Torrid Holdings Inc.

Note 1. Basis of Presentation and Description of the Business

Corporate Structure

Torrid Holdings Inc. is a Delaware corporation formed on October 29, 2019 and capitalized on February 20, 2020. Sycamore Partners Management, L.P. (“Sycamore”) owns a majority of the voting power of Torrid Holdings Inc.’s outstanding common stock. Torrid Parent Inc. is a Delaware corporation formed on June 4, 2019 and is a wholly owned subsidiary of Torrid Holdings Inc. Torrid Intermediate LLC, formerly known as Torrid Inc., is a Delaware limited liability company formed on June 18, 2019 and a wholly owned subsidiary of Torrid Parent Inc. Torrid LLC is a wholly owned subsidiary of Torrid Intermediate LLC. Substantially all of Torrid Holdings Inc.’s financial position, operations and cash flows are generated through its wholly owned indirect subsidiary, Torrid LLC.

Throughout these financial statements, the terms “Torrid,” “we,” “us,” “our,” the “Company” and similar references refer to Torrid Holdings Inc. and its consolidated subsidiaries.

Fiscal Year

Our fiscal year ends on the Saturday nearest to January 31 and each fiscal year is generally comprised of four 13-week quarters (although in years with 53 weeks, the fourth quarter is comprised of 14 weeks). Fiscal years 2025 and 2024 are 52-week years. Fiscal years are identified according to the calendar year in which they begin. For example, references to “fiscal year 2025” or similar references refer to the fiscal year ending January 31, 2026. References to the first quarter of fiscal years 2025 and 2024 and to the three-month periods ended May 3, 2025 and May 4, 2024, respectively, refer to the 13-week periods then ended.

Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial information. Accordingly, the interim financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair statement of the results for the interim periods presented have been included. Operating results for the three-month periods ended May 3, 2025 and May 4, 2024 are not necessarily indicative of the results that may be expected for any future interim periods, the fiscal year ending January 31, 2026, or for any future fiscal year.

The condensed consolidated balance sheet information at February 1, 2025 has been derived from the audited consolidated financial statements at that date, but does not include all of the disclosures required by GAAP. The accompanying unaudited condensed consolidated financial statements and related footnotes should be read in conjunction with our audited consolidated financial statements and notes thereto in our Annual Report on Form 10-K for the fiscal year ended February 1, 2025 (the “2024 Form 10-K”). The unaudited condensed consolidated financial statements include Torrid and those of our wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.

Description of Business

We are a direct-to-consumer brand of apparel, intimates and accessories in North America aimed at fashionable women who are curvy and wear sizes 10 to 30. We generate revenues primarily through our e-Commerce platform www.torrid.com and our stores in the United States of America, Puerto Rico and Canada.

Use of Estimates

The preparation of these unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that could affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. On an ongoing basis, we evaluate our estimates, including, but not limited to, those related to merchandise returns, the value of future loyalty program award redemptions, net realizable value of our inventory, share-based compensation, and incremental borrowing rate and probability assessments of exercising renewal options on leases. We base our estimates on the best information available at the time, our experiences, and various other assumptions believed to be reasonable under the circumstances. Actual results could differ from those estimates.

Significant Accounting Policies

A description of our significant accounting policies is included in the audited consolidated financial statements in our 2024 Form 10-K. No changes to significant accounting policies have occurred since February 1, 2025.

Inventory

Our inventory is comprised solely of finished goods.

Note 2. Accounting Standards

Recently Adopted Accounting Standards During the Three-Month Period Ended May 3, 2025

We did not adopt any new accounting standards during the three-month period ended May 3, 2025.

Accounting Standards Not Yet Adopted

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures("ASU 2023-09"). The ASU includes amendments requiring enhanced income tax disclosures, primarily related to standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. ASU 2023-09 will be effective for us for the fiscal year ended January 31, 2026. This guidance will be applied on a prospective basis with the option to apply the standard retrospectively. We are currently evaluating the impact of the standard on our financial statements and disclosures.

In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”) and in January 2025, the FASB issued ASU 2025-01, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date (“ASU 2025-01”), which clarified the effective date of ASU 2024-03. ASU 2024-03 is intended to improve disclosures about a public business entity's expenses, primarily through additional disaggregation of income statement expenses. ASU 2024-03 will be effective for the annual period beginning after December 15, 2026 and interim reporting periods within annual reporting periods beginning after December 15, 2027, with the option to early adopt at any time prior to the effective date and should be applied either prospectively to financial statements issued for reporting periods after the effective date or retrospectively to any or all prior periods presented in the financial statements. We are currently evaluating the impact of the standard on our financial statements and disclosures.

We have considered all other recent accounting pronouncements and have concluded that there are no other recent accounting pronouncements not yet adopted that are applicable to us, based on current information.

