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What changed in Torrid Holdings Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Torrid Holdings Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+254 added−237 removedSource: 10-K (2024-04-02) vs 10-K (2023-03-28)

Top changes in Torrid Holdings Inc.'s 2024 10-K

254 paragraphs added · 237 removed · 217 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

39 edited+7 added−3 removed62 unchanged
Biggest changeDuring 2020 we also accelerated our omni-channel offerings such as ship from store and curbside pickup, which when combined with BOPIS continues to drive both customer acquisition and retention. Our distribution center manages the transportation, receipt, storage, sorting, packing and distribution of merchandise for our e-Commerce platform and store channels.
Biggest changeThe facility also handles customer and store returns to drive efficient online returns processing, allowing us to execute on our unified commerce strategy. During 2020 we also accelerated our omni-channel offerings such as ship from store and curbside pickup, which when combined with BOPIS continues to drive customer acquisition and retention.
The General Data Protection Regulation (EU 2016/679) ("EU GDPR"), effective May 2018, and the EU GDPR as 6 it forms part of the laws of England and Wales, Scotland and Northern Ireland by virtue of section 3 of the European Union Withdrawal Act 2018 ("UK GDPR" and together with the EU GDPR, the "GDPR"), have compliance obligations applicable to businesses without an establishment in the EU, the European Economic Area ("EEA") or the UK, but that either (i) offer their goods or services to individuals located in the EU, EEA or UK, or (ii) monitor the behavior of individuals located in the EU, EEA or UK.
The General Data Protection Regulation (EU 2016/679) ("EU GDPR"), effective May 2018, and the EU GDPR as it forms part of the laws of England and Wales, Scotland and Northern Ireland by virtue of section 3 of the European Union Withdrawal Act 2018 ("UK GDPR" and together with the EU GDPR, the "GDPR"), have compliance obligations applicable to businesses without an establishment in the EU, the European Economic Area ("EEA") or the UK, but that either (i) offer their goods or services to individuals located in the EU, EEA or UK, or (ii) monitor the behavior of individuals located in the EU, EEA or UK.
Our core competency is our differentiated, market-leading fit that we achieve through the following strategies: • Maniacal focus on fit across our entire organization; • Differentiated technical fit created through building and continuously refining a database of fit specifications derived from testing, measuring and cataloging garments on our fit models; • Proprietary fabrics specifically engineered to enhance the fit; • Fit all of our products on fit models and our staff, not mannequins; and • We often test new fabrics, new silhouettes and new product lines on our community of loyal customers before launch.
Our core competency is our differentiated, market-leading fit that we achieve through the following strategies: • Maniacal focus on fit across our entire organization; 1 • Differentiated technical fit created through building and continuously refining a database of fit specifications derived from testing, measuring and cataloging garments on our fit models; • Proprietary fabrics specifically engineered to enhance the fit; • Fit all of our products on fit models and our staff, not mannequins; and • We often test new fabrics, new silhouettes and new product lines on our staff and community of loyal customers before launch.
We are agnostic to the channel where our customers choose to shop, as we are highly profitable across both e-Commerce and store channels. We deliver a consistent brand message by coordinating our strategies across channels, which we believe influences our customers’ buying decisions. This customer- 2 centric strategy enhances customer acquisition, retention and customer lifetime value.
We are agnostic to the channel where our customers choose to shop, as we are highly profitable across both e-Commerce and store channels. We deliver a consistent brand message by coordinating our strategies across channels, which we believe influences our customers’ buying decisions. This customer-centric strategy enhances customer acquisition, retention and customer lifetime value.
Our e-Commerce and store channels complement and drive traffic to one another, creating more loyal omni-channel customers. e-Commerce Our e-Commerce channel is central to our unified commerce platform. Our online platform provides customers with a highly engaging shopping experience featuring access to our full product assortment, an aesthetically rich and easily navigable website and seamless ordering and fulfillment.
Our e-Commerce and store channels complement and drive traffic to one another, creating more loyal omni-channel customers. 2 e-Commerce Our e-Commerce channel is central to our unified commerce platform. Our online platform provides customers with a highly engaging shopping experience featuring access to our full product assortment, an aesthetically rich and easily navigable website and seamless ordering and fulfillment.
We use our customer database to strategically optimize the value of our marketing investments across our customer base and channels. This enables us to efficiently acquire new customers, effectively market to repeat customers and reactivate lapsed customers. 4 Our investments in digital and physical marketing drive customer acquisition and engagement across all of our channels.
We use our customer database to strategically optimize the value of our marketing investments across our customer base and channels. This enables us to efficiently acquire new customers, effectively market to repeat customers and reactivate lapsed customers. Our investments in digital and physical marketing drive customer acquisition and engagement across all of our channels.
We use these channels to communicate with our customers, disseminate our outbound marketing messages and collect feedback about their lifestyles and product preferences. Sourcing and Production We outsource the manufacturing of our products, which eliminates the need to own or operate manufacturing facilities.
We use these channels to 4 communicate with our customers, disseminate our outbound marketing messages and collect feedback about their lifestyles and product preferences. Sourcing and Production We outsource the manufacturing of our products, which eliminates the need to own or operate manufacturing facilities.
The information contained on such websites and social media posts is not incorporated by reference into this filing. Further, our references to website URLs in this filing are intended to be inactive textual references only. 7
The 7 information contained on such websites and social media posts is not incorporated by reference into this filing. Further, our references to website URLs in this filing are intended to be inactive textual references only. 8
Product Product Offering We offer a full product assortment that addresses our customers' entire closet, including tops, bottoms, denim, dresses, intimates, activewear, shoes and accessories. We believe our products not only provide an unparalleled technical fit, but also have the style and attitude that enable our customers to dress like her non-plus-size friends.
Product Product Offering We offer a full product assortment that addresses our customers' entire closet, including tops, bottoms, denim, dresses, intimates, activewear, footwear and accessories. We believe our products not only provide an unparalleled technical fit, but also have the style and attitude that enable our customers to dress like her non-plus-size friends.
In fiscal year 2022, the Torrid Foundation raised over $2.2 million in support of partner organizations dedicated to educating and empowering women. Data Analytics We have a significant volume of customer and transaction data, collected from a variety of sources, including e-Commerce and in-store interactions, our loyalty program, social media and customer surveys.
In fiscal year 2023, the Torrid Foundation raised over $2.2 million in support of partner organizations dedicated to educating and empowering women. Data Analytics We have a significant volume of customer and transaction data, collected from a variety of sources, including e-Commerce and in-store interactions, our loyalty program, social media and customer surveys.
Our work environment is open and collaborative with a flat organizational structure that facilitates efficient decision making. Approximately 93% of our employees identify as female, and many are also customers who believe in our mission to empower curvy women to love the way they look and feel.
Our work environment is open and collaborative with a flat organizational structure that facilitates efficient decision making. Approximately 94% of our employees identify as female, and many are also customers who believe in our mission to empower curvy women to love the way they look and feel.
Through third parties, we periodically monitor our factories and suppliers to ensure compliance with these guidelines. Distribution and Fulfillment Our unified commerce business model is serviced by our distribution facility located in West Jefferson, Ohio. We acquired the operations of the fully-functional, state-of-the-art distribution center in West Jefferson, Ohio in 2018.
Through third parties, we periodically monitor our factories and suppliers to ensure compliance with these guidelines. Distribution and Fulfillment Our unified commerce business model is serviced by our distribution facility located in West Jefferson, Ohio. We leased the operations of the fully functional, state-of-the-art distribution center in West Jefferson, Ohio in 2018.
Customers Our typical customer is an employed, youthful woman between the ages of 25 and 40 years old with above-average annual household income, and wears sizes 10 to 30 (average of size 18). Approximately half of our customers are under 40 years old and the ethnic composition of our customer base largely parallels that of the U.S. population.
Customers Our typical customer is an employed, youthful woman between the ages of approximately 27 and 42 years old with above-average annual household income, and wears sizes 10 to 30 (average of size 18). Approximately half of our customers are under 40 years old and the ethnic composition of our customer base largely parallels that of the U.S. population.
In 2020, we established our Diversity & Inclusion Committee, which seeks to create a more equitable and inclusive workplace through open dialogue, training, recruiting, and retaining diverse talent. The goal of creating a welcoming and supportive environment spans our full organization from our headquarters and distribution centers to our stores.
In 2020, we established our Diversity, Equity, & Inclusion Committee, which seeks to create a more equitable and inclusive workplace through open dialogue, training, recruiting, and retaining diverse talent. The goal of creating a welcoming and supportive environment spans our full organization from our headquarters and distribution center to our stores.
Though we are working towards decreasing our share of product manufactured in China, our manufacturing partners may source their own raw materials from third parties in other countries, including China. We maintain compliance guidelines for our vendors that dictate various standards including product quality, manufacturing practices, labor compliance and legal compliance.
Though we are working towards decreasing our share of product manufactured in China, our manufacturing partners may source their own raw materials from third party suppliers in other countries, including China. We maintain compliance guidelines for our vendors that dictate various standards including product quality, manufacturing practices, labor compliance and legal compliance.
In fiscal year 2022, no single quarter contributed more than 27% of Torrid net sales. We believe this is partly attributable to our broad merchandise offering that encourages purchasing across seasons. We believe our reduced seasonality is also attributable to the behavior of our customer, who is generally purchasing products for herself, not as gifts.
In fiscal year 2023, no single quarter contributed more than 26% of Torrid net sales. We believe this is partly attributable to our broad merchandise offering that encourages purchasing across seasons. We believe our reduced seasonality is also attributable to the behavior of our customer, who is generally purchasing products for herself, not as gifts.
No single supplier accounted for more than 15% of merchandise purchased in fiscal year 2022. Approximately 98% of our product receipts in fiscal year 2022 were sourced internationally, primarily from Asia. We plan to continue diversifying our vendor bases by both vendor and geography. We continue to reduce our exposure to factories located within China.
No single supplier accounted for more than 13% of merchandise purchased in fiscal year 2023. Approximately 98% of our product receipts in fiscal year 2023 were sourced internationally, primarily from Asia. We plan to continue diversifying our vendor bases by both vendor and geography. We continue to reduce our exposure to factories located within China.
Our products are exclusive to us, with few exceptions, and provide a consistent quality and fit that we believe she cannot find elsewhere. Our product development is led by a team of more than seventy highly skilled designers, 1 artists and product engineers.
Our products are exclusive to us, with few exceptions, and provide a consistent quality and fit that we believe she cannot find elsewhere. Our product development is led by a team of highly skilled designers, artists and product engineers.
We are market leaders in bottoms and intimates, both attractive growth categories where fit is critical. These categories serve as entry point to the Torrid brand and drive customer loyalty. We believe the design of our intimates line, Torrid Curve, inspires confidence and allows our customer to move in effortless comfort throughout her day while feeling confident and sexy.
We strive to be market leaders in bottoms and intimates, both attractive growth categories where fit is critical. These categories serve as entry points to the Torrid brand and drive customer loyalty. We believe the design of our intimates line inspires confidence and allows our customer to move in effortless comfort throughout her day while feeling confident and sexy.
Our offering is built on the foundation of basic merchandise that represents year-round styles and colors that are constantly replenished and are not subject to a typical markdown cadence ("Basics"). Our core offering includes products that are on-trend interpretations of our Basics merchandise that we update with new fabrics, prints, embellishments or features ("Core").
Our offering is built on the foundation of basic merchandise that represents year-round styles and colors that are constantly replenished ("Basics"). Our core offering includes products that are on-trend interpretations of our Basics merchandise that we update with new fabrics, prints, embellishments or features ("Core").
As of January 28, 2023, we operated 639 stores in the U.S., Puerto Rico and Canada. Our stores are located primarily in premium malls, shopping plazas, lifestyle centers and outlet locations, and the quality of our real estate locations is high as substantially all of our stores are located in A and B malls or off-mall locations.
As of February 3, 2024, we operated 655 stores in the U.S., Puerto Rico and Canada. Our stores are located primarily in premium malls, shopping plazas, lifestyle centers and outlet locations, and the quality of our real estate locations is high as substantially all of our stores are located in A and B malls or off-mall locations.
For example, the Harper Blouse represents a Basics item with Core iterations that feature embellishments such as zippers or button-loops. Our trend driven items incorporate the latest fashions available in the broader market to excite and engage our customer but are bought narrowly and reordered as demand dictates to minimize inventory risk.
For example, the Harper Blouse represents a Basics item with Core iterations that feature different lengths and sleeve designs. Our trend driven items incorporate the latest fashions available in the broader market to excite and engage our customer but are bought narrowly and reordered as demand dictates to minimize inventory risk.
