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Greetings. Welcome to Torrid Holdings fourth quarter fiscal 2025 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star and the number zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Chinwe Abaelu. Thank you, and you may begin.

Good afternoon, everyone, and thank you for joining Torrid's call today to discuss our financial results for the fourth quarter and full year of fiscal 2025, which we released this afternoon and can be found on our website at investors.torrid.com. With me today on the call are Lisa Harper, Chief Executive Officer, and Paula Dempsey, Chief Financial Officer. Ashlee Wheeler, our Chief Strategy and Planning Officer, is also present and will be participating in the Q&A session. 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, March 19, 2026. 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, see our filings with the SEC. 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. With that, I will turn the call over to Lisa.

Thank you, Chinwe, and hello, everyone. Thank you for joining us today. On today's call, I'll review our fourth quarter and full year 2025 performance and discuss the substantial progress and transformation we've made over the past two years. We have optimized our channel, product, and pricing platforms. With these foundational elements now in place, I'll outline our primary focus for 2026, which is accelerating customer file growth through retention, reactivation, and acquisition. Finally, I'll turn the call over to Paula to discuss the financials in detail and our outlook for the year ahead. I'm pleased to report that for 2025, we reached the top end of our net sales outlook, delivering $1 billion, and exceeded the high end of the adjusted EBITDA range, achieving $63.6 million.

For Q4, we registered net sales of $236.2 million and adjusted EBITDA of $5.1 million. These results reflect early progress in our strategic initiatives. Throughout the year, we made deliberate decisions to strengthen our foundation, optimizing our store footprint, launching our sub-brand strategy, pausing and relaunching our footwear category, and later in the year, sharpening our product assortment around core franchises, fabrications, and silhouettes. The trends we experienced in Q4 give us confidence we are moving in the right direction and position us well for comparable sales growth in 2026. From a category perspective, we saw strength in dresses, demonstrating growth for four consecutive quarters. We also saw acceleration in sub-brands and a turnaround in knit tops, which comped positively for the latter half of the fourth quarter.

Intimates and activewear, both categories gained momentum and are poised for growth in 2026. Additionally, we reintroduced footwear with great success, having paused the category to resource it in the elevated tariff environment. We sold out of the limited assortment in record time and look forward to being back in the footwear business at scale and more profitably in the back half of 2026. As we close 2025 and enter 2026, we have strategically right-sized our channels, reinvigorated our product, and optimized our pricing platforms. With these foundational elements now in place, our primary focus for 2026 is accelerating customer file growth through targeted, segmented marketing to acquire new customers, reactivate lapsed ones, and increase purchase frequency among our most loyal shoppers. This is our number one priority, and we are deploying resources, talent, and capital accordingly.

I'll expand on this initiative momentarily, but first, an update on our channel optimization initiative. As we've discussed on prior calls, we identified up to 180 structurally unproductive stores for closure. These locations averaged roughly $350,000 in annual sales. We completed 85% of the closures by Q4, or 151 stores in 2025, and we've closed an additional 11 thus far in Q1. We are on track to finalize the full optimization plan by the first half of the year. Essentially, our channel platform is now optimized, supported by a more productive and strategically aligned store fleet. Our retention metrics validate that our strategy is working. Customer retention from last year's store closures is meeting and in many cases, exceeding our model. This demonstrates the strength of our omni-channel ecosystem.

We're also seeing customer shift to nearby stores and markets impacted by closures, driving increased traffic and transactions, resulting in dramatically improved four-wall profitability in our remaining store fleet. Even more encouraging, our 2025 closure retention rates are outperforming 2024 results, with more customers shifting to our digital platform. Our enhanced retention strategies, including targeted multi-touch communications, are seamlessly migrating customers to nearby stores and online channels. What this tells us is simple. Our most loyal customers are truly channel agnostic. The seamless and frictionless omni-channel platform we've built, combined with our commitment to superior and consistent fit, allows our customers to remain highly engaged with confidence in their channel of preference. Our product platform is built and now scaling effectively.

We entered 2026 with five sub-brands live and critically, 80% of our assortment planning and buying decisions are now data informed, covering both product selection and seasonality. 2025 was our learning year. We launched all five sub-brands and received real customer feedback across the board. We stayed agile, reading demand signals, adjusting buys midstream, chasing winners, and refining our assortment mix. Those learnings are now embedded in our 2026 plans. We've done more than just learn. As we shared on our Q3 call, we fundamentally strengthened our merchandising foundation. We've implemented stronger guardrails in our merchandising process and built out a more robust assortment planning function, both of which I'm directly overseeing. This represents a much more integrated way of working. Design, merchandising, planning, and product development now operates as a cohesive unit.

The new guardrails keep us anchored in proven categories while still allowing us to expand strategically and maximize opportunity. It's a disciplined approach that balances innovation with reliability. Our sub-brands are driving meaningful growth. They generated over $70 million in sales in 2025, and we're projecting roughly 60% growth in 2026 to approximately $110 million, growing from approximately 7% of total net sales in 2025 to 12% in 2026. Importantly, this growth is margin accretive. Our sub-brands carry higher product margins than our core assortments because they are bought with scarcity and achieve higher full price sell-through. The benefits extend beyond margins. Our sub-brands are customer acquisition engines, attracting new shoppers, reactivating lapsed customers, and driving higher spend among our most valuable customers.

These lifestyle concepts deliver the newness and excitement that broadens our appeal while deepening engagement with our existing base. Each brand, with their distinct positioning, inspired aesthetic, and lifestyle appeal, allow for broad reach and market share expansion. We're exploring multiple paths forward, not just through our direct channels, but also through pop-up experiences and expanded in-store assortments. We'll be testing these concepts throughout the year to determine the best approach for scaling these sub-brands, representing a disciplined approach to their growth. As I mentioned, our intimate apparel business showed strong momentum in Q4. We're building on that strength with the relaunch of Curve, our intimate apparel brand, this February, and we'll see the launch of two new bras in the back half of 2026. Bras are a pillar of our product portfolio that drives strong customer acquisition, reactivation, and long-term loyalty.

Finally, as we discussed on our Q3 call, we refocused the foundation of our product assortment on core franchises, fabrications, and silhouettes that resonate with our customers. We had previously stepped away from essential fabrications like Supersoft, a key favorite among our core customer base. Recognizing this gap, we began reintroducing these franchises in Q4 and immediately saw positive sales momentum and a turnaround in our tops business. Building on this success, we've introduced a knit dressing capsule collection built around that franchise. We will expand in a meaningful way in the fall of this year. Shifting briefly to footwear. In Q4, we selectively reintroduced a curated assortment, and as I mentioned, the results are encouraging. We fundamentally restructured our sourcing strategy and assortment mix. This more disciplined approach delivers a shoe offering that drives stronger attachment rates and improved profitability.

This will allow us to recapture both the direct revenue and attachment-driven sales we lost during the absence of footwear. The temporary pause of the footwear business had a 260 basis points negative comp impact to the full year in 2025 and a 460 basis points negative impact to the fourth quarter. Looking ahead, we'll face a first half headwind to comp and then a positive impact to the second half of the year. Now for an update on our opening price point strategy, which is exceeding our expectations. Developed in close partnership across merchandising, design, planning, and product development teams, this strategy is anchored in customer insight. We're successfully balancing customer demand for accessible price points with two non-negotiables, margin discipline and product quality.