Note 3. Property and Equipment

Property and equipment are summarized as follows (in thousands):

We recorded depreciation expense related to our property and equipment in the amounts of $9.4 million and $9.3 million during the three-month periods ended May 3, 2025 and May 4, 2024, respectively.

We group and evaluate long-lived assets for impairment at the individual store level, which is the lowest level at which individual cash flows can be identified. During the three-month periods ended May 3, 2025 and May 4, 2024, we didnot recognize any impairment charges.

Note 4. Revenue Recognition

Our revenue, disaggregated by product category, consists of the following (in thousands):

Amounts within Apparel include revenues earned from the sale of tops, bottoms, dresses, intimates, sleep wear, swim wear and outerwear. Amounts within Non-apparel include revenues earned from the sale of accessories, footwear and beauty. Amounts within Other primarily represent royalties, profit-sharing and marketing and promotional funds received from the use of private label credit cards (“PLCC Funds”).

We recognize a contract liability when we receive consideration from a customer before our performance obligations under the terms of a contract or an implied arrangement with the customer are satisfied. The opening and closing balances of our contract liabilities are as follows (in thousands):

(1)Amounts are included within accrued and other current liabilities in the condensed consolidated balance sheets.

(2)Amount as of May 3, 2025 consists of $3.2 million within accrued and other current liabilities and $0.3 million within other noncurrent liabilities in the condensed consolidated balance sheet. Amount as of February 1, 2025 is included within accrued and other current liabilities in the condensed consolidated balance sheet.

(3)Amount as of May 3, 2025 consists of $0.5 million within accrued and other current liabilities and $2.8 million within other noncurrent liabilities in the condensed consolidated balance sheet. Amount as of February 1, 2025 consists of $0.5 million within accrued and other current liabilities and $3.0 million within other noncurrent liabilities in the condensed consolidated balance sheet.

During the three-month period ended May 3, 2025, we recognized revenue of approximately $6.2 million, $3.2 million, $2.8 million and $0.1 million related to our accrued loyalty program, gift cards, deferred revenue and deferred PLCC Funds, respectively, that existed at the beginning of fiscal year 2025. During the three-month period ended May 4, 2024, we recognized revenue of approximately $7.5 million, $3.0 million, $1.9 million and $0.1 million related to our accrued loyalty program, gift cards, deferred revenue and deferred PLCC Funds, respectively, that existed at the beginning of fiscal year 2024.

During the three-month periods ended May 3, 2025 and May 4, 2024, we recorded $1.8 million as a reduction to net sales and $0.6 million as a benefit to net sales, respectively, to reflect the estimated value of future award redemptions under our loyalty program.

Note 5. Related Party Transactions

Services Agreements with Hot Topic

Hot Topic Inc. (“Hot Topic”) is an entity indirectly controlled by affiliates of Sycamore. On March 21, 2019, we entered into an amended and restated services agreement with Hot Topic, which was subsequently amended on August 1, 2019, April 30, 2023 and May 3, 2024 (“Amended and Restated Services Agreement”). Under the Amended and Restated Services Agreement, Hot Topic provides us (or causes applicable third parties to provide) real estate leasing and construction management services. We record payments made to Hot Topic under these service agreements in the applicable expense category in either cost of goods sold, or selling, general and administrative expenses.

During each of the three-month periods ended May 3, 2025 and May 4, 2024, Hot Topic charged us $0.5 million for various services under the applicable service agreements, all of which were recorded as components of selling, general and administrative expenses. As of the end of the first quarter of fiscal year 2025 and the end of fiscal year 2024, we owed $0.6 million to Hot Topic for these services which is included in due to related parties in our condensed consolidated balance sheets.

On August 1, 2019, we entered into a services agreement with Hot Topic, which was subsequently amended on July 31, 2022, September 30, 2022, December 1, 2022, January 1, 2024, and May 30, 2024 (“Amended Reverse Services Agreement”). Under the Amended Reverse Services Agreement, Torrid provides Hot Topic with certain information technology services for a fixed fee. The May 30, 2024 amendment solely amends certain pricing information. The term of the Amended Reverse Services Agreement ends on October 25, 2025, unless it is terminated by us or Hot Topic or we mutually agree, in writing, to extend the term.

During the three-month periods ended May 3, 2025 and May 4, 2024, we charged Hot Topic $0.1 million and$0.3 million, respectively, for these services. As of the end of the first quarter of fiscal year 2025 and the end of fiscal year 2024, Hot Topic owed us $0.1 million for these services.

Hot Topic incurs certain direct expenses on our behalf, such as payments to our non-merchandise vendors and each month, we pay Hot Topic for these pass-through expenses. As of the end of the first quarter of fiscal year 2025, the net amount we owed Hot Topic for these expenses was $0.1 million, which is included in due to related parties in our condensed consolidated balance sheet. As of the end of fiscal year 2024, the net amount we owed Hot Topic for these expenses wasnot material.