Consequently, our business is subject to increasingly complex and rigorous, and sometimes conflicting laws, regulatory standards, industry standards, external and internal privacy and security policies, contracts and other obligations governing data privacy and security in the U.S. and other jurisdictions where we do business, including with respect to the collection, storage, use, transmission, sharing and protection of personal information and other consumer data.
Consequently, our business is subject to increasingly complex and rigorous, and sometimes conflicting laws, regulatory standards, industry standards, external and internal privacy and security policies, contracts and other obligations governing data privacy and security in the U.S. and other jurisdictions where we do business, including with respect to the collection, storage, use, transmission, sharing and protection of personal information and other consumer data. 6 For example, the European Union ("EU") and United Kingdom ("UK"), have adopted strict data privacy and security regulations.
We believe we have established effective two-way lines of communication throughout our organization, including using technologies to communicate with stores in real time and routinely synthesize store insights and customer feedback from the field to influence decision making. As of January 28, 2023, we employed 2,061 full-time and 5,934 part-time employees.
We believe we have established effective two-way lines of communication throughout our organization, including using technologies to communicate with stores in real time and routinely synthesize store insights and customer feedback from the field to influence decision making. As of February 3, 2024, we employed approximately 1,820 full-time and 5,800 part-time employees.
Stores are replenished at least once per week from this facility by third-party delivery services. This frequency provides our stores a steady flow of new inventory that helps maintain product freshness and in-stock availability. Information Systems We utilize a full range of third-party management information systems to support our store, e-Commerce, merchandising, customer data, financial and real estate business teams.
This frequency provides our stores with a steady flow of new inventory that helps maintain product freshness and in-stock availability. Information Systems We utilize a full range of third-party management information systems to support our store, e-Commerce, merchandising, customer data, financial and real estate business teams.
Item 1. Business Overview Torrid Holdings Inc. ("Torrid," "we," "us," "our," the "Company") is a direct-to-consumer brand of apparel, intimates and accessories in North America, targeting the 25- to 40-year old woman who wears sizes 10 to 30.
Item 1. Business Overview Torrid Holdings Inc. ("Torrid," "we," "us," "our," the "Company") is 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 monitor changes in these laws and believe that we are in material compliance with applicable laws. A substantial portion of our products are manufactured outside the United States. These products are imported and are subject to U.S. customs laws, which impose tariffs as well as import quota restrictions for textiles and apparel.
A substantial portion of our products are manufactured outside the United States. These products are imported and are subject to U.S. customs laws, which impose tariffs as well as import quota restrictions for textiles and apparel. Some of our imported products are eligible for duty-advantaged programs.
For instance, we are subject to labor and employment, tax, environmental, privacy and anti-bribery laws. We are also subject to regulations, trade laws and customs, truth-in-advertising, consumer protection and zoning and occupancy laws and ordinances that regulate retailers generally and/or govern the importation, promotion and sale of merchandise and the operation of stores and warehouse facilities.
We are also subject to regulations, trade laws and customs, truth-in-advertising, consumer protection and zoning and occupancy laws and ordinances that regulate retailers generally and/or govern the importation, promotion and sale of merchandise and the operation of stores and warehouse facilities. We monitor changes in these laws and believe that we are in material compliance with applicable laws.
To further support the advancement of our employees, we invest in a wide range of training and development opportunities at all levels across the organization, including through both online and instructor-led internal programs, as well as third-party programs. We regularly collect feedback from our employees to better understand and improve our learning and development offerings to meet their needs.
We believe in rewarding high performance and seek to design plans and programs to support this culture. To further support the advancement of our employees, we invest in a wide range of training and development opportunities at all levels across the organization, including through both online and instructor-led internal programs, as well as third-party programs.
Our talent strategy is to attract, engage and retain the best and most qualified talent to create a diverse and inclusive workforce. We offer competitive compensation packages that are based on market-specific data for comparable roles and geographic locations. We believe in rewarding high performance and seek to design plans and programs to support this culture.
Our employees are not represented by a labor union and are not party to a collective bargaining agreement. 3 Our talent strategy is to attract, engage and retain the best and most qualified talent to create a diverse and inclusive workforce. We offer competitive compensation packages that are based on market-specific data for comparable roles and geographic locations.
This 750,000 square foot facility is highly automated and is capable of handling our existing and future needs. Additionally, the West Jefferson facility is equipped with omni-channel capabilities that enables buy-online-pickup-in-store ("BOPIS") while continuing to drive efficient online returns and allowing us to execute on our unified commerce strategy.
This 750,000 square foot facility is highly automated and is capable of handling our existing and future needs. The West Jefferson facility is equipped with omni-channel capabilities that enable both direct-to-customer eCommerce and retail store order fulfillment including buy-online-pickup-in-store ("BOPIS") and ship-to-store.
Of these employees, 720 are employed in our headquarters in City of Industry, California and 7,275 are employed in our stores and distribution centers. Our 3 number of employees, particularly part-time employees, fluctuates depending upon seasonal needs. Our employees are not represented by a labor union and are not party to a collective bargaining agreement.
Of these employees, approximately 530 are assigned to our headquarters in City of Industry, California and approximately 7,090 are employed in our stores and distribution center. Our number of employees, particularly part-time employees, fluctuates depending upon seasonal needs.
Each of these laws create additional obligations on businesses and could subject us to additional compliance costs as well as potential fines, individual claims and commercial liabilities. We may publish privacy policies, marketing materials, and other statements, such as compliance with certain certifications or self-regulatory principles, regarding data privacy and security.
Each of these laws create additional obligations on businesses and could require changes in our business practices or privacy policies or could subject us to additional compliance costs as well as potential fines, individual claims and commercial liabilities.
Over the course of almost two decades, Torrid has developed the requisite design and engineering expertise for the highly technical bra category through a rigorous in-house research and development process. We have patent applications pending for our 360° Back Smoothing Bras and our Power Mesh Panels for Tummy-Flattening Pants, both exclusive creations for the woman in our size range.
Over the course of approximately two decades, Torrid has developed the requisite design and engineering expertise for the highly technical bra category through a rigorous in-house research and development process.
To ensure we provide a rich and rewarding experience for our employees, we monitor culture and engagement to build on the competencies that are important for our future success. We routinely engage independent third parties to conduct cultural training sessions and engagement events.
We regularly collect feedback from our employees to better understand and improve our learning and development offerings to meet their needs. To ensure we provide a rich and rewarding experience for our employees, we monitor culture and engagement to build on the competencies that are important for our future success.
These include diversity and inclusion training sessions, fun employee engagement events, and virtual and on-demand learning sessions focused on emotional and social health. Employee safety remains a priority. We develop and administer company-wide policies to ensure the safety of each team member and compliance with Occupational Safety and Health Administration standards.
We routinely engage independent third parties to conduct cultural training sessions and engagement events. These include diversity, equity and inclusion training sessions, fun employee engagement events, and virtual and on-demand learning sessions focused on emotional and social health. Employee safety remains a priority.
Further, we have patent applications pending for our innovative and most popular line of bras, the 360° Back Smoothing Bra, and for our Power Mesh Panels for Tummy-Flattening Pants and Tummy-Covering Garments. Regulation and Legislation We are required to comply with numerous laws and regulations at the state, federal and international levels.
Further, we have patents issued, as well as applications pending for our innovative technology featured in our most popular line of bras, the 360° Back Smoothing Bra, as well as the Wire-free Push-Up Brassiere with Hinge for Improved Support and Flexibility, and for our Power Mesh Panels for Tummy-Flattening Pants and Tummy-Covering Garments.
At each of our retail stores, our headquarters and our West Jefferson, Ohio, distribution center, we continue to follow applicable local, state, and national government regulations, laws, and recommended guidance. An important part of our culture is our focus on giving back to the community, which we do primarily through our Torrid Foundation that we established in 2017.
As we managed through these challenges, we prioritized the health, safety and overall well-being of our teams and customers. An important part of our culture is our focus on giving back to the community, which we do primarily through our Torrid Foundation that we established in 2017.
In 2020, the COVID-19 pandemic brought unprecedented challenges to our business, our communities, and our teams. As we managed through these challenges, we prioritized the health, safety and overall well-being of our teams and customers.
We develop and administer company-wide policies to ensure the safety of each team member and compliance with Occupational Safety and Health Administration standards and local requirements. In 2020, the COVID-19 pandemic brought unprecedented challenges to our business, our communities, and our teams.
Removed
Some of our imported products are eligible for duty-advantaged programs.
Added
We have patent applications pending for our 360° Back Smoothing Bras as well as the Wire-free Push-Up Brassiere With Hinge For Improved Support And Flexibility, and our Power Mesh Panels for Tummy-Flattening Pants, both exclusive creations for the woman in our size range.
Removed
For example, the European Union ("EU") and United Kingdom ("UK"), have adopted strict data privacy and security regulations.
Added
Our supply chain team including the distribution center, transportation, customs compliance and vendor compliance functions manage the transportation, receipt, quality assurance, storage, sorting, packing and distribution of merchandise for our e-Commerce platform and store channels. Stores are replenished at least once per week from this facility by third-party delivery services.
Removed
Given that enforcement of the CPRA amendments begins on July 1, 2023, it remains unclear how this law will be enforced and interpreted. Four additional states (Virginia, Colorado, Utah and Connecticut) have enacted data privacy and security laws that have, or will in the near future, come into effect.
Added
Regulation and Legislation We are required to comply with numerous laws and regulations at the state, federal and international levels. For instance, we are subject to labor and employment, tax, environmental, privacy and anti-bribery laws.
Added
Additionally, similar U.S. state comprehensive privacy laws have gone into effect in other U.S. states including Virginia, Colorado, Connecticut and Utah. Oregon, Texas, and Montana have enacted privacy laws that will go into effect in 2024.
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Also, Delaware, Iowa New Jersey, New Hampshire and Tennessee have enacted privacy laws that will go into effect in 2025, followed by Indiana in 2026 . A number of other states have proposed new privacy laws, which could impose similar or more restrictive requirements than these laws.
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We anticipate that similar laws will continue to be proposed in other states and at the federal level, reflecting a trend toward more stringent data privacy legislation in the U.S.
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We cannot yet determine the full impact these laws, or other such future laws, regulations and standards, may have on our current or future business. We may publish privacy policies, marketing materials, and other statements, such as compliance with certain certifications or self-regulatory principles, regarding data privacy and security.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

52 edited+8 added−3 removed259 unchanged
Biggest changeElectronic security attacks designed to gain access to sensitive information by breaching mission critical systems of large organizations are constantly evolving, and high profile electronic security breaches leading to unauthorized release of confidential information have occurred recently at a number of major U.S. companies.
Biggest changeAdditionally, as a result of state-sponsored cyber threats including those stemming from the Russian invasion of Ukraine, we may face increased cybersecurity risks as companies in the United States and its allied countries have become targets of malicious cyber activity. 14 Electronic security attacks designed to gain access to sensitive information by breaching mission critical systems of large organizations are constantly evolving, and high-profile electronic security breaches leading to unauthorized release of confidential information have occurred recently at a number of major U.S. companies.
Under the rules of the NYSE, a company of which more than 50% of the outstanding voting power is held by an individual, group or another company is a "controlled company" and may elect not to comply with certain stock exchange corporate governance requirements, including: • the requirement that a majority of our board of directors consists of independent directors; • the requirement that nominating and corporate governance matters be decided solely by independent directors; and • the requirement that employee and officer compensation matters be decided solely by independent directors.
Under the rules of the NYSE, a company of which more than 50% of the outstanding voting power is held by an individual, group or another company is a "controlled company" and may elect not to comply with certain stock exchange corporate governance requirements, including: • the requirement that a majority of our Board of Directors (the "Board") consists of independent directors; • the requirement that nominating and corporate governance matters be decided solely by independent directors; and • the requirement that employee and officer compensation matters be decided solely by independent directors.
Among other things, these provisions: • would allow us to authorize the issuance of undesignated preferred stock in connection with a stockholder rights plan or otherwise, the terms of which may be established and the shares of which may be issued without stockholder approval, and which may include super voting, special approval, dividend or other rights or preferences superior to the rights of the holders of common stock; • prohibit stockholder action by written consent from and after the date on which Sycamore, Sycamore Partners Torrid, L.L.C. and each of their respective affiliates (the "Sycamore Investors") cease to beneficially own at least 50% of the total voting power of all then outstanding shares of our common stock (the "Trigger Event") unless such action is recommended by all directors then in office; • provide that our board of directors is expressly authorized to make, alter, or repeal our bylaws and that from and after the Trigger Event our stockholders may only amend our bylaws with the approval of 75% or more of all of the outstanding shares of our capital stock entitled to vote; and 24 • establish advance notice requirements for nominations for elections to our board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings.