Maintaining our quality standards while delivering accessible value remains imperative. OPP now represents approximately 30% of our total assortment and nearly 40% in stores. Represented across jeans, leggings, non-denim bottoms, and anchored in tops and graphic tees, this collection of most loved items are offered at an approachable value and provide everyday price parity across our e-commerce and brick-and-mortar channels. We are seeing the most loved opening price point collection drive conversion and UPT in both channels, and we believe that this will be a critical component of customer file growth, driving reactivation, acquisition, and frequency. Built on our disciplined product development platform, this assortment is cost-engineered in support of opening price point value and leveraging the strength of our sourcing partnerships with platform fabric to enable speed.

The combination of these efforts and the unit acceleration we see in the early stages of this initiative point to a highly accretive strategy with even greater runway ahead. As I've mentioned, our primary focus in 2026 is growing our customer file. We're implementing several targeted strategies to accomplish this critical goal. First, we are doubling down on reactivation of lapsed customers, leveraging our wealth of customer data to reintroduce customers to the expansive assortment offering of core opening price points and sub-brands. Second, and this goes hand in hand with reactivation, we are deeply committed to more informed customer segmentation and personalization across our owned and organic marketing channels. Early results are promising in our ability to drive incremental reactivation of lapsed customers and frequency among our most active.

This includes greater email segmentation, personalized content and messaging strategies, testing initiatives, and the reintroduction of direct mail to augment owned marketing channels. Our intent is to work methodically through the full marketing funnel, continuing to allocate resources and investments to channels and tactics that drive positive ROAS and increase customer lifetime value. Third, we're strengthening the marketing and analytical infrastructure to support these efforts. We have redeployed senior marketing and analytical talent oriented around individual marketing channels, messaging, and content strategies in support of a more comprehensive and effective commercial plan that is laser-focused on customer file growth.

Fourth, we are continuing to evolve and refine our loyalty program, of which over 95% of our active customers are engaged with a focus on strengthening the value proposition, ensuring the program remains a meaningful reason for customer engagement with our brand, and most importantly, drives long-term retention and increased customer lifetime value. Our mission is clear to leverage the foundational work we've completed across our channel, product, and pricing platforms to acquire new customers, reactivate lapsed customers, and increase purchase frequency among our most loyal shoppers. This is our number one priority, and we're deploying resources, talent, and capital accordingly. We know the most efficient path to customer file growth is through increased retention efforts and reactivation of our lapsed customer population, followed by new customer acquisition. We have over 7 million lapsed customers who are reachable through owned marketing channels.

The cost of reactivating these customers through segmentation and personalized communication costs roughly 1/3 of a new customer acquired through paid digital media channels. Leaning into this pool, leveraging in-house owned and organic marketing channels in a more strategic way supports a marketing spend outlook consistent with prior years in the 5%-5.5% of net sales range. We have completed a substantial two-year transformation, strategically optimized our channel, product, and pricing platforms. Q4 results reflect an early progress on our strategic initiatives, including the store footprint optimization, the sub-brand expansion, the footwear reintroduction, and a product assortment anchored in core franchises and opening price points. The foundational platform is now built. We are entering a phase of maximization and scale.

I'd like to take this opportunity to speak to the entire organization and thank them for their extraordinary dedication and resilience throughout the year and this transformational journey. Your hard work, adaptability, and commitment to excellence have been the driving force behind our progress. The operational improvements we've achieved would have not been possible without your daily efforts and unwavering focus on execution. With that, I'll turn the call over to Paula.

Thank you, Lisa. Good afternoon, everyone, and thank you for joining us today. I will begin with a review of our full year 2025 results and our fourth quarter financial performance, then walk through the strategic progress we have made on our multi-year transformation and close with our outlook for fiscal 2026. Fiscal 2025 was a year of intentional structural change. We delivered full-year sales of $1 billion in line with our guidance and an adjusted EBIT of $63.6 million, slightly ahead of expectations. Most importantly, we achieved this while simultaneously executing a significant transformation of our physical footprint, proactively managing an estimated $50 million in gross tariff headwinds, and maintaining the inventory discipline that leaves us entering fiscal 2026 in a balanced inventory position. The headline result is this.

We enter 2026 with a fundamentally stronger operating structure. Turning to the fourth quarter, net sales were $236.2 million, compared to $275.6 million in the prior year. Comparable sales declined 10%, which includes 460 basis points of negative comp impact due to the temporary pause of the shoe business. Gross profit was $70.9 million versus $92.6 million last year, and gross margin was 30% compared to 33.6% in the prior year, reflecting promotional activities, product mix, and deleverage on a reduced sales base. SG&A expenses declined by $11.4 million-$62.4 million compared to $73.8 million a year ago. As a percentage of net sales, SG&A leveraged 40 basis points to 26.4%. This is a meaningful proof point.

Our cost structure is coming down drastically, supporting our EBITDA margin expansion, which is precisely the outcome our store optimization program was designed to produce. We expect this leverage to continue and accelerate through fiscal 2026 as the full benefit of our rationalized footprint flows through. Marketing investment decreased by $1.9 million-$13.5 million. Net loss for the quarter was $8.1 million or $0.08 per share, compared to a net loss of $3 million or $0.03 per share last year. Adjusted EBITDA was $5.2 million, a 2.2% margin versus $16.7 million and 6.1% margin a year ago. We ended the quarter with $200 million in cash and cash equivalents and $31 million drawn on our revolving credit facility.

Total liquidity at the end of the year, including available borrowing capacity under a revolving credit agreement, was $84.9 million, providing adequate liquidity to execute our plan. Inventory totaled $136.5 million, down 8%, reflecting both tighter receipt management and the intentional reduction of our store base. Aligned with our store optimization program, during the fourth quarter, we closed 77 stores, bringing our full year total to 151 closures for fiscal 2025. We expect to close up to an additional 30 stores by the end of the first half of fiscal 2026, at this point, the program will be substantially complete. Customer retention rates from closed locations have performed consistently with historical levels, validating both the network strategy and the underlying brand health.

Our customers are finding us where we remain open and online, and we minimized exit costs by structuring closures around natural lease expirations wherever possible, significantly reducing the cash cost of the program and preserving liquidity. Most importantly, the financial impact is substantial and compounding. For fiscal 2025, we realized approximately $18.5 million in lower operating expenses from this year's 151 closures, plus the 35 stores closed in the prior year. We move into fiscal 2026 with a fully rationalized footprint, and we expect to capture an additional $40 million in expense savings. Now turning to our outlook. As Lisa mentioned, we enter 2026 in a much stronger position. We have strategically optimized our channels, products, and pricing platforms.