Sponsor Advisory Services Agreement

On May 1, 2015, we entered into an advisory services agreement with Sycamore, pursuant to which Sycamore agreed to provide strategic planning and other related services to us. We are obligated to reimburse Sycamore for its expenses incurred in connection with providing such advisory services to us. As of the end of the first quarter of fiscal year 2025 and as of the end of fiscal year 2024, there wereno amounts due, and during the three-month periods ended May 3, 2025 and May 4, 2024, no amounts were paid under this agreement.

From time to time, we reimburse Sycamore for certain management expenses it pays on our behalf. During the three-month periods ended May 3, 2025 and May 4, 2024, the amounts paid to Sycamore for these expenses werenot material. As of the end of the first quarter of fiscal year 2025 and as of the end of fiscal year 2024, there wasno amount due.

Other Related Party Transactions

MGF Sourcing US, LLC, an entity indirectly controlled by affiliates of Sycamore, is one of our suppliers. During the three-month periods ended May 3, 2025 and May 4, 2024, cost of goods sold included $8.0 million and $12.0 million, respectively, related to the sale of merchandise purchased from this supplier. As of the end of the first quarter of fiscal year 2025 and as of the end of fiscal year 2024, the net amounts we owed MGF Sourcing US, LLC for these purchases were $7.3 million and $7.9 million, respectively. This liability is included in due to related parties in our condensed consolidated balance sheets.

HU Merchandising, LLC, a subsidiary of Hot Topic, is one of our suppliers. During the three-month period ended May 3, 2025, cost of goods sold related to the sale of merchandise purchased from this supplier wasnominal, and during the three-month period ended May 4, 2024, cost of goods included $0.2 million related to the sale of merchandise purchased from this supplier. As of the end of the first quarter of fiscal year 2025 and the end of fiscal year 2024, there wasno amount due to HU Merchandising, LLC.

Note 6. Debt

Our noncurrent debt consists of the following (in thousands):

Senior Secured Asset-Based Revolving Credit Facility, as amended (“ABL Facility”)

As of May 3, 2025 and February 1, 2025, the applicable per annum interest rate for borrowings under the ABL Facility was approximately 8%.

As of May 3, 2025, the maximum restricted payment utilizing the ABL Facility that our subsidiaries could make from its net assets was $109.4 million.

As of May 3, 2025, availability under the ABL Facility was $117.3 million, which reflectsno borrowings, net of standby letters of credit issued and outstanding of $11.4 million.

During each of the three-month periods ended May 3, 2025 and May 4, 2024, amortization of financing costs for the ABL Facility wasnot material. During the three-month periods ended May 3, 2025 and May 4, 2024, interest expense was $0.2 million and $0.3 million, respectively.

As of May 3, 2025, we were compliant with our covenants under the ABL Facility.

Amended Term Loan Credit Agreement, as amended (the “Amended Term Loan Credit Agreement”)

As of May 3, 2025 and February 1, 2025, the elected interest rate was approximately 10%.

During the three-month periods ended May 3, 2025 and May 4, 2024, we recognized $7.5 million and $8.7 million, respectively, of interest expense related to the Amended Term Loan Credit Agreement. During each of the three-month periods ended May 3, 2025 and May 4, 2024, amortization of original issue discount and financing costs related to the Amended Term Loan Credit Agreement was $0.3 million.

As of May 3, 2025, we were compliant with our covenants under the Amended Term Loan Credit Agreement.

Note 7. Leases

Our lease costs consist of the following (in thousands):

Note 8. Income Taxes

Effective Tax Rate

During the three-month periods ended May 3, 2025 and May 4, 2024, the provision for income taxes were $2.6 million and $4.5 million, respectively. The effective tax rates for the three-month periods ended May 3, 2025 and May 4, 2024 were 30.7% and 26.9%, respectively. The increase in the effective tax rate for the three-month period ended May 3, 2025 as compared to the three-month period ended May 4, 2024 was primarily due to an increase in the amount of non-deductible compensation for covered employees and a decrease in income before provision for income taxes for the three months ended May 3, 2025.

Note 9. Commitments and Contingencies

Litigation

In April 2024, a class action complaint was filed in the United States District Court for the Central District of California captioned Crystal Jillson and Carmen Perez v. Torrid LLC. The complaint alleges misleading and unlawful pricing, sales, and discounting practices on our website under multiple legal theories including violation of California’s Unfair Competition Law, California False Advertising Law and California Consumer Legal Remedies Act. In May 2025, we entered into a proposed settlement agreement to resolve this matter. The proposed settlement agreement is subject to approval by the court. Accrued legal of $4.0 million, which comprises the estimated probable loss for this case and other unrelated legal costs, is included in accrued and other current liabilities in our condensed consolidated balance sheet as of May 3, 2025.