Among other things, these provisions: • would allow us to authorize the issuance of undesignated preferred stock in connection with a stockholder rights plan or otherwise, the terms of which may be established and the shares of which may be issued without stockholder approval, and which may include super voting, special approval, dividend or other rights or preferences superior to the rights of the holders of common stock; • prohibit stockholder action by written consent from and after the date on which Sycamore, Sycamore Partners Torrid, L.L.C. and each of their respective affiliates (the "Sycamore Investors") cease to beneficially own at least 50% of the total voting power of all then outstanding shares of our common stock (the "Trigger Event") unless such action is recommended by all directors then in office; • provide that our Board is expressly authorized to make, alter, or repeal our bylaws and that from and after the Trigger Event our stockholders may only amend our bylaws with the approval of 75% or more of all of the outstanding shares of our capital stock entitled to vote; and • establish advance notice requirements for nominations for elections to our Board or for proposing matters that can be acted upon by stockholders at stockholder meetings.
See also "—The interruption of the flow of merchandise from international manufacturers could disrupt our supply chain, including as a result of the imposition of additional duties, tariffs and other charges on imports and exports" and "—Changes in tax laws or regulations or in our operations may impact our effective tax rate and may adversely affect our business, financial condition and results of operations." If our distribution facility were to encounter difficulties or if it were to shut down for any reason, we could face shortages of inventory in our stores, delayed shipments to our e-Commerce customers and harm to our reputation.
See also "—The interruption of the flow of merchandise from international manufacturers could disrupt our supply chain, including as a result of the imposition of additional duties, tariffs and other charges on imports and exports" and "—Changes in tax laws or regulations or in our operations may impact our effective tax rate and may adversely affect our business, financial condition and results of operations." 17 If our distribution facility were to encounter difficulties or if it were to shut down for any reason, we could face shortages of inventory in our stores, delayed shipments to our e-Commerce customers and harm to our reputation.
The New Term Loan Credit Agreement and the agreement governing the Existing ABL Facility, as amended, contain, and the agreements evidencing or governing any other future indebtedness, may contain, financial restrictions on us and our restricted subsidiaries, including restrictions on our or our restricted subsidiaries' ability to, among other things: • place liens on our or our restricted subsidiaries’ assets; • make investments other than permitted investments; • incur additional indebtedness; • prepay or redeem certain indebtedness; • merge, consolidate or dissolve; • sell assets; • engage in transactions with affiliates; • change the nature of our business; • change our or our subsidiaries' fiscal year or organizational documents; and • make restricted payments (including certain equity issuances).
The New Term Loan Credit Agreement and the agreement governing the Existing ABL Facility, as amended, contain, and the agreements evidencing or governing any other future indebtedness, may contain, financial restrictions on us and our restricted subsidiaries, including restrictions on our or our restricted subsidiaries' ability to, among other things: • place liens on our or our restricted subsidiaries’ assets; • make investments other than permitted investments; • incur additional indebtedness; • prepay or redeem certain indebtedness; • merge, consolidate or dissolve; • sell assets; • engage in transactions with affiliates; • change the nature of our business; 23 • change our or our subsidiaries' fiscal year or organizational documents; and • make restricted payments (including certain equity issuances).
Any intellectual property litigation or claims against us could result in the loss or compromise of our intellectual property rights, could subject us to significant liabilities, require us to seek licenses on unfavorable terms, if available at all, prevent us from manufacturing or selling certain products, limit our ability to market or sell to our customers using certain methods or technologies and/or require us to redesign or re-label our products or rename our brand, any of which could have a material adverse effect on our business, financial condition, results of operations or cash flows.
Any intellectual property litigation or claims against us could result in the loss or compromise of our intellectual property rights, could subject us to significant liabilities, require us to seek licenses on unfavorable terms, if available at all, prevent us from manufacturing or selling certain products, limit our ability to market or 22 sell to our customers using certain methods or technologies and/or require us to redesign or re-label our products or rename our brand, any of which could have a material adverse effect on our business, financial condition, results of operations or cash flows.
See also "—The interruption of the flow of merchandise from international manufacturers could disrupt our supply chain, including as a result of the imposition of additional duties, tariffs and other charges on imports and exports" and "—We source a significant amount of our product receipts from China, which exposes us to risks inherent in doing business there." Presidential and congressional elections in the United States could also result in significant changes in, and uncertainty with respect to, tax legislation, regulation and government policy directly affecting us and our business.
See also "—The 21 interruption of the flow of merchandise from international manufacturers could disrupt our supply chain, including as a result of the imposition of additional duties, tariffs and other charges on imports and exports" and "—We source a significant amount of our product receipts from China, which exposes us to risks inherent in doing business there." Presidential and congressional elections in the United States could also result in significant changes in, and uncertainty with respect to, tax legislation, regulation and government policy directly affecting us and our business.
For example, the U.S. government recently enacted the Inflation Reduction Act of 2022 (the "IR Act"), which includes changes to the U.S. corporate income tax system, including a 15% alternate minimum tax based on the adjusted financial statement income of corporations or their predecessors with a three-year taxable year average annual adjusted financial statement income in excess of $1 billion, and a 1% excise tax on the fair market value of stock repurchases made by covered corporations after December 31, 2022.
For example, the U.S. government enacted the Inflation Reduction Act of 2022 (the "IR Act"), which includes changes to the U.S. corporate income tax system, including a 15% alternate minimum tax based on the adjusted financial statement income of corporations or their predecessors with a three-year taxable year average annual adjusted financial statement income in excess of $1 billion, and a 1% excise tax on the fair market value of stock repurchases made by covered corporations after December 31, 2022.
If we are unable to conclude that we have effective internal control over financial reporting or material weaknesses or control deficiencies occur in the future, the accuracy and timing of our financial reporting may be adversely affected, we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports in addition to applicable stock exchange listing requirements and investors may lose confidence in our financial reporting, which could have a material adverse effect on the trading price of our stock.
If we are unable to conclude that we have effective internal control over financial reporting or material weaknesses or control deficiencies occur in the future, the accuracy and timing of our financial reporting may be adversely affected, we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports in addition to 26 applicable stock exchange listing requirements and investors may lose confidence in our financial reporting, which could have a material adverse effect on the trading price of our stock.
Alternatively, if a court were to find this provision of our amended and restated certificate of incorporation inapplicable or unenforceable with respect to one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could materially and adversely affect our business, financial condition and results of operations and result in a diversion of the time and resources of our management and board of directors.
Alternatively, if a court were to find this provision of our amended and restated certificate of incorporation inapplicable or unenforceable with respect to one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could materially and adversely affect our business, financial condition and results of operations and result in a diversion of the time and resources of our management and Board.
To prevent having to litigate claims in multiple jurisdictions and the 25 threat of inconsistent or contrary rulings by different courts, among other considerations, our certificate of incorporation will provide that, unless we consent in writing to the selection of an alternate forum, the federal district courts of the United States will be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act.
To prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or contrary rulings by different courts, among other considerations, our certificate of incorporation will provide that, unless we consent in writing to the selection of an alternate forum, the federal district courts of the United States will be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act.
The market price of our common stock may fluctuate significantly in response to a number of factors, most of which we cannot control, including: • quarterly variations in our operating results compared to market expectations; • changes in preferences of our customers; • announcements of new products, significant price reductions or other strategic actions by us or our competitors; • public reactions to our press releases, public announcements and/or filings with the SEC; • speculation in the press or investment community; • size of our public float; • stock price performance and valuations of our competitors; • fluctuations in stock market prices and volumes; • default on our indebtedness; • actions by competitors or other shopping center tenants; 23 • changes in senior management or key personnel; • actions by our stockholders; • changes in financial estimates by securities analysts or our failure to meet any such estimates; • negative earnings or other announcements by us or other retail apparel companies; • downgrades in our credit ratings or the credit ratings of our competitors; • issuances (or sales by our stockholders) of capital stock; • general market conditions; • global economic, legal and regulatory factors unrelated to our performance; and • the realization of any of the risks described in this section, or other risks that may materialize in the future.
The market price of our common stock may fluctuate significantly in response to a number of factors, most of which we cannot control, including: • quarterly variations in our operating results compared to market expectations; 24 • changes in preferences of our customers; • announcements of new products, significant price reductions or other strategic actions by us or our competitors; • public reactions to our press releases, public announcements and/or filings with the SEC; • speculation in the press or investment community; • size of our public float; • stock price performance and valuations of our competitors; • fluctuations in stock market prices and volumes; • default on our indebtedness; • actions by competitors or other shopping center tenants; • changes in senior management or key personnel; • actions by our stockholders; • changes in financial estimates by securities analysts or our failure to meet any such estimates; • negative earnings or other announcements by us or other retail apparel companies; • downgrades in our credit ratings or the credit ratings of our competitors; • issuances (or sales by our stockholders) of capital stock; • general market conditions; • global economic, legal and regulatory factors unrelated to our performance; and • the realization of any of the risks described in this section, or other risks that may materialize in the future.
Our stockholders may experience immediate dilution upon such future equity issuances or the exercise of stock options to purchase common stock granted to our employees, consultants and directors under our stock option and incentive plans. Anti-takeover provisions in our organizational documents and Delaware law might discourage or delay acquisition attempts for us that you might consider favorable.
Our stockholders may experience immediate dilution upon such future equity issuances or the exercise of stock options to purchase common stock granted to our employees, consultants and directors under our stock option and incentive plans. 25 Anti-takeover provisions in our organizational documents and Delaware law might discourage or delay acquisition attempts for us that you might consider favorable.
If these regulations were to change or were 19 violated by our management, employees, vendors, buying agents or trading companies, the costs of certain goods could increase, or we could experience delays in shipments of our goods, be subject to fines or penalties, or suffer reputational harm, which could reduce demand for our merchandise and hurt our business and results of operations.
If these regulations were to change or were violated by our management, employees, vendors, buying agents or trading companies, the costs of certain goods could increase, or we could experience delays in shipments of our goods, be subject to fines or penalties, or suffer reputational harm, which could reduce demand for our merchandise and hurt our business and results of operations.
To the extent that such changes have a negative impact on us or our business, these changes may materially and adversely impact our business, financial condition and results of operations. 20 Government or consumer concerns about product safety could result in regulatory actions, recalls or changes to laws, which could harm our reputation, increase costs or reduce sales.
To the extent that such changes have a negative impact on us or our business, these changes may materially and adversely impact our business, financial condition and results of operations. Government or consumer concerns about product safety could result in regulatory actions, recalls or changes to laws, which could harm our reputation, increase costs or reduce sales.
There can be no assurance that we will receive adequate assistance from our temporary personnel, or that there will be sufficient sources of suitable temporary personnel to meet our demand. Any such failure to meet our staffing needs or any material increases in employee turnover rates could have a material adverse effect on our business or results of operations.
There can be no assurance that we will receive adequate assistance from our temporary personnel, or that 13 there will be sufficient sources of suitable temporary personnel to meet our demand. Any such failure to meet our staffing needs or any material increases in employee turnover rates could have a material adverse effect on our business or results of operations.
The success of our stores depends on their timely receipt of merchandise. The efficient flow of our merchandise requires that our distribution facility be 16 operated effectively and have adequate capacity to support our current level of operations and any anticipated increased levels that may follow from the growth of our business.
The success of our stores depends on their timely receipt of merchandise. The efficient flow of our merchandise requires that our distribution facility be operated effectively and have adequate capacity to support our current level of operations and any anticipated increased levels that may follow from the growth of our business.
Any such claims, proceedings or actions may also hurt our reputation, brand and business, force us to incur significant expenses in defense of such proceedings or actions, distract our management, increase our costs of doing business, result in a loss of customers, suppliers or vendors and result in the imposition of monetary penalties.
Any such claims, proceedings or actions may also hurt our reputation, brand and business, force us to incur significant expenses in defense of 18 such proceedings or actions, distract our management, increase our costs of doing business, result in a loss of customers, suppliers or vendors and result in the imposition of monetary penalties.
Litigation and other claims and regulatory proceedings against us could result in unexpected expenses, legal liability and injunctions against us or restrictions placed upon us, which could disrupt our operations, preclude us from selling products, or otherwise have a material adverse effect on our operations, financial results and our reputation.