For the full year, we expect net sales of $940 million-$960 million and adjusted EBIT of $65 million-$75 million, representing margin expansion up to 140 basis points off of fiscal 2025. Capital expenditures are expected in the range of $8 million-$10 million, reflecting continued reinvestment discipline. For the first quarter, we expect sales of $236 million-$244 million and adjusted EBITDA of $14 million-$18 million. The EBIT expansion reflects the full year benefit of our optimized cost structure and the compounding effect of those operating savings flowing through the P&L. It is worth providing some context on the bridge from our $40 million in expected cost savings to our EBITDA guidance range, calling for midpoint growth of 10% to $70 million.

I want to be transparent about what is moving in both directions. On the offset side, the lower sales base naturally reduces gross margin dollars, which absorbs a portion of the cost savings. We're also resetting our incentive compensation program in fiscal 2026, which represents a meaningful year-over-year headwind as we return to a more normalized bonus structure. Taken together, these offsets explain the gap between the gross cost savings and the net EBITDA outcome. What the guidance reflects is a business where the structural cost work is fully embedded and the underlying earnings power is growing even after absorbing those headwinds.

In closing, the store optimization program is largely complete. The cost structure has been reset. Inventory is aligned to our full year plan. The team demonstrated it can execute through complexity, tariff pressures, demand volatility, and a major operational transformation. Our path forward centers on growing our customer file and expanding EBITDA margin. Now we will open the call to answer your questions. Operator?

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star and the number one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star and the number two if you would like to remove your question from the queue. For any participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment while we poll for questions. Our first question comes from Janine Stichter with BTIG. You may proceed.

Hi. Congrats on the progress. Was hoping to hear a little bit more about the learnings from the first year of sub-brands. Maybe help us understand some of the differences in the brands that you've launched this year, what's working, what's not. Then as we think about sub-sub-brands at 12% of sales next year, I think at one point you had talked about it being 25%-30% of the assortment. Is that still the right number? Just trying to reconcile those two figures.

Okay. Hi, Janine. Sub-brands we are still very happy with the progress in that business. I think that what we've made a decision is to be more conservative about the growth cycle of that business. We're still happy the margin is a benefit overall. Some of the brands are incredibly strong. I would say of the five brands, I would highlight Festi, Nightfall, and Retro Chic as being very consistent performers with Festi particularly being the number one sub-brand and with the largest opportunity for expansion. Belle Isle has a very high level of seasonality, so we're adjusting that. It sells better in the first half of the year than the back half of the year. We're still exploring the opportunity with Lovesick, which is the younger-oriented brand.

We are still feeling very bullish and seeing very positive momentum in that business. We think that it'll expand a little bit more in the front half than the back half, really because we'll be lapping in the back half of full presentation of all brands. We launched them sequentially in the first half of last year. I think I had said earlier in the mid-20s as a mix. I think we'll be more in the mid-teens as we lap. I think we talked about going up to about $110 million estimated opportunity this year. We're still very happy with how they're performing, and we'll be testing some additional store opportunities as well as potential pop-ups later this year for sub-brands.

As we see the stores performing better with the store optimization program, it gives us some room to add some of those businesses to stores more very judiciously, but to expand that opportunity.

Okay, great. Then maybe just on the retention and lapsed customer reactivation, what have you learned about the reasons why some of these customers have not stayed with the brand? Maybe just elaborate more on the communications that you're going forth with now to reactivate those lapsed customers. Thank you.

Hi, Janine. This is Ashlee. We've heard time and time again from lapsed customers that one of the primary reasons for spending less is economic pressure, price, which we have addressed through opening price point. In the prepared remarks, Lisa expanded on opening price point as an initiative that now represents about 30% of the business, will expand to be closer to 40%. We're seeing incredible response to that. We're seeing it as a vehicle to reactivate customers through a more approachable value pricing as well as acquire new customers that way. We're seeing it drive frequency among existing customers as well.

Beyond that, we recognize, with the 7 million customers in our lapsed file that are marketable through our owned channels, we have enormous opportunity through more advanced targeted segmentation and personalization of messaging, using product affinity as a starting point as well as other demographic and kind of price preference among that population, to get them back into the brand.

Thanks for the color. Best of luck. I'll pass it on.

Thank you.

Thank you.

Our next question comes from the line of Dana Telsey with Telsey Advisory Group. You may proceed with your question.

Hi, good afternoon, everyone. Can you talk a little bit about the cadence that you saw of sales during the holiday season, quarter to date, what it looks like? Any thoughts on how the shaping of this year is going with tariff expenses, what you have built into the model on margins with the puts and takes? Lastly, the return of footwear, how do you expect that to come back, impact on margins? Are there other categories, Lisa, that you're looking to that could be sales drivers going forward? Thank you.

I'm gonna do this backwards, and I'm gonna take the category conversation, and then I'll talk about tariffs and categories, and then I'll let Ashlee go through the rhythm of the business. We do have obviously tariff pressure in the first quarter, as everyone does. I would think we've managed this well, even with our, you know, other types of supply chain challenges. We have very, very good relationships with our vendors, and they've been great partners with us, and so we've been able to manage that pretty consistently. From a category basis, the shoes are. I'll just remind you, when the tariffs came, we were running a pretty much, I would say, even EBITDA business in shoes from that specific shoe business.

We had a very high level of attachment to it, so we were keen on engineering it to make sense, both from a margin perspective as well as the customer acquisition modality and attachment to other types of products. We tested the new vendor structure and the new look and feel and quality of the product in November, and it was a resounding success. Very happy with the results. We've got some inventory coming in in the first half of the year, but we still have headwinds, substantive headwinds, I'd say, in first quarter and second quarter related to footwear will be back in stock in the June/July time period. We expect to have a benefit in that business in the back half.

The way that we've tested it and the way that we're rolling it out allows us to expand margin in footwear, as well as recapture the associated sales from customers who come to the brand through footwear. Other categories that we see expanding outside of the OPP, which actually touches many of the categories of the business, I think, denim, non-denim, tops, dresses, sweaters in the back half. The other categories would be active. We have a fleece program rolling out that we think will be very advantageous. The expansion of OPP in some of these broader categories, as we move forward. Those would be the bulk of the categories for expansion. Ashlee will remind me if I've forgotten something. I'll let you go through the business rhythm.

Sure. Hi, Dana. We're pleased with fourth quarter results, as communicated. Holiday performed as expected. We really saw improvement in the business in January. If you recall, we talked in our third quarter call about chasing into goods, into core franchises, core fabrication, particularly in our tops business. Those goods arrived late December for January selling, and we immediately saw the business turn in those categories. Our knit top business, for example, which is the second largest department in our portfolio, started to comp positive as a function of those chased receipts. We continue to see really positive momentum in the categories that we've chased into, further supported by opening price point. As for the shape of 2026, footwear, as Lisa communicated, will continue to be a headwind in the front half of the year.

The largest headwind will be felt in the first quarter, abates a little bit in the second quarter, and then will provide a benefit on a year-over-year basis starting in the third quarter when we launch the boot business in a fulsome way. Additionally, in the back half of the year, we'll see the launch of two bras that will support expansion in the Curve business, as well as some additional fleece programs and knit dressing capsules. There's more to come in the back half of the year.

Thank you.

Our next question comes from the line of Brooke Roach with Goldman Sachs. You may proceed.