In October 2024, we were notified by a third-party vendor that it had observed a potentially unauthorized access to our data stored in a data warehouse. We have been named as a defendant insix pending class action lawsuits alleging that we failed to employ adequate security measures to protect the data stored in the data warehouse. On February 25, 2025, the United States District Court of the Central District of California granted a motion to consolidate thesix lawsuits, and plaintiffs filed a single consolidated class action complaint on April 28, 2025. We intend to vigorously defend ourselves in this matter. We are currently unable to determine the probability of the outcome of this matter or the range of reasonably possible loss, if any.

In February 2025, a class action complaint was filed in the Superior Court of the State of California captioned Leslie Cruz v. Torrid LLC. The complaint alleges terms on our website violate California’s Yelp Law which makes it unlawful for contracts or proposed contracts for goods or services to include provisions waiving a consumer’s right to make statements concerning the goods or services and threatening to enforce such provisions. In May 2025, the complaint was amended to also allege misleading and unlawful pricing, sales and discounting practices on our website under multiple legal theories including violation of California’s Unfair Competition Law, California False Advertising Law, California Legal Remedies Act, and Federal Trade Commission Act. We intend to vigorously defend ourselves against the complaint. We are currently unable to determine the probability of the outcome of this matter or the range of reasonably possible loss, if any.

From time to time, we are involved in other matters of litigation that arise in the ordinary course of business. Though significant litigation or awards against us could seriously harm our business and financial results, we do not at this time expect these other matters of litigation to have a material adverse effect on our condensed consolidated financial statements.

Indemnities, Commitments and Guarantees

During the ordinary course of business, we have made certain other indemnities, commitments and guarantees under which we may be required to make payments in relation to certain transactions. These indemnities include those given to various lessors in connection with facility leases for certain claims arising from such facility or lease and indemnities to our Board of Directors and officers to the maximum extent permitted. Commitments include those given to various merchandise vendors and suppliers. From time to time, we have issued guarantees in the form of standby letters of credit as security for workers’ compensation claims. The durations of these indemnities, commitments and guarantees vary. Some of these indemnities, commitments and guarantees do not provide for any limitation of the maximum potential future payments we could be obligated to make. We have not recorded any liability for these indemnities, commitments and guarantees in the accompanying condensed consolidated financial statements as no demands have been made upon us to provide indemnification under such agreements and there are no claims that we are aware of that could have a material effect on our condensed consolidated financial statements.

Note 10. Earnings Per Share

The following table provides the computation of basic and diluted net earnings per share (in thousands, except per share amounts):

The following table presents potentially dilutive securities excluded from the computation of diluted earnings per share for the periods presented because their effect would have been anti-dilutive (in thousands):

Note 11. Fair Value Measurements

Financial assets and liabilities measured at fair value on a recurring basis consisted of the following (in thousands):

The fair value of our money market funds is based on quoted prices in active markets. The deferred compensation plan liability represents the amount that would be earned by participants if the funds were invested in securities traded in active markets. The fair value of the deferred compensation plan liability is determined based on quoted prices of similar assets that are traded in observable markets, or represents the cash withheld by participants prior to any investment activity.

The book value of cash, certain of our other current assets, accounts payable, and certain of our accrued expenses and other current liabilities approximate fair value because of the short maturity and high liquidity of these instruments.

As of May 3, 2025 and February 1, 2025, the fair value of the Amended Term Loan Credit Agreement was approximately $268.5 million and $274.1 million, respectively. The fair value of the Amended Term Loan Credit Agreement is determined using current applicable rates for similar instruments as of each balance sheet date, a Level 2 measurement.

The book value of the ABL Facility approximates fair value because of the variable interest rate of this facility, a Level 2 measurement.

Note 12. Segment Reporting

We have determined that we haveone reportable segment, which includes the operation of our e-Commerce platform and stores. The single segment was identified based on how the Chief Operating Decision Maker ("CODM"), who we have determined to be our Chief Executive Officer, manages and evaluates performance and allocates resources based on consolidated net income. The following table presents information regularly provided to the CODM about our reportable segment (in thousands):

(A)Cost of goods sold as provided to the CODM excludes depreciation and amortization and share-based compensation, which are presented separately.

(B)Selling, general and administrative expenses as provided to the CODM exclude depreciation and amortization, share-based compensation and other expenses, which are presented separately.

(C)Depreciation and amortization excludes amortization of debt issuance costs and original issue discount that are reflected in interest expense.

(D)Other expenses include severance costs for certain key management positions, certain transaction and litigation fees (including certain settlement costs), and the reimbursement of certain management expenses, primarily for travel, incurred by Sycamore on our behalf, which are not considered to be part of our core business.