Litigation and other claims and 20 regulatory proceedings against us could result in unexpected expenses, legal liability and injunctions against us or restrictions placed upon us, which could disrupt our operations, preclude us from selling products, or otherwise have a material adverse effect on our operations, financial results and our reputation.
Upon the occurrence of an event of default or cross-default under any of the present or future agreements governing our indebtedness, 22 the lenders could elect to declare all amounts outstanding to be due and payable and exercise other remedies as set forth in the agreements.
Upon the occurrence of an event of default or cross-default under any of the present or future agreements governing our indebtedness, the lenders could elect to declare all amounts outstanding to be due and payable and exercise other remedies as set forth in the agreements.
While we have not historically experienced significant sales seasonality, we may require temporary personnel to adequately staff our stores, with heightened dependence during busy periods such as the holiday season and when multiple new 12 stores are opening.
While we have not historically experienced significant sales seasonality, we may require temporary personnel to adequately staff our stores, with heightened dependence during busy periods such as the holiday season and when multiple new stores are opening.
Also, outbreaks of epidemic, pandemic, or contagious diseases, such as the ongoing COVID-19 outbreak originating in China, may adversely impact our ability to source products from China, including fabrics, or to source them in a timely manner.
Also, outbreaks of epidemic, pandemic, or contagious diseases, such as the COVID-19 outbreak originating in China, may adversely impact our ability to source products from China, including fabrics, or to source them in a timely manner.
Any determination to pay dividends in the future will be at the discretion of our board of directors and will depend upon results of operations, financial condition, contractual restrictions, restrictions imposed by applicable law and other factors our board of directors deems relevant.
Any determination to pay dividends in the future will be at the discretion of our Board and will depend upon results of operations, financial condition, contractual restrictions, restrictions imposed by applicable law and other factors our Board deems relevant.
Failure to achieve our future operating plans or generate sufficient levels of cash flow at our stores could result in impairment charges on long-lived assets, which could have a material adverse effect on our financial condition or results of operations. 14 Risks Related to the Manufacturing, Processing and Supply of Our Products We do not own or operate any manufacturing facilities and therefore depend upon third parties for the manufacture of all of our merchandise.
Failure to achieve our future operating plans or generate sufficient levels of cash flow at our stores could result in impairment charges on long-lived assets, which could have a material adverse effect on our financial condition or results of operations. 15 Risks Related to the Manufacturing, Processing and Supply of Our Products We do not own or operate any manufacturing facilities and therefore depend upon third parties for the manufacture of all of our merchandise.
If we encounter difficulties associated with our distribution facility or our facility were to shut down for any reason, including as a result of fire or other natural disaster, public health issues (including COVID-19) or work stoppage, we could face shortages of inventory, resulting in "out of stock" conditions in our stores, incur significantly higher costs and longer lead times associated with distributing our products to both our stores and e-Commerce customers and experience dissatisfaction from our customers.
If we encounter difficulties associated with our distribution facility or our facility were to shut down for any reason, including as a result of fire or other natural disaster, public health issues or work stoppage, we could face shortages of inventory, resulting in "out of stock" conditions in our stores, incur significantly higher costs and longer lead times associated with distributing our products to both our stores and e-Commerce customers and experience dissatisfaction from our customers.
The failure of our product offerings to appeal to our customers could have a material adverse effect on our business, results of operations and financial condition. 9 Our business depends in part on a strong brand image, and if we are not able to maintain and enhance our brand, particularly among our target segment and in new markets where we have limited brand recognition, we may be unable to attract sufficient numbers of customers to our stores or sell sufficient quantities of our products.
The failure of our product offerings to appeal to our customers could have a material adverse effect on our business, results of operations and financial condition. 10 Our business depends in part on a strong brand image, and if we are not able to maintain and enhance our brand, particularly among our target segment and in new markets where we have limited brand recognition, we may be unable to attract sufficient numbers of customers to our stores or sell sufficient quantities of our products.
Our amended and restated certificate of incorporation and amended and restated bylaws contain provisions that may make the merger or acquisition of our Company more difficult without the approval of our board of directors.
Our amended and restated certificate of incorporation and amended and restated bylaws contain provisions that may make the merger or acquisition of our Company more difficult without the approval of our Board.
The COVID-19 outbreak, including the spread of COVID-19 variants, caused a disruption in our supply chain and has adversely impacted economic conditions in North America, Europe, China and elsewhere. These and other disruptions, as well as poor economic conditions generally, may lead to a decline in the sales and operating results of our omni-channel business.
For instance, the COVID-19 outbreak, including the spread of COVID-19 variants, caused a disruption in our supply chain and has adversely impacted economic conditions in North America, Europe, China and elsewhere. These and other disruptions, as well as poor economic conditions generally, may lead to a decline in the sales and operating results of our omni-channel business.
These increased demands may cause us to operate our business less efficiently, which in turn could cause deterioration in the performance of our existing stores. 11 Executing our growth plans and achieving our objectives is dependent upon our ability to successfully execute against such plans and objectives.
These increased demands may cause us to operate our business less efficiently, which in turn could cause deterioration in the performance of our existing stores. 12 Executing our growth plans and achieving our objectives is dependent upon our ability to successfully execute against such plans and objectives.
While we believe we are a destination for our customers, our sales at these stores are impacted by the volume of customer traffic in those 10 shopping centers and the surrounding area.
While we believe we are a destination for our customers, our sales at these stores are impacted by the volume of customer traffic in those 11 shopping centers and the surrounding area.
These laws and regulations could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as our executive officers.
These laws and regulations could also make it more difficult for us to attract and retain qualified persons to serve on our Board, our Board committees or as our executive officers.
You should read this summary together with the more detailed description of each risk factor contained below: • the effect of changes in consumer spending and general macroeconomic conditions on our operations and financial performance; • our inability or failure to identify or respond to new trends; • our inability to maintain and enhance our brand and attract sufficient numbers of customers to our stores or sell sufficient quantities of our products; • increased competition from other brands or retailers and our ability to obtain favorable store locations; • our dependency or reliance on third parties for different services, such as customer driving, product sourcing, manufacturing and transportation; • our failure to successfully adapt to consumer shopping preferences and develop and maintain a relevant and reliable omni-channel experience for our customers; • our failure to find employees that reflect our brand image and embody our culture; • our failure to effectively utilize information systems and implement new technologies or misuse or unauthorized use of these systems and technologies; • price volatility and lack of availability of raw materials to manufacture our products and impact on transportation and labor costs; • our sourcing a significant amount of our products from China; • the interruption of the flow of merchandise from international manufacturers, including as a result of the imposition of additional duties, tariffs and other charges on imports and exports; • potential liability arising from payment-related risks, litigation or regulatory proceedings; • changes in laws and regulations, including, among others, privacy, data protection, advertising, consumer protection, environmental and tax regulations; • government or consumer concerns about product safety that could result in regulatory actions, recalls or changes to laws; • our inability to protect our trademarks or other intellectual property rights; • our substantial indebtedness and lease obligations; • our dependency on key members of our executive management team; • the effect of infectious disease outbreaks, including the COVID-19 pandemic, on our operations and financial performance; and • war, terrorism and other catastrophes. 8 Risks Related to Our Business Our business is sensitive to consumer spending and general economic conditions, and an economic slowdown or inflationary pressures could adversely affect our financial performance.
You should read this summary together with the more detailed description of each risk factor contained below: • the adverse impact of rulemaking changes implemented by the Consumer Financial Protection Bureau on our income streams, profitability and results of operations; • the effect of changes in consumer spending and general macroeconomic conditions on our operations and financial performance; • our inability or failure to identify or respond to new trends; • our inability to maintain and enhance our brand and attract sufficient numbers of customers to our stores or sell sufficient quantities of our products; • increased competition from other brands or retailers and our ability to obtain favorable store locations; • our dependency or reliance on third parties for different services, such as customer driving, product sourcing, manufacturing and transportation; • our failure to successfully adapt to consumer shopping preferences and develop and maintain a relevant and reliable omni-channel experience for our customers; • our failure to find employees that reflect our brand image and embody our culture; • our failure to effectively utilize information systems and implement new technologies or misuse or unauthorized use of these systems and technologies; • price volatility and lack of availability of raw materials to manufacture our products and impact on transportation and labor costs; • our sourcing a significant amount of our products from China; • the interruption of the flow of merchandise from international manufacturers, including as a result of the imposition of additional duties, tariffs and other charges on imports and exports; • potential liability arising from payment-related risks, litigation or regulatory proceedings; • changes in laws and regulations, including, among others, privacy, data protection, advertising, consumer protection, environmental and tax regulations; • government or consumer concerns about product safety that could result in regulatory actions, recalls or changes to laws; • our inability to protect our trademarks or other intellectual property rights; • our substantial indebtedness and lease obligations; • our dependency on key members of our executive management team; and • war, terrorism and other catastrophes. 9 Risks Related to Our Business Our business is sensitive to consumer spending and general economic conditions, and an economic slowdown or inflationary pressures could adversely affect our financial performance.
In fiscal year 2022, we sourced approximately 56% of our products from manufacturing partners in China. Additionally, our manufacturing partners outside of China may source their own raw materials from third parties in other countries, including China. With the rapid development of the Chinese economy, the cost of labor has increased and may continue to increase in the future.
In fiscal year 2023, we sourced approximately 53% of our products from manufacturing partners in China. Additionally, our manufacturing partners outside of China may source their own raw materials from third parties in other countries, including China. With the rapid development of the Chinese economy, the cost of labor has increased and may continue to increase in the future.
These factors may include unemployment rates, levels of consumer and student debt, the availability of consumer credit, healthcare costs, reductions in net worth, residential real estate and mortgage markets, taxation, fuel and energy prices, interest rates, inflation, consumer confidence, the value of the United States dollar versus foreign currencies and other macroeconomic factors, such as the economic disruption caused by the COVID-19 pandemic and the Russian invasion of Ukraine.
These factors may include unemployment rates, levels of consumer and student debt, the availability of consumer credit, healthcare costs, reductions in net worth, residential real estate and mortgage markets, taxation, fuel and energy prices, interest rates, inflation, consumer confidence, the value of the United States dollar versus foreign currencies and other macroeconomic factors, such as the economic disruption caused by a global pandemic such as COVID-19.
Our target market of 25 to 40 year old plus-size women has stylistic preferences that cannot be predicted with certainty and are subject to change. Our success depends in large part upon our ability to effectively identify and respond to changing product trends and consumer demands among this segment, and to translate market trends into appropriate, salable product offerings.
Our target market of approximately 27 to 42 year old plus-size women has stylistic preferences that cannot be predicted with certainty and are subject to change. Our success depends in large part upon our ability to effectively identify and respond to changing product trends and consumer demands among this segment, and to translate market trends into appropriate, salable product offerings.
Our success depends in part upon our ability to attract, motivate and retain a sufficient number of employees who understand and appreciate our corporate culture and customers and are able to adequately and effectively represent this culture and establish credibility with our customers. The employee turnover rate in the retail industry is generally high and worsened during the COVID-19 pandemic.
Our success depends in part upon our ability to attract, motivate and retain a sufficient number of employees who understand and appreciate our corporate culture and customers and are able to adequately and effectively represent this culture and establish credibility with our customers. The employee turnover rate in the retail industry is generally high.
See "Note 12—Debt Financing Arrangements." Risks Related to Ownership of Our Common Stock We are a "controlled company" and, as a result, qualify for, and rely on, exemptions from certain corporate governance requirements. In addition, Sycamore’s interests may conflict with our interests and the interests of other stockholders. As of January 28, 2023, Sycamore Partners Management, L.P.
See "Note 12—Debt Financing Arrangements." Risks Related to Ownership of Our Common Stock We are a "controlled company" and, as a result, qualify for, and rely on, exemptions from certain corporate governance requirements. In addition, Sycamore’s interests may conflict with our interests and the interests of other stockholders. As of February 3, 2024, Sycamore Partners Management, L.P.
Other events that could also cause disruptions to our supply chain include: • the imposition of additional trade law provisions or regulations; • the imposition of additional duties, tariffs and other charges on imports and exports, including as a result of the trade war between China and the United States; • quotas imposed by bilateral textile agreements; • foreign currency fluctuations; 15 • natural disasters; • public health issues and epidemic diseases, their effects (including any disruptions they may cause) or the perception of their effects, such as the COVID-19 pandemic; • theft; • restrictions on the transfer of funds; • the financial instability or bankruptcy of manufacturers; and • significant labor disputes, such as dock strikes.