Good afternoon, and thank you for taking our question. Lisa, I was hoping we could dive a little bit deeper into your marketing plans for the year, specifically around pricing, promo, and loyalty. What's changing in the loyalty program as you look to reactivate lapsed customers and increase dollars spent per active customer today, and how does that tie into your plans for Torrid Cash and marketing? Thank you.

Great. We've talked a lot about price and beyond the opening price point. As we survey our customers, more than half of our customers articulate that one of their reasons for lapsing would be their personal financial situation and that they would like to see more price parity in terms of both channel and opening price point in our core businesses. We've talked a lot about that, and that's moving forward. I would say the biggest shift that we'll see this year in promotion is that we're putting less pressure on Torrid Cash redemption. That has been dwindling over time, and we've just reset our expectations for the redemption in those categories. We'll be able to pull back on our reliance on that piece of that.

I think the other piece for us, for the customers is price point messaging versus percentage off messaging, and I think all of those things are working well. We also have a lot more multiples in our promos right now, so that multiples in bralettes and knits and woven tops, those types of things that have been that have tested very well for us and are exceeding our expectations. Promos will shift out of so much reliance on Torrid Cash, a bit more into everyday opening price point opportunities and price parity between channels, which we also think that's important. Loyalty has been pretty consistent for us. What we're looking to build in the loyalty piece is a bit more frequency.

Retention isn't as much of an issue there as we think we have opportunity in driving a bit more frequency among those loyalty customers with better segmentation. We just did a special sale for them a couple of weeks ago that we delivered in a very different way than we'd normally deliver. It was very well-received, and the conversion on that was quite good. We're testing different tactics to highlight their loyalty levels and giving them more attention. We've also reinstituted the icon level in our loyalty program, which is the top of the top of those customers, so that we ensure that we continue to get very robust feedback from the loyalty customers. Some of the decisions that we've made are completely driven.

They're very much driven by the feedback that we get from our customers and with every level of communication, every touch point that we have. That's been the play. I would say that we feel like there's a grassroots version of marketing that will augment what we do in more of the paid spend, and I'll let Ashlee talk a little bit more about that.

Hi, Brooke. We recognize that we have an enormous amount of opportunity to leverage our owned and organic channels, particularly to reactivate customers, but also to drive frequency among our existing loyalty members, through really precise targeting, personalized or segmented content and messaging in a way that we haven't. We have an enormous amount of data on our customers, with over 95% of them participating in our loyalty program. It gives us a great advantage to communicate to them in a more personalized way, and that's gonna be one of our key focuses for the year. Additionally, we've re-entered direct mail as a modality, an additional touch point.

A portion of that will be allocated to loyalty customers or active customers as a frequency-driving touch point, and we'll really leverage that, in a more powerful way toward acquisition and reactivation.

Great. Just one follow-up for Paula. As you look on a multi-year basis, do you think that double-digit EBITDA margins are achievable? If so, how should we be thinking about the core drivers of achieving that recovery in margin rates? Thank you.

Yeah. Hi, Brooke. Yes, I do believe so. I will tell you that our plan, we have up to 150 basis points of EBITDA margin increase in fiscal 2026, and that's really through leveraging our SG&A platform. As we progress throughout the year, we're going to see that leverage increases more and more. Even with the Q1 guidance that we have provided, you will see us starting to leverage SG&A, in which at the end of the year, you're going to see that gap increase and then therefore driving that to the bottom to the profitability. Yes, 150 basis points of leverage by this year is very much a possibility, and for that to continue to grow in the next few years is probably a good assumption.

Great. Thanks so much. I'll pass it on.

Our next question comes from the line of Corey Tarlowe with Jefferies. You may proceed.

Yeah, great. Thanks. Lisa, I guess a high-level strategic question. 2025 sort of felt like a defensive year, closing stores. What do you think more is left on the defensive side of the equation as opposed to when do you feel like you can really get to playing offense, and is that the way to kinda think about what 2026 should be? I have a follow-up.

Yep. Hi, Corey. I do think about us pivoting into a more offense-oriented approach. I think what we've done to restructure the channel expense space to expand product, and now this is really more about refinement. I think what we were talking about in terms of segmentation and the refocus on owned and organic marketing efforts is a great opportunity for us and should expand the customer file this year. We are also seeing the, you know, I think, reinvigoration of the loyalty interest in the business through sub-brands. We are seeing those aspects of the business. I think product, I feel great about. OPP is working very well and will expand.

Sub-brands are working well and expanding. We've cut a substantive amount of fixed expense from underperforming stores. The stores that are open right now are exceeding our expectations in terms of their performance. We're starting to see that turn, and have actually put a little bit more pressure on store sales as we move through the year, which we think is a better mix in terms of the margin opportunity there. We do think, and I think my message overall is intended to share that we've accomplished this store closure very effectively, and executed that very well. We've integrated and introduced the OPP through multiple categories of the business and are pleased with how that's working. Our store profitability are improving. We're bringing back footwear. We're expanding other categories of the business.

We do feel like we're in the position to start reaping the benefits of this as we move through the year.

Got it. That's helpful. Just as a follow-up, how are you thinking about pricing and promotions for 2026?

I think one of the things that helps us with OPP is we actually generate a similar out-the-door price point as well as an enhanced margin as we are cost engineering these products due to volume opportunities. As I mentioned, Torrid Cash has less pressure on it this year as we are moving into more aligned integrated channel promotions that are more price pointed. I think the last piece of that is targeted promotions throughout segmentation efforts that we think early on we're seeing nice results on.

A much more targeted opportunity and using those promotions to reactivate and build frequency of our customers, and using the OPP product on one end and the sub-brands on the other to really engage a broad swath of our customers, and build that frequency, build their basket. We're seeing early results in segmentation to be positive, early results in segmentation in the loyalty program to be positive. I really think being more personalized and surgical about those messages both from a product and promotional basis is what the business needs, and we're prepared to do that this year.

Great. Thanks so much. Best of luck.

Great.

Our next question comes from Dylan Carden with William Blair. You may proceed with your question.

Hi. Can you guys hear me?

Yep.

Yep.

Awesome. I just wanted to ask a general question about your consumer. How are they, you know, behaving? How have they changed over the last six months? Are you expecting anything from refunds? Any changes in the performance of different demographics?

Performance within the customer file from a demographic basis has been very consistent. We've seen consumer behavior or our customers' behavior be very consistent as well. As Lisa talked about earlier, when we survey customers, the most frequent response we get is related to price or economic pressures that she's feeling. We've been able to answer that with opening price point in a very effective way.

Gotcha. On the refunds, do you expect that to lift any of your, like, your OPP sales or anything on that front that you're embedding in the outlook?

We're encouraged with the trends of the business that we're seeing now. Whether or not that's related to tax refunds, I can't say for certain. We are encouraged by the trends that we're seeing in the business so far this quarter.

I would say we don't have anything outsized embedded into the guidance related to accelerated tax refunds.

Okay. Thank you.

There are no further questions at this time, which now concludes our question-and-answer session. I would like to turn the call back over to Lisa for closing comments.

Thank you. Thanks everyone for joining us today. We look forward to sharing the progress in the business as we move forward and we release Q1. Thank you.

