Torrid claims it'll make $20M extra dollars in 2026 by closing 180 stores in 2025.

Torrid is a plus-size women's apparel brand. They sell $700M worth of clothes online. And another $300M of clothes offline through 620 stores.

They closed their least productive 180 stores in 2025. They claim that will generate an extra $20M in profit next year. This is only possible if (1) those stores, in the aggregate, were losing $20M and now those losses are gone; or (2) enough sales are redirected from those closing stores to the remainder of the Torrid business without having to hire more store associates or pay more rent.

We don't have data on whether these 180 stores are, in the aggregate, cash flow destructive or generative. It seems safe to assume that these store closures are lease non-renewals by a rational businessperson. 

Torrid has asserted the claim that 60% of sales from closing stores will remain with the business. This is an interesting claim worthy of further examination. 

Let's kick some tires. Those 180 stores, Torrid has disclosed, are responsible for $63M of sales. The Chinese clothing manufacturers that Torrid uses to source this merchandise charge probably around $30M (52% gross margins). That leaves $33M in gross profit. Torrid probably pays $80K/year to rent those stores, pay utilities, insurance, taxes, common area maintenance fees, i.e., $15M and staffs them for 70 hours a week at/around minimum wage times times two, i.e., $30 * 70 * 52 = $110K. So that's $20M in staffing. These three assumptions support a rational decision to exit these stores because 20+15+30 = $65M in costs against only $63M in sales. 

If they retain 60% of those sales, that's $38M in retained sales. They'll generate ~$20M in gross profit off those sales (because the Chinese vendors must still be paid). But they won't owe a dime to landlords/store associates for those 180 stores. And they won't pay extra rent/wages to the surviving store landlords/associates. 

Granted, to achieve a 60% retention rate despite store closures, there needs to be some coherent explanation as to why customers of a shop that ceases to exist would remain with the brand. The answer? Brand loyalty stemming from limited options in plus-size clothing. These women, the theory goes, will - to the tune of 60% of sales - stick with the brand's online channel or go to a nearby open store as opposed to ditch the brand completely. If that happens, the above math supports a claim of a $20M profit bump in 2026, which is the very claim Torrid's CFO made during the last conference call.

Thoughts? 

Disclosure: Long Torrid. Not investment advice.