Other events that could also cause disruptions to our supply chain include: • the imposition of additional trade law provisions or regulations; • the imposition of additional duties, tariffs and other charges on imports and exports, including as a result of the trade war between China and the United States; • quotas imposed by bilateral textile agreements; • foreign currency fluctuations; 16 • natural disasters; • public health issues and epidemic diseases, their effects (including any disruptions they may cause) or the perception of their effects; • theft; • terrorist threats such as pirate attacks at sea and other rogue activity; • restrictions on the transfer of funds; • the financial instability or bankruptcy of manufacturers; and • significant labor disputes, such as dock strikes.
For a description of our debt service obligations, including mandatory repayments, under the New Term Loan Credit Agreement, see "Note 12— 21 Debt Financing Arrangements." Our level of indebtedness increases the risk that we may be unable to generate cash sufficient to pay amounts due in respect of our indebtedness.
For a description of our debt service obligations, including mandatory repayments, under the New Term Loan Credit Agreement, see "Note 12—Debt Financing Arrangements." Our level of indebtedness increases the risk that we may be unable to generate cash sufficient to pay amounts due in respect of our indebtedness. We also have, and will continue to have, significant lease obligations.
These provisions could also discourage proxy contests and make it more difficult for our stockholders to elect directors of their choosing and to cause us to take other corporate actions that they desire. We do not expect to pay any cash dividends for the foreseeable future. The continued operation and expansion of our business will require substantial funding.
These provisions could also discourage proxy contests and make it more difficult for our stockholders to elect directors of their choosing and to cause us to take other corporate actions that they desire. We have never declared nor paid any cash dividends. The continued operation and expansion of our business will require substantial funding.
As a public company, we are subject to certain reporting requirements. We have incurred, and will continue to incur, significant costs associated with complying with the requirements of the Exchange Act, Sarbanes-Oxley and any rules promulgated thereunder, as well as the rules of the NYSE.
We have incurred, and will continue to incur, significant costs associated with complying with the requirements of the Exchange Act, Sarbanes-Oxley and any rules promulgated thereunder, as well as the rules of the NYSE.
Our New Term Loan Credit Agreement has a maturity date of June 14, 2028. As of January 28, 2023, we had $329.2 million of outstanding indebtedness, net of unamortized original issue discount ("OID") and financing costs, consisting of loans under the New Term Loan Credit Agreement and borrowings under the Existing ABL, as amended.
Our New Term Loan Credit Agreement has a maturity date of June 14, 2028. As of February 3, 2024, we had $312.0 million of outstanding indebtedness, net of unamortized original issue discount ("OID") and debt financing costs, consisting of loans under the New Term Loan Credit Agreement and borrowings under the Existing ABL, as amended.
For example, failure to comply with the GDPR, depending on the nature and severity of the breach (and with a requirement on regulators to ensure any enforcement action taken is proportionate), could (in the worst case) attract regulatory penalties of up to the greater of (i) €20 million / £17.5 million (as applicable); and (ii) 4% of an entire group's total annual worldwide turnover, as well as the possibility of other enforcement actions (such as suspension of processing activities and audits), and liabilities from third-party claims.
For example, failure to comply with the GDPR, depending on the nature and severity of the breach (and with a requirement on regulators to ensure any enforcement action taken is proportionate), could (in the worst case) attract regulatory penalties of up to the greater of (i) €20 million / £17.5 million (as applicable); and (ii) 4% of an entire group's total annual worldwide turnover, as well as the possibility of other enforcement actions (such as suspension of processing activities and audits), and liabilities from third-party claims. 19 Further, we are subject to the Payment Card Industry, or PCI, Data Security Standard, which is a multifaceted security standard that is designed to protect credit card account data as mandated by payment card industry entities.
We also have, and will continue to have, significant lease obligations. As of January 28, 2023, the estimated annual future occupancy payments for lease terms that include periods covered by options to extend some of our leases was $257.4 million. Our indebtedness and lease obligations could have other important consequences to you and significant effects on our business.
As of February 3, 2024, the estimated annual future occupancy payments for lease terms that include periods covered by options to extend some of our leases was $243.1 million. Our indebtedness and lease obligations could have other important consequences to you and significant effects on our business.
To the extent the COVID-19 pandemic, or any other future pandemic, adversely affects our business, financial condition, results of operations, cash flows and prospects, it may also have the effect of heightening many of the other risks described in this "Risk Factors" section, such as those relating to our level of indebtedness, our need to generate sufficient cash flows to service our indebtedness and our ability to comply with the covenants contained in the agreements that govern our indebtedness.
To the extent the COVID-19 pandemic, or any other future pandemic, adversely affects our business, financial condition, results of operations, cash flows and prospects, it may also have the effect of heightening many of the other risks described in this "Risk Factors" section, such as those relating to our level of indebtedness, our need to generate sufficient cash flows to service our indebtedness and our ability to comply with the covenants contained in the agreements that govern our indebtedness. 27 We depend on key members of our executive management team and may not be able to retain or replace these individuals or recruit additional personnel, which could harm our business.
We may also be contractually required to indemnify and hold harmless third parties from the costs or consequences of non-compliance with any laws, regulations or other legal obligations relating to privacy or consumer protection or any inadvertent or unauthorized use or disclosure of data that we store or handle as part of operating our business. 17 Federal and state governmental authorities continue to evaluate the privacy implications inherent in the use of third-party "cookie" and other methods of online tracking for behavioral advertising and other purposes.
We may also be contractually required to indemnify and hold harmless third parties from the costs or consequences of non-compliance with any laws, regulations or other legal obligations relating to privacy or consumer protection or any inadvertent or unauthorized use or disclosure of data that we store or handle as part of operating our business.
General Risk Factors Our operations and financial performance have been affected by, and may continue to be affected by, infectious disease outbreaks, such as the COVID-19 pandemic. We could be adversely affected by infectious disease outbreaks, such as COVID-19.
General Risk Factors Our operations and financial performance have been affected by, and may continue to be affected by, infectious disease outbreaks.
Despite our compliance efforts, we may become subject to claims that we have violated the PCI Data Security Standard, based on past, present, and future business practices, which could have an adverse impact on our business and reputation. 18 Each of these privacy, security, and data protection laws and regulations, and any other such changes or new laws or regulations, could impose significant limitations, require changes to our business, or restrict our use or storage of personal information, which may increase our compliance expenses and make our business more costly or less efficient to conduct.
Each of these privacy, security, and data protection laws and regulations, and any other such changes or new laws or regulations, could impose significant limitations, require changes to our business, or restrict our use or storage of personal information, which may increase our compliance expenses and make our business more costly or less efficient to conduct.
If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, demand for our stock could decrease, which could cause our stock price and trading volume to decline. 26 The requirements of being a public company may strain our resources, divert management's attention and affect our ability to attract and retain qualified board members.
If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, demand for our stock could decrease, which could cause our stock price and trading volume to decline.
The spread of COVID-19 disrupted, and may continue to disrupt, local, regional and global economies and businesses in the countries in which we operate, as well as adversely affected workforces, customers, consumer sentiment, economies and financial markets, and impacted our financial results.
We could be adversely affected by infectious disease outbreaks which could disrupt, local, regional and global economies and businesses in the countries in which we operate, and adversely affect workforces, customers, consumer sentiment, economies and financial markets, and impact our financial results.
We are subject to payment-related risks that could increase our operating costs, expose us to fraud or theft, subject us to potential liability and potentially disrupt our business. We accept payments using a variety of methods, including cash, checks, credit and debit cards and gift cards, and we may offer new payment options over time.
We accept payments using a variety of methods, including cash, checks, credit and debit cards and gift cards, and we may offer new payment options over time.
We depend on key members of our executive management team and may not be able to retain or replace these individuals or recruit additional personnel, which could harm our business. We depend on the leadership and experience of key members of our executive management team.
We depend on the leadership and experience of key members of our executive management team.
Removed
Additionally, as a result of state-sponsored cyber threats including those stemming from the Russian invasion of Ukraine, we 13 may face increased cybersecurity risks as companies in the United States and its allied countries have become targets of malicious cyber activity.
Added
Federal and state governmental authorities continue to evaluate the privacy implications inherent in the use of third-party "cookie" and other methods of online tracking for behavioral advertising and other purposes.
Removed
Further, we are subject to the Payment Card Industry, or PCI, Data Security Standard, which is a multifaceted security standard that is designed to protect credit card account data as mandated by payment card industry entities. We rely on vendors to handle PCI matters and to ensure PCI compliance.
Added
We rely on vendors to handle PCI matters and to ensure PCI compliance. Despite our compliance efforts, we may become subject to claims that we have violated the PCI Data Security Standard, based on past, present, and future business practices, which could have an adverse impact on our business and reputation.
Removed
Accordingly, we do not anticipate that we will pay any cash dividends on shares of our common stock for the foreseeable future.
Added
Rulemaking changes and regulatory initiatives implemented by the Consumer Financial Protection Bureau (the “CFPB”) may result in adverse effects to our income streams, profitability and results of operations.
Added
Our business, results of operations or competitive position may be adversely affected by new regulations affecting certain of our major commercial partners, including our third-party financing company that solely owns the accounts issued under our PLCC program.
Added
In March 2024, the CFPB issued a final rule to amend Regulation Z to mandate significant decreases in credit card late fees and eliminate annual inflation adjustments for late fee safe harbor amounts.
Added
If the rule becomes effective, it could result in a reduction of late fees and other income streams to our third-party financing company that may alter the profitability of our agreements with them.
Added
Such changes could also affect our ability or willingness to provide certain products or services, necessitate changes to our business practices or have an adverse effect on our results of operations. We are subject to payment-related risks that could increase our operating costs, expose us to fraud or theft, subject us to potential liability and potentially disrupt our business.
Added
The requirements of being a public company may strain our resources, divert management's attention and affect our ability to attract and retain qualified Board members. As a public company, we are subject to certain reporting requirements.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeState Number of Stores AK 2 ME 2 SC 6 AL 7 MI 22 SD 2 AR 6 MN 14 TN 15 AZ 15 MO 12 TX 57 CA 59 MS 5 UT 7 CO 12 MT 2 VA 15 CT 8 NC 17 VT 1 DE 2 ND 3 WA 16 FL 36 NE 3 WI 15 GA 19 NH 6 WV 5 HI 3 NJ 18 WY 1 IA 8 NM 5 ID 3 NV 7 Number of Stores IL 23 NY 19 Canada IN 17 OH 28 CAN-AB 4 KS 3 OK 7 CAN-BC 2 KY 9 OR 8 CAN-MB 1 LA 10 PA 25 CAN-NB 1 MA 10 PR 2 CAN-ON 18 MD 12 RI 2 CAN-WN 2
Biggest changeState Number of Stores AK 2 ME 2 SC 5 AL 7 MI 20 SD 2 AR 6 MN 14 TN 13 AZ 15 MO 12 TX 59 CA 63 MS 5 UT 6 CO 12 MT 2 VA 18 CT 8 NC 17 VT 1 DE 3 ND 3 WA 16 FL 38 NE 3 WI 15 GA 19 NH 6 WV 5 HI 3 NJ 16 WY 1 IA 8 NM 5 ID 3 NV 8 Number of Stores IL 21 NY 21 Canada IN 16 OH 27 CAN-AB 8 KS 3 OK 6 CAN-BC 3 KY 9 OR 8 CAN-HAL 1 LA 10 PA 24 CAN-MB 2 MA 10 PR 2 CAN-NB 2 MD 13 RI 2 CAN-NL 1 CAN-NS 1 CAN-ON 21 CAN-SK 2 CAN-WN 1
All of our stores are leased from third parties and we expect new leases to have initial terms of six years based on current discussions. A majority of our store leases, including all new leases signed since fiscal year 2013 include performance-based early termination provisions or "kickout" clauses.
All of our stores are leased from third parties and we expect new leases to have initial terms of eight years based on current discussions. A majority of our store leases, including all new leases signed since fiscal year 2013 include performance-based early termination provisions or "kickout" clauses.
These clauses provide us the contractual flexibility to exit a store or renegotiate rent in the event a store’s performance deteriorates. Approximately 70% of current leases will have a termination or kickout within 3 years of the end of fiscal year 2022, providing us with significant flexibility.
These clauses provide us the contractual flexibility to exit a store or renegotiate rent in the event a store’s performance deteriorates. Approximately 90% of current leases will have a termination or kickout within 3 years of the end of fiscal year 2022, providing us with significant flexibility.
The leases also generally require us to pay real estate taxes, insurance and certain common area costs. We renegotiate with landlords to obtain more favorable terms as opportunities arise. 27 The table below sets forth the number of Torrid stores by U.S. state or territory or Canadian province that we operated as of January 28, 2023. U.S.