Ladies and gentlemen, thank you for your participation. This concludes today's conference. Please disconnect your lines and have a wonderful day.

Greetings, and welcome to Torrid Holdings Inc.'s fourth quarter fiscal 2025 earnings conference call. At this time, all participants are in a listen-only mode. Please note this conference is being recorded. I will now turn the conference over to Chinwe Abaelu. Thank you. You may begin.

Good afternoon, everyone. Thank you for joining Torrid Holdings Inc.'s call today to discuss our financial results for the fourth quarter and full year of fiscal 2025, which we released this afternoon and can be found on our website at investors.torrid.com. With me today on the call are Lisa Harper, Chief Executive Officer, and Paula Dempsey, Chief Financial Officer. Ashlee Wheeler, Chief Strategy and Planning Officer, is also present and will be participating in the Q&A session. Before we get started, I would like to remind you of the company's safe harbor language, which I am sure you are 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, March 19, 2026. 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, see our filings with the SEC. This call will contain non-GAAP financial measures, such as adjusted EBITDA. Reconciliations of 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. I will now turn the call over to Lisa Harper.

Thank you, Chinwe, and hello, everyone. Thank you for joining us today. On today's call, I will review our fourth quarter and full-year 2025 performance and discuss the substantial progress we have made over the past two years. We have optimized our channel, product, and pricing platforms. With these foundational elements now in place, I will outline our primary focus for 2026, which is accelerating customer file growth through retention, reactivation, and acquisition. Finally, I will turn the call over to Paula to discuss the financials in detail and our outlook for the year ahead. I am pleased to report that for 2025, we reached the top end of our net sales outlook, delivering $1,000,000,000, and exceeded the high end of the adjusted EBITDA range, achieving $63,600,000. For Q4, we registered net sales of $236,200,000 and adjusted EBITDA of $5,100,000. These results reflect early progress in our strategic initiatives. Throughout the year, we made deliberate decisions to strengthen our foundation, optimizing our store footprint, launching our sub-brand strategy, pausing and relaunching our footwear category, and, later in the year, sharpening our product assortment around core franchises, fabrications, and silhouettes. The trends we experienced in Q4 give us confidence we are moving in the right direction and position us well for comparable sales growth in 2026. From a category perspective, we saw strength in dresses, demonstrating growth for four consecutive quarters. We also saw acceleration in sub-brands, and a turnaround in knit tops, which comped positively for the latter half of the fourth quarter. Jeans and activewear both gained momentum and are poised for growth in 2026. Additionally, we reintroduced footwear with great success, having paused the category to resource it in the elevated tariff environment. We sold out of the limited assortment in record time, and look forward to being back in the footwear business at scale and more profitably in 2026. As we close 2025 and enter 2026, we have strategically rightsized our channels, reinvigorated our product, and optimized our pricing platforms. With these foundational elements now in place, our primary focus for 2026 is accelerating customer file growth through targeted, segmented marketing to acquire new customers, reactivate lapsed ones, and increase purchase frequency among our most loyal customers. This is our number one priority, and we are deploying resources, talent, and capital accordingly. I will expand on this initiative momentarily, but first, an update on our channel optimization initiative. As we have discussed on prior calls, we identified up to 180 structurally unproductive stores for closure. These locations averaged roughly $350,000 in annual sales. We completed 85% of the closures by Q4, or 151 stores in 2025, and we have closed an additional 11 thus far in Q1. We are on track to finalize the full optimization plan by the first half of the year. Essentially, our channel platform is now optimized, supported by a more productive and strategically aligned store fleet. Our retention metrics validate that our strategy is working. Customer retention from last year's store closures is meeting and, in many cases, exceeding our model. This demonstrates the strength of our omnichannel ecosystem. We are also seeing customers shift to nearby stores in markets impacted by closures, driving increased traffic and transactions, and resulting in dramatically improved four-wall profitability in our remaining store fleet. Even more encouraging, our 2025 closure retention rates are outperforming 2024 results, with more customers shifting to our digital platform. Our enhanced retention strategies, including targeted multi-touch communications, are seamlessly migrating customers to nearby stores and online channels. What this tells us is simple. Our most loyal customers are truly channel agnostic. The seamless and frictionless omnichannel platform we have built, combined with our commitment to superior and consistent fit, allows our customers to remain highly engaged with confidence in their channel of preference. Our product platform is built and now scaling effectively. We entered 2026 with five sub-brands live and, critically, 80% of our assortment planning and buying decisions are now data-informed, covering both product selection and seasonality. 2025 was our learning year. We launched all five sub-brands and received real customer feedback across the board. We stayed agile, reading demand signals, adjusting buys midstream, chasing winners, and refining our assortment mix. Those learnings are now embedded in our 2026 plans. But we have done more than just learn. As we shared on our Q3 call, we fundamentally strengthened our merchandising foundation. We have implemented stronger guardrails in our merchandising process and built out a more robust assortment planning function, both of which I am directly overseeing. This represents a much more integrated way of working. Design, merchandising, planning, and product development now operate as a cohesive unit. The new guardrails keep us anchored in improving categories while still allowing us to expand strategically and maximize opportunity. It is a disciplined approach that balances innovation with reliability. Our sub-brands are driving meaningful growth. They generated over $70,000,000 in sales in 2025, and we are projecting roughly 60% growth in 2026 to approximately $110,000,000, growing from approximately 7% of total net sales in 2025 to 12% in 2026. Importantly, this growth is margin accretive. Sub-brands carry higher product margins than our core assortments because they are bought with scarcity and achieve higher full-price sell-through. But the benefits extend beyond margin. Our sub-brands are customer acquisition engines, attracting new shoppers, reactivating lapsed customers, and driving higher spend among our most valuable customers. These lifestyle concepts deliver the newness and excitement that broadens our appeal while deepening engagement with our existing base. Each brand, with their distinct positioning, inspired aesthetic, and lifestyle appeal, allows for broad reach and market share expansion. We are exploring multiple paths forward, not just through our direct channels, but also through pop-up experiences and expanded in-store assortments. We will be testing these concepts throughout the year to determine the best approach for scaling these sub-brands, representing a disciplined approach to their growth. As I mentioned, our intimate apparel business showed strong momentum in Q4. We are building on that strength with the relaunch of Curve, our intimate apparel brand, this February, and we will see the launch of two new bras in 2026. Bras are a pillar of our product portfolio that drives strong customer acquisition, reactivation, and long-term loyalty. Finally, as we discussed on our Q3 call, we refocused the foundation of our product assortment on core franchises, fabrications, and silhouettes that resonate with our customers. We had previously stepped away from essential fabrications like SuperSoft, a key favorite among our core customer base. Recognizing this gap, we began reintroducing these franchises in Q4 and immediately saw positive sales momentum and a turnaround in our tops business. Building on this success, we have introduced the knit dressing capsule collection built around that franchise, and we will expand in a meaningful way in 2026. In footwear, we selectively reintroduced a curated assortment as I mentioned, and the results are encouraging. We fundamentally restructured our sourcing strategy and assortment mix. This more disciplined approach delivers a shoe offering that drives stronger attachment rates and improved profitability. This will allow us to recapture both the direct revenue and attachment-driven sales we lost during the absence of footwear. The temporary pause of the footwear business had a 260-basis-point negative comp impact to the full year in 2025 and a 460-basis-point negative impact to the fourth quarter. Looking ahead, we will face a first-half headwind to comp and then a positive impact in the second half of the year. Now for an update on our opening price point strategy, which is exceeding our expectations. Developed in close partnership across merchandising, design, planning, and product development teams, this strategy is anchored in customer insight. We are successfully balancing customer demand for accessible price points with two nonnegotiables: margin discipline and product quality. Maintaining our quality standards while delivering accessible value remains imperative. OPP now represents approximately 30% of our total assortment and nearly 40% in stores, represented across jeans, leggings, non-denim bottoms, and anchored in tops and graphic tees. This collection of most-loved items is offered at an approachable value and provides everyday price parity across our e-commerce and brick-and-mortar channels. We are seeing the most-loved opening price point collection drive conversion and UPT in both channels, and we believe that this will be a critical component of customer file growth, driving reactivation, acquisition, and frequency. Built on our disciplined product development platform, this assortment is cost-engineered in support of opening price point value and leverages the strength of our sourcing. We have platformed fabric to enable speed. The combination of these efforts and the unit acceleration we see in the early stages of this initiative point to a highly accretive strategy with even greater runway ahead. As I have mentioned, our primary focus in 2026 is growing our customer file. We are implementing several targeted strategies to accomplish this critical goal. First, we are doubling down on reactivation of lapsed customers, leveraging our wealth of customer data to reintroduce customers to the expansive assortment offering of core, opening price points, and sub-brands. Second, and this goes hand in hand with reactivation, we are deeply committed to more informed customer segmentation and personalization across our owned and organic marketing channels. Early results are promising in our ability to drive incremental reactivation of lapsed customers and frequency among our most active. This includes greater email segmentation, personalized content and message strategies, testing initiatives, and the reintroduction of direct mail to augment owned marketing channels. Our intent is to work methodically through the full marketing funnel, continuing to allocate resources and investments to channels and tactics that drive positive ROAS and increase customer lifetime value. Third, we are strengthening the marketing and analytic infrastructure to support these efforts. We have redeployed senior marketing and analytical talent, oriented around individual marketing channels, messaging, and content strategies, in support of a more comprehensive and effective commercial plan that is laser-focused on customer file growth. And fourth, we are continuing to evolve and refine our loyalty program, of which over 95% of our active customers are engaged, with a focus on strengthening the value proposition, ensuring the program remains a meaningful reason for customer engagement with our brand, and most importantly, driving long-term retention and increased customer lifetime value. Our mission is clear: to leverage the foundational work we have completed across our channel, product, and pricing platforms to acquire new customers, reactivate lapsed customers, and increase purchase frequency among our most loyal shoppers. This is our number one priority, and we are deploying resources, talent, and capital accordingly. We know the most efficient path to customer file growth is through increased retention efforts and reactivation of our lapsed customer population, followed by new customer acquisition. We have over 7,000,000 lapsed customers who are reachable through owned marketing channels. The cost of reactivating these customers through segmentation and personalized communication costs roughly one-third of a new customer acquired through paid digital media channels. Leaning into this pool, leveraging in-house owned and organic marketing channels in a more strategic way, supports a marketing spend outlook consistent with prior years, in the 5% to 5.5% of net sales range. We have completed the substantial two-year transformation, strategically optimizing our channel, product, and pricing. Q4 results reflect early progress on our strategic initiatives, including the store footprint optimization, the sub-brand expansion, the footwear reintroduction, and a product assortment anchored in core franchises and opening price points. The foundational platform is now built. We are entering a phase of maximization and scale. I would like to take this opportunity to speak to the entire organization and thank them for their extraordinary dedication and resilience throughout the year and this transformational journey. Your hard work, adaptability, and commitment to excellence have been the driving force behind our progress. The operational improvements we have achieved would not have been possible without your daily efforts and unwavering focus on execution. I will now turn the call over to Paula Dempsey.

