
Ashley: Some of that will go to a higher level of profitability for the company and some of that will go toward the right sizing of the digital investment that needs to happen to continue to drive this new customer to the brand as we see the younger customers coming in as we see the reactivated customers coming in the experience for the breadth of it for the product cat.
Ashley: <unk> the.
Ashley: Being able to visualize them outfit them.
Ashley: Tell the stories about them is I think we've.
Ashley: The team has done a tremendous job in driving that visual representation of the brand. So it is the best expression of the brand.
Ashlee Wheeler: We're not giving up on stores at all. We are right-sizing the portfolio. So if you do the math, this ends up at about being 450 stores with this round of closures, and we think we're leaving very few markets, so it's really about thinning out of existing markets. The customers will still have a close-by store, and just to reinforce, we've seen with the closures, most recently with the fourth-quarter closures, that we are still transferring slightly higher than 60% of those customers and sales to nearby stores or online. So as we're doing that, we're just right-sizing the business to the demands of the customer and being able to reallocate our resources to the right channel.
Ashley: We're not giving up on stores at all we are right sizing the portfolio. So if you do the math this ends up at about being 450 stores.
Ashley: With this round of closures.
Ashley: And we think where we're leaving very few markets. So it's really about a thinning out of existing markets.
Ashley: Customers will still have a close by store and just to reinforce we've seen with the closures.
Ashley: Most recently with the fourth quarter closures that were still transferring slightly higher than 60% of those customers and sales to nearby stores or online.
Ashley: So as we're doing that we're just right sizing the business to the demands of the customer and being able to reallocate our resources to.
Ashley: To the right channel I think sub brand says.
Ashlee Wheeler: I think sub-brands, as illustrated to us, are and We substantiated our theory that this customer wants more choices and is willing to pay for them, meaning she's willing to pay more for more fashion. And our experience with their response to the sub-brands and the halo effect that it provides to the core business is best expressed online.
Ashley: Illustrated to us are.
Ashley: <unk>.
Ashley: Substantiated, our theory that this customer wants more choices and is willing to.
Ashley: <unk>.
Ashley: Pay for them, meaning she is willing to pay more for more fashion and are experienced with their response to these sub brands and the Halo effect that it provides to the core business.
Ashley: It is best expressed.
Ashlee Wheeler: And so it became very, very clear to us that it was time to restructure our portfolio to a digitally-led perspective. I hope that answered that. Very much so, thank you.
Ashley: Online and so that was became very very clear to us that it was time to restructure our portfolio to a digitally led.
Ashley:
Ashley: Perspective.
Ashley: I hope that answered that.
Ashley: Very much so thank you and last one can you square the circle as you mentioned it there the.
Ashlee Wheeler: And last one, can you square the circle, you mentioned it there, the... 60% retention, but full year negligible sales impact of closing the stores. Is that just some sort of function of when you're closing them, the fact that you retain, maybe increase marketing and other online channels, just how you get to that kind of neutral impact? Thanks. Right. So most of those stores will close toward the end of the fourth quarter, and at the same time, we'll be ramping up our marketing spend in relationship to that. So based on what we've learned from our digital marketing investments over the last 18 months, we have a high confidence level in our ability to offset the small amount that doesn't naturally transfer with new customer acquisition through the digital channel.
Speaker Change: 60% retention, but full year negligible sales impact of closing the stores is that just some sort of a function of.
Ashley: When you are closing them.
Speaker Change: Maybe increased marketing and other online channels.
Ashley: You get to that kind of neutral impact. Thanks.
Ashley: Right. So most of those stores will close towards the end of the fourth quarter and at the same time will be.
Ashley: Ramping up our marketing spend in relationship to that so based on what we've learned from our digital marketing investments over the last 18 months, we have a high confidence level in our ability to offset.
Ashley: So small amount that doesn't naturally transfer with new customer acquisition through the digital channel.
Ashlee Wheeler: Thank you. And those stores, by the way, are very, very low volume. So it's less of a hill to climb in terms of replacing those those revenue dollars. Great, thank you. Thanks. Thank you.
Ashley: Thank you.
Ashley: And those stores by the way are very very low volume so.
Ashley: It is a less of a hill to climb in terms of replacing those those revenue dollars.
Ashley: Okay. Thank you.
Ashley: Thanks.
Ashley: Yes.
Ashley: Thank you.
Chinwe Abaelu: And we have reached the end of the question and answer session.
Speaker Change: And we have reached the end of the question and answer session.
Lisa Harper: I would like to turn the floor back to CEO Lisa Harper for a closing remark. Great. Thanks so much for joining us today. We look forward to sharing the progress in our next call as we reflect on the Q2. Thanks so much.
Ashley: I'd like to turn the floor back to CEO, Lisa Hartman for closing remarks.
Ashley: Great. Thanks, so much for joining us today, we look forward to sharing the progress in our next call as we reflect on our Q2. Thanks so much.
Chinwe Abaelu: Thank you, and this does conclude today's conference, and you may disconnect your line at this time. Thank you for your participation. Have a great day.
Speaker Change: Thank you and this does concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation and have a great day.
Ashley: Okay.
Ashley: [music].