The leases also generally require us to pay real estate taxes, insurance and certain common area costs. We renegotiate with landlords to obtain more favorable terms as opportunities arise. 30 The table below sets forth the number of Torrid stores by U.S. state or territory or Canadian province that we operated as of February 3, 2024. U.S.
Item 2. Properties We are headquartered in City of Industry, California. Our principal executive offices are leased under a lease agreement expiring in 2024, with options to renew thereafter. We do not own any real property. As of January 28, 2023, we operated 639 stores in 50 U.S. states, Puerto Rico and Canada.
Item 2. Properties We are headquartered in City of Industry, California. Our principal executive offices are leased under a lease agreement expiring in 2027, with an option to renew thereafter. We do not own any real property. As of February 3, 2024, we operated 655 stores in 50 U.S. states, Puerto Rico and Canada.
As of January 28, 2023, 56% of our total leases were on variable rent structures, providing additional flexibility to our store fleet going forward. A number of our leases have built-in options to extend our tenancy for periods of up to five years.
As of February 3, 2024, 17% of our total leases were on variable rent structures, providing additional flexibility to our store fleet going forward. A number of our leases have built-in options to extend our tenancy for periods of up to five years.
The average remaining lease term was 3.4 years as of January 28, 2023, before the assumed benefit of kickout clauses. Assuming termination of each lease at the earlier of its first available kickout date or full term, the average remaining lease term was 2.0 years as of January 28, 2023.
The average remaining lease term was 3.1 years as of February 3, 2024, before the assumed benefit of kickout clauses. Assuming termination of each lease at the earlier of its first available kickout date or full term, the average remaining lease term was 2.1 years as of February 3, 2024.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeWe establish reserves for specific legal matters when we determine that the likelihood of an unfavorable outcome is probable and the loss is reasonably estimable. Item 4. Mine Safety Disclosures Not applicable. 28 Part II
Biggest changeWe establish reserves for specific legal matters when we determine that the likelihood of an unfavorable outcome is probable and the loss is reasonably estimable. Item 4. Mine Safety Disclosures Not applicable. 31 Part II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeWe currently do not expect to pay any dividends on our common stock in the foreseeable future. Any determination to pay dividends in the future will be at the discretion of our board of directors and will depend upon results of operations, financial condition, contractual restrictions, restrictions imposed by applicable law and other factors our board of directors deems relevant.
Biggest changeAny determination to pay dividends in the future will be at the discretion of our Board and will depend upon results of operations, financial condition, contractual restrictions, restrictions imposed by applicable law and other factors our Board deems relevant.
Share Repurchases On December 6, 2021, our board of directors authorized a share repurchase program under which we may purchase up to $100.0 million of our outstanding common stock. Repurchases may be made from time to time, depending upon a variety of factors, including share price, corporate and regulatory requirements, and other market and business conditions, as determined by us.
Share Repurchases On December 6, 2021, our Board authorized a share repurchase program under which we may purchase up to $100.0 million of our outstanding common stock. Repurchases may be made from time to time, depending upon a variety of factors, including share price, corporate and regulatory requirements, and other market and business conditions, as determined by us.
Additionally, our operating 29 subsidiaries are currently restricted from paying cash dividends by the agreements governing their indebtedness, and we expect these restrictions to continue in the future. We are not obligated to pay dividends on our common stock. Recent Sales of Unregistered Securities and Use of Proceeds None.
Additionally, our operating subsidiaries are currently restricted from paying cash dividends by the agreements governing their indebtedness, and we expect these restrictions to continue in the future. We are not obligated to pay dividends on our common stock. 32 Recent Sales of Unregistered Securities and Use of Proceeds None.
The graph assumes $100 was invested at the market close on July 1, 2021, which was the first day our common stock began trading and its relative performance is tracked through January 27, 2023. Data for the S&P 500 Index and the S&P Retail Select Industry Index assume reinvestment of dividends, if any.
The graph assumes $100 was invested at the market close on July 1, 2021, which was the first day our common stock began trading and its relative performance is tracked through February 2, 2024. Data for the S&P 500 Index and the S&P Retail Select Industry Index assume reinvestment of dividends, if any.
The number of holders of record of our common stock as of March 22, 2023 was 35. Stock Performance Graph This performance graph shall not be deemed "filed" with the SEC for purposes of Section 18 of the Exchange Act or incorporated by reference into any filing of Torrid Holdings Inc. under the Securities Act or the Exchange Act.
The number of holders of record of our common stock as of March 28, 2024 was 37 . Stock Performance Graph This performance graph shall not be deemed "filed" with the SEC for purposes of Section 18 of the Exchange Act or incorporated by reference into any filing of Torrid Holdings Inc. under the Securities Act or the Exchange Act.
During the three months ended January 28, 2023, we did not repurchase any shares of our common stock. As of January 28, 2023, we had approximately $44.9 million remaining under the repurchase program. Item 6. [Reserved] 30
During the three months ended February 3, 2024, we did not repurchase any shares of our common stock. As of February 3, 2024, we had approximately $44.9 million remaining under the repurchase program. Item 6. [Reserved] 33
(in dollars) July 1, 2021 January 28, 2023 Torrid Holdings Inc. $ 100.00 $ 15.36 S&P 500 $ 100.00 $ 94.23 S&P 500 Retail Select Industry $ 100.00 $ 71.18 Dividends We have never declared nor paid any cash dividends on our common stock.
(in dollars) July 1, 2021 February 3, 2024 Torrid Holdings Inc. $ 100.00 $ 20.58 S&P 500 $ 100.00 $ 114.78 S&P 500 Retail Select Industry $ 100.00 $ 73.12 Dividends We have never declared nor paid any cash dividends on our common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe increase in net cash used in financing activities is primarily as a result of the following activities during fiscal year 2021: (i) $300.0 million distribution to Torrid Holding LLC, (ii) principal payments on the Amended Term Loan Credit agreement of $210.7 million, (iii) $2.1 million prepayment penalty related to the Amended Term Loan Credit Agreement, (iv) tax payments of $2.1 million made on behalf of our employees related to the vesting of restricted stock awards and RSUs, (v) $0.7 million of deferred financing costs related to the 3rd Amendment to the Existing ABL Facility, as amended and (vi) $23.4 million for repurchases and retirement of common stock, partially offset by proceeds from the New Term Loan Credit Agreement of $340.5 million, net of OID and deferred financing costs and proceeds of $0.6 million for issuances under share-based compensation plans. 40 Debt Financing Arrangements For the stated periods, our debt financing arrangements consisted of the following (in thousands): January 28, 2023 January 29, 2022 Existing ABL Facility, as amended $ 8,380 $ — Term loan New Term Loan Credit Agreement 328,125 350,000 Less: current portion of unamortized original issue discount and debt financing costs (1,356) (1,356) Less: noncurrent portion of unamortized original issue discount and debt financing costs (5,928) (7,284) Total term loan outstanding, net of unamortized original issue discount and debt financing costs 320,841 341,360 Less: current portion of term loan, net of unamortized original issue discount and debt financing costs (16,144) (20,519) Total term loan, net of current portion and unamortized original issue discount and debt financing costs $ 304,697 $ 320,841 New Term Loan Credit Agreement On June 14, 2021, we entered into a term loan credit agreement ("New Term Loan Credit Agreement") among Bank of America, N.A., as agent, and the lenders party thereto.
Biggest changeDebt Financing Arrangements For the stated periods, our debt financing arrangements consisted of the following (in thousands): February 3, 2024 January 28, 2023 Existing ABL Facility, as amended $ 7,270 $ 8,380 Term loan New Term Loan Credit Agreement 310,625 328,125 Less: current portion of unamortized original issue discount and debt financing costs (1,356) (1,356) Less: noncurrent portion of unamortized original issue discount and debt financing costs (4,572) (5,928) Total term loan outstanding, net of unamortized original issue discount and debt financing costs 304,697 320,841 Less: current portion of term loan, net of unamortized original issue discount and debt financing costs (16,144) (16,144) Total term loan, net of current portion and unamortized original issue discount and debt financing costs $ 288,553 $ 304,697 New Term Loan Credit Agreement On June 14, 2021, we entered into a term loan credit agreement (the "New Term Loan Credit Agreement") among Bank of America, N.A., as agent, and the lenders party thereto.
We define an active customer as a distinct, identifiable customer who has completed at least one purchase transaction either in-store or online in the preceding four quarters. We are able to identify the vast majority of our customers primarily through our robust loyalty program, which gives us access to extensive customer and sales data.
Active Customers. We define an active customer as a distinct, identifiable customer who has completed at least one purchase transaction either in-store or online in the preceding four quarters. We are able to identify the vast majority of our customers primarily through our robust loyalty program, which gives us access to extensive customer and sales data.
Net Sales per Active Customer. We define net sales per active customer for any given period as the net sales in the preceding four quarters, divided by the total number of active customers at the end of that period.
We define net sales per active customer for any given period as the net sales in the preceding four quarters, divided by the total number of active customers at the end of that period.
The primary drivers of our merchandise costs include the raw materials, labor in the countries where we source our merchandise, customs duties, and logistics costs. Selling, General and Administrative Expenses. Selling, general and administrative expenses include all operating costs not included in cost of goods sold or marketing expenses.
The primary drivers of our merchandise costs include the raw materials, labor in the countries where we source our merchandise, customs duties, and logistics costs. Selling, General and Administrative Expenses. Selling, general and administrative expenses include all operating costs not included in cost of goods sold or marketing expenses. Marketing Expenses.
Interest expense consists primarily of interest expense and other fees associated with our Existing ABL Facility, as amended and New Term Loan Credit Agreement. Provision for Income Taxes.
Interest expense consists primarily of interest expense and other fees associated with our Existing ABL Facility, as amended, and New Term Loan Credit Agreement, as amended. Provision for Income Taxes.
Active customers increased 0.1 million, or 2.1%, to 3.9 million at the end of fiscal year 2022, from 3.8 million at the end of fiscal year 2021. Net sales per active customer decreased by $10 from $340 in fiscal year 2021 to $330 in fiscal year 2022. Comparable sales decreased 3.0%.
Active customers increased by 0.1 million, or 2.1%, to 3.9 million at the end of fiscal year 2022, from 3.8 million at the end of fiscal year 2021. Net sales per active customer decreased by $10 to $330 in fiscal year 2022, from $340 in fiscal year 2021. Comparable sales decreased 3.0%.
This decrease was driven by decreased share-based compensation expense and performance bonuses, partially offset by increases in store and e-Commerce payroll costs, primarily due to inflationary pressures, and other store operating costs. Marketing Expenses Marketing expenses for fiscal year 2022 increased $7.3 million, or 13.8%, to $59.9 million, from $52.7 million for fiscal year 2021.
This decrease was driven by decreased share-based compensation expense and performance bonuses, partially offset by increases in store and e-Commerce payroll costs, primarily due to inflationary pressures, and other store operating costs. Marketing Expenses Marketing expenses for fiscal year 2022 increased by $7.3 million, or 13.8%, to $59.9 million, from $52.7 million for fiscal year 2021.
The reclassification is applied retrospectively to all prior periods presented. See "Note 2–Summary of Significant Accounting Policies" for further information.
The reclassification is applied retrospectively to all prior periods presented. See "Note 2–Summary of Significant Accounting Policies" for further information.
The decrease in cash provided by operating activities during fiscal year 2022 was primarily as a result of a decrease in share-based compensation expense added back to cash provided by operating activities as a noncash adjustment and a decrease in accrued and other current liabilities, partially offset by the following activities during fiscal year 2022: (i) an 39 increase in net income, (ii) a decrease in prepaid income taxes and (iii) a decrease in inventory purchases.
The decrease in cash provided by operating activities during fiscal year 2022 was primarily as a result of a decrease in share-based compensation expense added back to cash provided by operating activities as a noncash adjustment and a decrease in accrued and other current liabilities, partially offset by the following activities during fiscal year 2022: (i) an increase in net income, (ii) a decrease in prepaid income taxes and (iii) a decrease in inventory purchases.
We recognize amortization of financing costs and interest payments for the revolving credit facilities in interest expense in our consolidated statements of operations and comprehensive income (loss). Share Repurchases On December 6, 2021, our board of directors authorized a share repurchase program under which we may purchase up to $100.0 million of our outstanding common stock.
We recognize amortization of financing costs and interest payments for the revolving credit facilities in interest expense in our consolidated statements of operations and comprehensive income (loss). Share Repurchases On December 6, 2021, our Board authorized a share repurchase program under which we may purchase up to $100.0 million of our outstanding common stock.