Thank you, Lisa. Good afternoon, everyone, and thank you for joining us today. I will begin with a review of our full-year 2025 results and our fourth quarter financial performance, then walk through the strategic progress we have made on our multiyear transformation and close with our outlook for fiscal 2026. Fiscal 2025 was a year of intentional structural change. We delivered full-year sales of $1,000,000,000 in line with our guidance and an adjusted EBITDA of $63,600,000, slightly ahead of expectations. Most importantly, we achieved this while simultaneously executing a significant transformation of our physical footprint, proactively managing an estimated $50,000,000 in gross tariff headwinds, and maintaining the inventory discipline that leaves us entering fiscal 2026 in a balanced inventory position. The headline result is this: we enter 2026 with a fundamentally stronger operating structure. Turning to the fourth quarter, net sales were $236,200,000 compared to $275,600,000 in the prior year. Comparable sales declined 10%, which includes 460 basis points of negative comp impact due to the temporary pause of the shoe business. Gross profit was $70,900,000 versus $92,600,000 last year, and gross margin was 30% compared to 33.6% in the prior year, reflecting promotional activities, product mix, and deleverage on a reduced sales base. SG&A expenses declined by $11,400,000 to $62,400,000 compared to $73,800,000 a year ago. As a percentage of net sales, SG&A leveraged 40 basis points to 26.4%. This is a meaningful proof point. Our cost structure is coming down drastically, supporting our EBITDA margin expansion, which is precisely the outcome our store optimization program was designed to produce. We expect this leverage to continue and accelerate through fiscal 2026 as the full benefit of our rationalized footprint flows through. Marketing investment decreased by $1,900,000 to $13,500,000. Net loss for the quarter was $8,100,000, or $0.08 per share, compared to a net loss of $3,000,000, or $0.03 per share, last year. Adjusted EBITDA was $5,200,000, a 2.2% margin, versus $16,700,000 and a 6.1% margin a year ago. We ended the quarter with $200,000,000 in cash and cash equivalents and $31,000,000 drawn on our revolving credit facility. Total liquidity at the end of the year, including available borrowing capacity under our revolving credit agreement, was $84,900,000, providing adequate liquidity to execute our plan. Inventory totaled $136,500,000, down 8%, reflecting both tighter receipt management and the intentional reduction of our store base. Aligned with our store optimization program, during the fourth quarter we closed 77 stores, bringing our full-year total to 151 closures for fiscal 2025. We expect to close up to an additional 30 stores by the end of the first half of fiscal 2026, at which point the program will be substantially complete. Customer retention rates from closed locations have performed consistently with historical levels, validating both the network strategy and the underlying brand health. Our customers are finding us where we remain open and online. We minimized exit costs by structuring closures around natural lease expirations wherever possible, significantly reducing the cash cost of the program and preserving liquidity. Most importantly, the financial impact is substantial and compounding. For fiscal 2025, we realized approximately $18,500,000 in lower operating expenses from this year's 151 closures, plus the 35 stores closed in the prior year. As we move into fiscal 2026 with a fully rationalized footprint, we expect to capture an additional $40,000,000 in expense savings. Now turning to our outlook. As Lisa mentioned, we entered 2026 in a much stronger position. We have strategically optimized our channels, products, and pricing platform. For the full year, we expect net sales of $940,000,000 to $960,000,000 and adjusted EBITDA of $65,000,000 to $75,000,000, representing margin expansion of up to 140 basis points versus fiscal 2025. Capital expenditures are expected in the range of $8,000,000 to $10,000,000, reflecting continued reinvestment discipline. For the first quarter, we expect sales of $236,000,000 to $244,000,000 and adjusted EBITDA of $14,000,000 to $18,000,000. The EBITDA expansion reflects the full-year benefit of our optimized cost structure and the compounding effect of those operating savings flowing through the P&L. It is worth providing some context on the bridge from our $40,000,000 in expected cost savings to our EBITDA guidance range calling for midpoint growth of 10% to $70,000,000. I want to be transparent about what is moving in both directions. On the offset side, the lower sales base naturally reduces gross margin dollars, which absorbs a portion of the cost savings. We are also resetting our incentive compensation program in fiscal 2026, which represents a meaningful year-over-year headwind as we return to a more normalized bonus structure. Taken together, these offsets explain the gap between the gross cost savings and the net EBITDA outcome. What the guidance reflects is a business where the structural cost work is fully embedded and the underlying earnings power is growing, even after absorbing those headwinds. In closing, the store optimization program is largely complete. The cost structure has been reset, inventory is aligned to our full-year plan, and this team demonstrated it can execute through complexity, tariff pressures, demand volatility, and a major operational transformation. Our path forward centers on growing our customer file and expanding EBITDA margin. We will now open for questions.

Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, you may press star and the number 2. If you would like to remove your question from the queue, it may be necessary to pick up your handset before pressing the star keys. One moment while we poll for questions. Our first question comes from Janine Hoffman Stichter with BTIG. You may proceed.

Hi. Congrats on the progress. Was hoping to hear a little bit more about the learnings from the first year of sub-brands at 12% of sales next year. I think at one point, you had talked about it being 25% to 30% of the assortment. Is that still the right number? Just trying to reconcile those two figures.

Hi, Janine. We are still very happy with the progress in that business. I think that we have made a decision to be more conservative about the growth cycle of that business. We are still happy the margin is a benefit overall. Some of the brands are incredibly strong. I would say out of the five brands, I would highlight Festi, Nightfall, and Retro as being very consistent performers, with Festi particularly being the number one sub-brand and with the largest opportunity for expansion. Belle Isle has a very high level of seasonality, so we are adjusting that, as it sells better in the first half of the year than the back half of the year. And we are still exploring the opportunity with Lovesick, which is the younger-oriented brand. We are still feeling very bullish and have seen very positive momentum in that business. We think that it will expand a little bit more in the front half than the back half, really because we will be lapping in the back half a full presentation of all brands, and we launched them sequentially in the first half of last year. I think I had said earlier in the mid-twenties as a mix. I think we will be more in the mid-teens as we play. I think we talked about going up to about $110,000,000 estimated opportunity this year. We are still very happy with how they are performing, and we will be testing some additional store-in-store opportunities as well as potential pop-ups later this year for sub-brands. As we see the stores performing better with the store optimization program, it gives us some room to add some of those businesses to stores, very judiciously, but to expand that opportunity.

Okay, great. And then maybe just on the retention and lapsed customer reactivation, what have you learned about the reasons why some of these customers have not stayed with the brand? And maybe just elaborate more on the communications that you are going forth with now to reactivate those lapsed customers. Thank you.

Hi, Janine. We have heard time and time again from lapsed customers that one of the primary reasons for spending less is economic pressure and price, which we have addressed through opening price point. In the prepared remarks, Lisa expanded on opening price point as an initiative that now represents about 30% of the business and will expand to be closer to 40%. We are seeing incredible response to that. We are seeing it as a vehicle to reactivate customers through a more approachable value pricing as well as acquire new customers that way. We are seeing it drive frequency among existing customers as well. Beyond that, we recognize with the 7,000,000 customers in our lapsed file who are marketable through our owned channels, we have enormous opportunity through more advanced targeted segmentation and personalization of messaging, using product affinity as a starting point as well as other demographic and price preference signals among that population to get them back into the brand.

Thank you.

Our next question comes from the line of Dana Telsey with Telsey Group. You may proceed with your question.

Hi. Good afternoon, everyone. Can you talk a little bit about the cadence that you saw of sales during the holiday season, quarter-to-date what it looks like, any thoughts on how the shaping of this year is going with tariff expenses, what you have built into the model on margins with the puts and takes, and lastly, the return of footwear—how you expect that to come back, impact on margins? And are there other categories, Lisa, that you are looking to that could be sales drivers going forward? Thank you.

I am going to do this backwards, and I am going to take the category conversation, and then I will talk about tariffs and categories, and then I will let Ashlee go through the rhythm of the business. We do have, obviously, tariff pressure in the first quarter, as everyone does, and we think we have managed this well, even with other types of supply chain challenges. We have very, very good relationships with our vendors, and they have been great partners with us, and so we have been able to manage that pretty consistently. From a category basis, the shoes are—just to remind you, when the tariffs came, we were running a pretty much, I would say, even EBITDA business in shoes from that specific shoe business, but we had a very high level of attachment to it. So we were keen on reengineering it to make sense both from a margin perspective as well as the customer acquisition modality and attachment to other types of products. We tested the new vendor structure and the new look and feel and quality of the product in November, and it was a resounding success. We are very happy with the results. We have some inventory coming in in the first half of the year, but we still have substantive headwinds, I would say, in the first quarter and second quarter related to footwear. We will be back in stock in the June–July time period, and we expect to have a benefit in that business in the back half. The way that we have tested it and the way that we are rolling it out allows us to expand margin in footwear as well as recapture the associated sales from customers who come to the brand through footwear. Other categories that we see expanding, outside of the OPP—which actually touches many of the categories of the business—I think denim, non-denim, tops, dresses, and sweaters in the back half. The other categories would be active. We have a fleece program rolling out that we think will be very advantageous, and then the expansion of OPP in some of these broader categories as we move forward. Those would be the bulk of the categories for expansion. Ashlee will go through the business rhythm.

Sure. Hi, Dana. We are pleased with fourth quarter, as communicated. Holiday performed as expected. We really saw improvement in the business in January. If you recall, we talked in our third-quarter call about chasing goods into core franchises and core fabrications, particularly in our tops business, and those goods arrived in late December or January selling, and we immediately saw the business turn in those categories. Our knit tops business, as an example, which is the second-largest department in our portfolio, started to comp positive as a function of those chase receipts. We continue to see really positive momentum in the categories that we have chased into, further supported by opening price point. As for the shape of 2026, footwear, as Lisa communicated, will continue to be a headwind in the front half of the year. The largest headwind will be felt in the first quarter, abates a little bit in the second quarter, and then will provide a benefit on a year-over-year basis starting in the third quarter when we launch the boot business in a fulsome way. Additionally, in the back half of the year, we will see the launch of two bras that will support expansion in the Curve business as well as some additional fleece programs and knit dressing capsules. So there is more to come in the back half of the year.