Our historical gift card redemption experience has not varied significantly from amounts historically recorded as breakage and we believe our assumptions are reasonable. While customer redemption patterns result in estimated gift card breakage, changes in 45 our customers’ behavior could impact the amount that ultimately is unused and could affect the amount recognized as a component of net sales.
Our historical gift card redemption experience has not varied significantly from amounts historically recorded as breakage and we believe our assumptions are reasonable. While customer redemption patterns result in estimated gift card breakage, changes in our customers’ behavior could impact the amount that ultimately is unused and could affect the amount recognized as a component of net sales.
Based on these criteria, we have operating lease agreements for our retail stores, distribution center and headquarter office space; and vehicles and equipment; under primarily non-cancelable leases with terms ranging from approximately two to seventeen years. Certain of our operating lease agreements contain one or more options to extend the leases at our sole discretion.
Based on these criteria, we have operating lease agreements for our retail stores, distribution center and headquarter office space; and vehicles and equipment; under primarily non-cancelable leases with terms ranging from approximately one to seventeen years. Certain of our operating lease agreements contain one or more options to extend the leases at our sole discretion.
Management evaluates its policies and assumptions on an ongoing basis. Our significant accounting estimates related to these accounts in the preparation of our consolidated financial statements are described below (see Note 2 to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information regarding our critical accounting policies).
Management evaluates its policies and assumptions on an ongoing basis. Our significant accounting estimates related to these accounts in the preparation of our consolidated financial statements are 47 described below (see Note 2 to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information regarding our critical accounting policies).
The decrease in share-based compensation expense during fiscal year 2022 was due to an increase in the Torrid Holding LLC equity value during fiscal year 2021. Selling, general and administrative expenses as a percentage of net sales decreased 10.7% to 23.1% in fiscal year 2022 from 33.8% in fiscal year 2021.
The decrease in share-based compensation expense during fiscal year 2022 was due to an increase in the Torrid Holding LLC equity value during fiscal year 2021. Selling, general and administrative expenses as a percentage of net sales decreased by 10.7% to 23.1% in fiscal year 2022 from 33.8% in fiscal year 2021.
Accordingly, estimates of future sales prices requires management judgment based on historical experience, assessment of current conditions and assumptions about future transactions. In addition, we conduct physical inventory counts to determine and record actual shrinkage. Estimates for shrinkage are recorded between physical counts, based on actual shrinkage experience. Actual shrinkage can vary from these estimates.
Accordingly, estimates of future sales prices requires management judgment based on historical experience, assessment of current conditions and assumptions about future transactions. In addition, we conduct physical inventory counts to determine and record actual shrinkage. Estimates for shrinkage are recorded between physical store counts, based on actual shrinkage experience. Actual shrinkage can vary from these estimates.
We believe that cash generated from operations and the availability of borrowings under our Existing ABL Facility, as amended, or other financing arrangements will be sufficient to meet working capital requirements and anticipated capital expenditures for at least the next 12 months.
We believe that cash generated from operations and the availability of borrowings under our Existing ABL Facility, as amended, or 41 other financing arrangements will be sufficient to meet working capital requirements and anticipated capital expenditures for at least the next 12 months.
We make certain assumptions regarding net realizable value in order to assess whether our inventory is recorded properly at the lower of cost or net realizable value. These assumptions are based on both historical average selling price experience, current selling price information and estimated future selling price information.
We make certain assumptions regarding net realizable value in order to assess whether our inventory is recorded properly at the lower of cost or net realizable value. These assumptions are based on historical average selling price experience, current selling price information and estimated future selling price information.
Based on these aforementioned features and characteristics, we determined that the incentive units were in-substance liabilities accounted for as liability instruments in accordance with ASC 710, Compensatio n. The incentive units were remeasured based on the fair value of the awards at the end of each reporting period.
Based on these aforementioned features and characteristics, we determined that the incentive units were in-substance liabilities accounted for as liability instruments in accordance with ASC 710, Compensatio n. The incentive units were remeasured based 50 on the fair value of the awards at the end of each reporting period.
Components of Our Results of Operations In the fourth quarter of fiscal year 2022, we made a voluntary change in our accounting policy regarding the classification of PLCC Funds (as defined in “Note 2–Summary of Significant Accounting Policies”) we receive pursuant to the Credit Card 33 Agreement (as defined in “Note 2–Summary of Significant Accounting Policies”).
Components of Our Results of Operations In the fourth quarter of fiscal year 2022, we made a voluntary change in our accounting policy regarding the classification of PLCC Funds (as defined in “Note 2–Summary of Significant Accounting Policies”) we receive pursuant to the Credit Card Agreement (as defined in “Note 2–Summary of Significant Accounting Policies”).
The incentive units did not have any voting 47 or distribution rights and contained a repurchase feature, whereby upon termination, Torrid Holding LLC had the right to purchase from former employees any or all of the vested incentive units at fair value.
The incentive units did not have any voting or distribution rights and contained a repurchase feature, whereby upon termination, Torrid Holding LLC had the right to purchase from former employees any or all of the vested incentive units at fair value.
Borrowings under the Existing ABL Facility, as amended, bear interest at an annual rate equal to, at our option, either (a) a base rate determined by reference to the highest of (1) the prime rate of Bank of America, N.A., (2) the federal funds effective rate plus 0.50% and (3) a LIBOR rate for an interest period of one month adjusted for certain costs, plus 1.00%, in each case, plus an applicable margin that ranges from 0.25% to 0.75% based on average daily availability; or (b) at a LIBOR rate for the interest period relevant to such borrowing adjusted for certain costs ("Adjusted LIBOR"), in each case plus an applicable margin that ranges from 1.25% to 1.75%, based on average daily availability.
Borrowings under the Existing ABL Facility, as amended, bear interest at an annual rate equal to, at our option, either (a) a base rate determined by reference to the highest of (1) the prime rate of Bank of America, N.A., (2) the federal funds effective rate plus 0.50% and (3) a SOFR rate for an interest period of one month adjusted for certain costs, plus 1.00%, in each case, plus an applicable margin that ranges from 0.25% to 0.75% based on average daily availability; or (b) at a SOFR rate for the interest period relevant to such borrowing adjusted for certain costs ("Adjusted SOFR"), in each case plus an applicable margin that ranges from 1.25% to 1.75%, based on average daily availability.
In addition, although the fair value of the incentive units was determined through an option pricing methodology that utilized the possible equity values of Torrid Holding LLC, the settlement amounts and method of settlement of the incentive units were at the discretion of our board of directors.
In addition, although the fair value of the incentive units was determined through an option pricing methodology that utilized the possible equity values of Torrid Holding LLC, the settlement amounts and method of settlement of the incentive units were at the discretion of our Board.
Loans made pursuant to the New Term Loan Credit Agreement bear interest at an annual rate equal to, at our option, either (a) a base rate determined by reference to the highest of (1) the prime rate quoted by The Wall Street Journal, (2) the federal funds effective rate plus 0.50% and (3) a LIBOR rate for an interest period of one month, plus 1.00% (in each case, subject to a floor of 1.75%); or (b) at a LIBOR rate for the interest period relevant to such borrowing (subject to a floor of 0.75%), in each case plus an applicable margin of 5.50% for LIBOR borrowings and 4.50% for base rate borrowings.
Loans made pursuant to the New Term Loan Credit Agreement bear interest at an annual rate equal to, at our option, either (a) a base rate determined by reference to the highest of (1) the prime rate quoted by The Wall Street Journal, (2) the federal funds effective rate plus 0.50% and (3) a SOFR rate for an interest period of one month, plus 1.00% (in each case, subject to a floor of 1.75%); or (b) at a SOFR rate for the interest period relevant to such borrowing (subject to a floor of 0.75%), in each case plus an applicable margin of 5.50% for SOFR borrowings and 4.50% for base rate borrowings.
Historically, we recorded PLCC Funds (as defined in “Note 2–Summary of Significant Accounting Policies”) as a reduction to selling, general and administrative expenses in the consolidated statements of operations and comprehensive income (loss).
Historically, we recorded PLCC Funds (as 36 defined in “Note 2–Summary of Significant Accounting Policies”) as a reduction to selling, general and administrative expenses in the consolidated statements of operations and comprehensive income (loss).
Senior Secured Asset-Based Revolving Credit Facility In May 2015, we entered into a credit agreement for a senior secured asset-based revolving credit facility ("Original ABL Facility") of $50.0 million (subject to a borrowing base), with Bank of America, N.A.
Senior Secured Asset-Based Revolving Credit Facility In May 2015, we entered into a credit agreement for a senior secured asset-based revolving credit facility (the "Original ABL Facility") of $50.0 million (subject to a borrowing base), with Bank of America, N.A.
The IBR is the rate of interest that we would have to pay to borrow 46 on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.
The IBR is the rate of interest that we would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.
Share-Based Compensation On June 22, 2021, in connection with our IPO, our board of directors adopted the Torrid Holdings Inc. 2021 Long-Term Incentive Plan (the "2021 LTIP"), for employees, consultants and directors.
Share-Based Compensation On June 22, 2021, in connection with our IPO, our Board adopted the Torrid Holdings Inc. 2021 Long-Term Incentive Plan (the "2021 LTIP"), for employees, consultants and directors.
We elected this option; accordingly, we did not remeasure the lease liabilities or record a change to the ROU assets for any concessions we received for our retail store leases.
We elected this option; accordingly, we did not remeasure the lease liabilities or 49 record a change to the ROU assets for any concessions we received for our retail store leases.
Selling, General and Administrative Expenses Selling, general and administrative expenses for fiscal year 2022 decreased $141.4 million, or 32.2%, to $298.0 million, from $439.4 million for fiscal year 2021.
Selling, General and Administrative Expenses Selling, general and administrative expenses for fiscal year 2022 decreased by $141.4 million, or 32.2%, to $298.0 million, from $439.4 million for fiscal year 2021.
The lenders under this facility 42 are not under any obligation to provide any such additional commitments, and any increase in commitments is subject to customary conditions precedent.
The lenders under this facility are not under any obligation to provide any such additional commitments, and any increase in commitments is subject to customary conditions precedent.
On October 23, 2017, we entered into an amended and restated credit agreement ("Existing ABL Facility"), which amended our Original ABL Facility.
On October 23, 2017, we entered into an amended and restated credit agreement (the "Existing ABL Facility"), which amended our Original ABL Facility.
At the end of fiscal year 2022, we were compliant with our debt covenants under the Existing ABL Facility, as amended. The Existing ABL Facility, as amended, specifically restricts dividends and distributions, aside from amounts to cover ordinary operating expenses and taxes, between our subsidiaries and to us.
At the end of fiscal year 2023, we were compliant with our debt covenants under the Existing ABL Facility, as amended. The Existing ABL Facility, as amended, specifically restricts dividends and distributions, aside from amounts to cover ordinary operating expenses and taxes, between our subsidiaries and to us.
We choose not to separate nonlease components (such as common area maintenance charges and heating, ventilation and air conditioning charges), from lease components (such as fixed minimum rent payments), and instead account for each separate lease component and the nonlease components associated with that lease component as a single lease component.
We choose not to separate non-lease components (such as common area maintenance charges and heating, ventilation and air conditioning charges), from lease components (such as fixed minimum rent payments), and instead account for each separate lease component and the non-lease components associated with that lease component as a single lease component.
If we elect the LIBOR rate, interest is due and payable on the last day of each interest period, unless an interest period exceeds three months, then the respective dates that fall every three months after the beginning of the interest period shall also be interest payment dates.
If we elect the SOFR rate, interest is due and payable on the last day of each interest period, unless an interest period exceeds three months, then the respective dates that fall every three months after the beginning of the interest period shall also be interest payment dates.
If we elect the LIBOR rate, interest is due and payable on the last day of each interest period, unless an interest period exceeds three months, then the respective dates that fall every three months after the beginning of the interest period shall also be interest payment dates.
If we elect the SOFR rate, interest is due and payable on the last day of each interest period, unless an interest period exceeds three months, then the respective dates that fall every three months after the beginning of the interest period shall also be interest payment dates.
We may voluntarily reduce the unused portion of the commitment amount and repay outstanding loans at any time. Prepayment of the loans may be made without premium or penalty other than customary “breakage” costs with respect to LIBOR loans.
We may voluntarily reduce the unused portion of the commitment amount and repay outstanding loans at any time. Prepayment of the loans may be made without premium or penalty other than customary “breakage” costs with respect to SOFR loans.
Comparable sales allow us to evaluate how our unified commerce business is performing exclusive of the effects of new store openings. We apply current year foreign currency exchange rates to both current year and prior year comparable sales to remove the impact of foreign currency fluctuation and achieve a consistent basis for comparison.