Thank you.

Our next question comes from the line of Brooke Roach with Goldman Sachs. You may proceed.

Good afternoon, and thank you for taking our question. Lisa, I was hoping we could dive a little bit deeper into your marketing plans for the year, specifically around pricing, promo, and loyalty. What is changing in the loyalty program as you look to reactivate lapsed customers and increase dollars per spend on active customers today? And how does that tie into your plans for Torrid Cash and marketing? Thank you.

Great. We have talked a lot about price, beyond the opening price point. As we survey our customers, more than half of our customers articulate that one of their reasons for lapsing would be their personal financial situation and that they would like to see more price parity in terms of both channel and opening price point in our core businesses. We have talked a lot about that, and that is moving forward. I would say the biggest shift that we will see this year in promotion is that we are putting less pressure on Torrid Cash redemption. That has been dwindling over time, and we have reset our expectations for the redemption in those categories. We will be able to pull back on our reliance on that piece. I think the other piece for us for the customers is price-point messaging versus percentage-off messaging, and I think all of those things are working well. We also have a lot more multiples in our promos right now—multiples in bralettes and knits and woven tops—those types of things that have tested very well for us and are exceeding our expectations. So promos will shift out of much reliance on Torrid Cash, a bit more into everyday opening price point opportunities and price parity between channels, which we also think is important. Loyalty has been pretty consistent for us. What we are looking to build in the loyalty piece is a bit more frequency. Retention is not as much of an issue there as we think we have opportunity in driving a bit more frequency among those loyalty customers with better segmentation. We just did a special sale for them a couple of weeks ago that we delivered in a very different way than we normally deliver. It was very well received, and the conversion on that was quite good. We are testing different tactics to highlight their loyalty levels and giving them more attention. We have also reinstituted the Icon level of our loyalty program, which is the top of those customers, so that we ensure that we continue to get very robust feedback from the loyalty customers. Some of the decisions that we have made are very much driven by the feedback that we get from our customers with every level of communication, every touch point that we have. I would say that we feel like there is a grassroots version of marketing that will augment what we do in more of the paid spend, and I will let Ashlee talk a little bit more about that.

Hi, Brooke. We recognize that we have an enormous amount of opportunity to leverage our owned and organic channels, particularly to reactivate customers but also to drive frequency among our existing loyalty members through really precise targeting and personalized or segmented content and messaging in a way that we have not historically. We have an enormous amount of data on our customers, with over 95% of them participating in our loyalty program. It gives us a great advantage to communicate to them in a more personalized way, and that is going to be one of our key focuses for the year. Additionally, we have reentered direct mail as a modality, an additional touch point. A portion of that will be allocated to loyalty customers or actives as a frequency-driving touch point, and we will really leverage that in a more powerful way toward acquisition and reactivation.

Great. And then just one follow-up for Paula. As you look on a multiyear basis, do you think that double-digit EBITDA margins are achievable? And if so, how should we be thinking about the core drivers of achieving that recovery in margin rate? Thank you.

Hi, Brooke. Yes, I do believe so. Our plan has up to 150 basis points of EBITDA margin increase in fiscal 2026, and that is really through leveraging our SG&A platform. As we progress throughout the year, we are going to see that leverage increase more and more. Even with the Q1 guidance that we have provided, you will see us starting to leverage SG&A, and at the end of the year, you are going to see that gap increase and, therefore, drive that to the bottom-line profitability. So yes, 150 basis points of leverage this year is very much a possibility, and for that to continue to grow in the next few years is probably a good assumption.

Great. Thanks so much. I will pass it on.

Our next question comes from the line of Corey Tarlowe with Jefferies. You may proceed.

Great, thanks. Lisa, I guess high-level strategic question. 2025 sort of felt like a defensive year, closing stores. What do you think more is left on the defensive side of the equation as opposed to when do you feel like you can really get to playing offense? And is that the way to think about what 2026 should be? And I have a follow-up.

Hi, Corey. I do think about us pivoting into a more offense-oriented approach. I think what we have done to restructure the channel expense base, to expand product, and now refine—what we are talking about in terms of segmentation and refocus on owned and organic marketing efforts—is a great opportunity for us and should expand the customer file this year. We are also seeing the reinvigoration of the loyalty interest in the business through sub-brands. We are seeing those aspects of the business. I feel great about product. OPP is working very, very well and will expand. Sub-brands are working well and expanding. We have cut a substantive amount of fixed expense from underperforming stores. The stores that are open right now are exceeding our expectations in terms of their performance. We are starting to see that turn and have actually put a little bit more pressure on store sales as we move through the year, which we think is a better mix in terms of the margin opportunity there. My message overall is intended to share that we have accomplished this store closure very effectively and executed that very well. We have integrated and introduced OPP through multiple categories of the business and are pleased with how that is working. Our store profitability is improving. We are bringing back footwear. We are expanding other categories of the business. We do feel like we are in the position to start reaping the benefits of this as we move through the year.

Got it. That is helpful. And then just as a follow-up, how are you thinking about pricing and promotions for 2026?

One of the things that helps us with OPP is we actually generate a similar out-the-door price point as well as an enhanced margin, as we are cost-engineering these products due to volume opportunities. As I mentioned, Torrid Cash has less pressure on it this year, as we are moving into more aligned, integrated channel promotions that are more price-pointed. The last piece is targeted promotions throughout segmentation efforts that we think, early on, are showing nice results. So a much more targeted opportunity, using those promotions to reactivate and build frequency of our customers, and using the OPP product on one end and the sub-brands on the other to really engage a broad swath of our customers and build the basket. We are seeing early results in segmentation to be positive, early results in segmentation in the loyalty program to be positive. Being more personalized and surgical about those messages, both from a product and promotional basis, is what the business needs, and we are prepared to do that this year.

Our next question comes from Dylan Carden with William Blair. You may proceed with your question.

Hi. Can you guys hear me?

Yes.

Awesome. I just want to ask a general question about your consumer. How are they behaving? How have they changed over the last six months? Are you expecting anything from refunds? Any changes in the performance of different demographics?

Performance within the customer file from a demographic basis has been very consistent. We have seen consumer behavior, or our customers' behavior, be very consistent as well. As Lisa talked about earlier, when we survey customers, the most frequent response we get is related to price or economic pressures that she is feeling, and we have been able to answer that with opening price point in a very effective way.

Gotcha. So on the refunds, do you expect that to lift any of your OPP sales or anything on that front that you are embedding in the outlook?

We are encouraged with the trends of the business we are seeing now. Whether or not that is related to tax refunds, I cannot say for certain, but we are encouraged by the trends that we are seeing in the business so far this quarter.

I would say we do not have anything outsized embedded into the guidance related to accelerated tax refunds.

There are no further questions at this time, which now concludes our question-and-answer session. I would like to turn the call back over to Lisa for closing comments.

Thank you. Thanks, everyone, for joining us today. We look forward to sharing the progress in the business as we move forward and we release Q1. Thank you.

Ladies and gentlemen, thank you for your participation. This concludes today's conference. Please disconnect your lines, and have a wonderful day.