We apply current year foreign currency exchange rates to both current year and prior year comparable sales to remove the impact of foreign currency fluctuation and achieve a consistent basis for comparison. Comparable sales allow us to evaluate how our unified commerce business is performing exclusive of the effects of non-comparable sales and new store openings. Number of Stores .
If we opt for the base rate (including a Swing Line Loan), interest is due and payable on the first business day of each month and on the maturity date. In addition to paying interest on outstanding principal under the Existing ABL Facility, as amended, we are required to pay a commitment fee in respect of unutilized commitments.
If we elect the base rate (including a Swing Line Loan), interest is due and payable on the first business day of each month and on the maturity date. 45 In addition to paying interest on outstanding principal under the Existing ABL Facility, as amended, we are required to pay a commitment fee in respect of unutilized commitments.
During fiscal years 2022, 2021 and 2020, we amortized financing costs of $0.2 million, $0.1 million and $0.1 million, respectively. During fiscal years 2022, 2021 and 2020, interest payments were $1.8 million, $0.6 million and $0.6 million, respectively.
During fiscal years 2023, 2022 and 2021, we amortized financing costs of $0.2 million, $0.2 million and $0.1 million, respectively. During fiscal years 2023, 2022 and 2021, interest payments were $1.6 million, $1.8 million and $0.6 million, respectively.
The increase was primarily due an increase in the variable interest rate associated with the New Term Loan Credit Agreement and an increase in borrowings on the Existing ABL Facility, as amended, during fiscal year 2022 compared to fiscal year 2021, partially offset by the absence of the write-off of $5.2 million of unamortized deferred financing costs and OID when we repaid the amended term loan credit agreement ("Amended Term Loan Credit Agreement"), and the absence of the $2.1 million prepayment penalty.
The increase was primarily due an increase in the variable interest rate associated with the 1st Amendment to the New Term Loan Credit Agreement, dated as of May 24, 2023, and an increase in borrowings on the Existing ABL Facility, as amended, during fiscal year 2022 compared to fiscal year 2021, partially offset by the absence of the write-off of $5.2 million of unamortized deferred financing costs and OID when we repaid the amended term loan credit agreement ("Amended Term Loan Credit Agreement"), and the absence of the $2.1 million prepayment penalty.
In order to realize such growth, we anticipate that our operating expenses will grow as we continue to increase our spending on advertising and marketing and hire additional personnel primarily in marketing, product design and development, merchandising, technology, operations, customer service and general and administrative functions.
We anticipate that our operating expenses will grow as we continue to increase our spending on advertising and marketing and hire additional personnel primarily in marketing, product design and development, merchandising, technology, operations, customer service and general and administrative functions.
(D) Other expenses include IPO-related transaction fees, severance costs for certain key management positions 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.
(D) Other expenses include severance costs for certain key management positions, certain litigation fees, 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.
We have not included any income tax audit settlement payments due in less than one year in the contractual obligations table above as we do not have any open income tax audits as of January 28, 2023 or any material gross unrecognized tax benefits for which the statutes of limitations are expected to expire in fiscal year 2023.
We have not included any income tax audit settlement payments due in less than one year in the contractual obligations table above as we do not have any open income tax audits as of February 3, 2024 or any material gross unrecognized tax benefits for which the statutes of limitations are expected to expire in fiscal year 2024.
At the end of fiscal year 2022, we were compliant with our financial covenants under the New Term Loan Credit Agreement. At the end of fiscal year 2022, the fair value of the New Term Loan Credit Agreement was approximately $267.4 million.
At the end of fiscal year 2023, we were compliant with our financial covenants under the New Term Loan Credit Agreement. At the end of fiscal year 2023, the fair value of the New Term Loan Credit Agreement was approximately $259.4 million.
If we make Optional Prepayments before June 14, 2023, we will be subject to penalties ranging from 1.00% to 2.00% of the aggregate principal amount. All of Torrid LLC’s existing domestic subsidiaries and Torrid Intermediate LLC unconditionally guarantee all obligations under the New Term Loan Credit Agreement.
If we made Optional Prepayments before June 14, 2023, we would have been subject to penalties ranging from 1.00% to 2.00% of the aggregate principal amount. All of Torrid LLC’s existing domestic subsidiaries and Torrid Intermediate LLC unconditionally guarantee all obligations under the New Term Loan Credit Agreement.
(2) Assumes an interest rate of approximately 10% per annum, consistent with the interest rate at January 28, 2023. (3) Amounts listed above do not include cash obligations related to relocation expenses in connection with the involuntary separation of certain employees due to the uncertainty regarding the amount of such expenses.
(2) Assumes an interest rate of approximately 11% per annum, consistent with the interest rate at February 3, 2024. (3) Amounts listed above do not include cash obligations related to relocation expenses in connection with the involuntary separation of certain employees due to the uncertainty regarding the amount of such expenses.
At the end of fiscal year 2022, the applicable interest rate for borrowings under the Existing ABL Facility, as amended, was approximately 8% per annum.
At the end of fiscal year 2023, the applicable interest rate for borrowings under the Existing ABL Facility, as amended, was approximately 9% per annum.
If we elect the Base rate loan, interest is due and payable the last day of each calendar quarter. The elected interest rate at the end of fiscal year 2022 was approximately 10%.
If we elect the Base rate, interest is due and payable the last day of each calendar quarter. The elected interest rate at the end of fiscal year 2023 was approximately 11%.
Gross profit as a percentage of net sales decreased 5.7% to 35.7% in fiscal year 2022 from 41.4% in fiscal year 2021. This decrease was primarily driven by increases in discounts and promotions related to inventory clearance activity, product costs and e-Commerce shipping costs. The increases in product and e-Commerce shipping costs were primarily as a result of inflation.
This decrease was primarily due to increases in discounts and promotions related to inventory clearance activity, and product and transportation costs, primarily as a result of inflation. Gross profit as a percentage of net sales decreased by 5.7% to 35.7% in fiscal year 2022 from 41.4% in fiscal year 2021.
At the end of fiscal year 2022, the maximum restricted payment utilizing the Existing ABL Facility, as amended, that our subsidiaries could make from its net assets was $127.5 million.
At the end of fiscal year 2023, the maximum restricted payment utilizing the Existing ABL Facility, as amended, that our subsidiaries could make from its net assets was $103.2 million.
As of January 28, 2023, we did not meet the Excess Cash Flow threshold to require a Prepayment. 41 In addition to mandatory Repayment and Prepayment obligations, we may at our option, prepay a portion of the outstanding Principal ("Optional Prepayment").
As of February 3, 2024, we did not meet the Excess Cash Flow threshold to require a Prepayment. In addition to mandatory Repayment and Prepayment obligations, we may at our option, prepay a portion of the outstanding Principal ("Optional Prepayment").
Our provision for income taxes consists of an estimate of federal and state income taxes based on enacted federal and state tax rates, as adjusted for allowable credits, deductions and uncertain tax positions. 34 Results of Operations Fiscal Year 2022 Compared to Fiscal Year 2021 The following table summarizes our consolidated results of operations for the periods indicated (dollars in thousands): Fiscal Year Ended January 28, 2023 % of Net Sales January 29, 2022 % of Net Sales Net sales (A) $ 1,288,144 100.0 % $ 1,297,271 100.0 % Cost of goods sold 828,605 64.3 % 759,826 58.6 % Gross profit 459,539 35.7 % 537,445 41.4 % Selling, general and administrative expenses (A) 297,973 23.1 % 439,409 33.8 % Marketing expenses 59,941 4.7 % 52,654 4.1 % Income from operations 101,625 7.9 % 45,382 3.5 % Interest expense 29,736 2.3 % 29,497 2.3 % Interest income, net of other expense 207 0.0 % 56 0.0 % Income before provision for income taxes 71,682 5.6 % 15,829 1.2 % Provision for income taxes 21,473 1.7 % 45,773 3.5 % Net income (loss) $ 50,209 3.9 % $ (29,944) (2.3) % (A) In the fourth quarter of fiscal year 2022, we made a voluntary change in our accounting policy regarding the classification of PLCC Funds (as defined in "Note 2–Summary of Significant Accounting Policies") in the consolidated statements of operations and comprehensive income (loss).
The increase in the effective tax rate for fiscal year 2023 as compared to fiscal year 2022 was primarily due to increases in the amount of non-deductible compensation for covered employees and state income taxes relative to income before provision for income taxes for fiscal year 2023. 39 Fiscal Year 2022 Compared to Fiscal Year 2021 The following table summarizes our consolidated results of operations for the periods indicated (dollars in thousands): Fiscal Year Ended January 28, 2023 % of Net Sales January 29, 2022 % of Net Sales Net sales (A) $ 1,288,144 100.0 % $ 1,297,271 100.0 % Cost of goods sold 828,605 64.3 % 759,826 58.6 % Gross profit 459,539 35.7 % 537,445 41.4 % Selling, general and administrative expenses (A) 297,973 23.1 % 439,409 33.8 % Marketing expenses 59,941 4.7 % 52,654 4.1 % Income from operations 101,625 7.9 % 45,382 3.5 % Interest expense 29,736 2.3 % 29,497 2.3 % Interest income, net of other expense 207 0.0 % 56 0.0 % Income before provision for income taxes 71,682 5.6 % 15,829 1.2 % Provision for income taxes 21,473 1.7 % 45,773 3.5 % Net income (loss) $ 50,209 3.9 % $ (29,944) (2.3) % (A) In the fourth quarter of fiscal year 2022, we made a voluntary change in our accounting policy regarding the classification of PLCC Funds (as defined in "Note 2–Summary of Significant Accounting Policies") in the consolidated statements of operations and comprehensive income (loss).
A resurgence in the pandemic or the emergence of new variants of the coronavirus could have a negative impact on our business including, but not limited to, new closure requirements with respect to some or all of our physical locations, changes in consumer behavior, difficulties attracting and retaining employees and supply chain disruptions. Investments.
This could have a negative impact on our business including, but not limited to, closure requirements with respect to some or all of our physical locations, changes in consumer behavior, difficulties attracting and retaining employees and supply chain disruptions.
Cash Flow Analysis A summary of operating, investing and financing activities are shown in the following table (dollars in thousands): Year Ended January 28, 2023 January 29, 2022 January 30, 2021 Net cash provided by operating activities $ 53,311 $ 121,220 $ 151,821 Net cash used in investing activities (23,369) (17,552) (11,570) Net cash used in financing activities (45,117) (197,809) (45,925) Net Cash Provided By Operating Activities Operating activities consist primarily of net income (loss) adjusted for noncash items, including depreciation and amortization and share-based compensation, the effect of working capital changes and taxes paid.
Cash Flow Analysis A summary of operating, investing and financing activities are shown in the following table (dollars in thousands): Year Ended February 3, 2024 January 28, 2023 January 29, 2022 Net cash provided by operating activities $ 42,771 $ 53,311 $ 121,220 Net cash used in investing activities (26,002) (23,369) (17,552) Net cash used in financing activities (18,517) (45,117) (197,809) Net Cash Provided By Operating Activities Operating activities consist primarily of net income (loss) adjusted for noncash items, including depreciation and amortization and share-based compensation, the effect of working capital changes and taxes paid.
Actual results could differ materially from those discussed in or implied by forward-looking statements as a result of various factors, including those discussed below and elsewhere in this Annual Report on Form 10-K, particularly in the section entitled "Risk Factors." Overview Torrid is a direct-to-consumer brand of apparel, intimates and accessories in North America, targeting the 25- to 40-year old woman who wears sizes 10 to 30.
Actual results could differ materially from those discussed in or implied by forward-looking statements as a result of various factors, including those discussed below and elsewhere in this Annual Report on Form 10-K, particularly in the section entitled "Risk Factors." Overview Torrid is 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.
(D) Other expenses include IPO-related transaction fees 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. Net Sales Net sales for fiscal year 2021 increased $313.1 million, or 31.8%, to $1,297.3 million, from $984.2 million for fiscal year 2020.
(D) Other expenses include IPO-related transaction fees 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. Net Sales Net sales for fiscal year 2022 decreased by $9.2 million, or 0.7%, to $1,288.1 million, from $1,297.3 million for fiscal year 2021.
We view net sales per active customer as a key indicator of our customers' purchasing patterns, including their initial and repeat purchase behavior and intend to closely monitor this metric going forward. 31 Comparable Sales.
We view net sales per active customer as a key indicator of our customers' purchasing patterns, including their initial and repeat purchase behavior and we continue to closely monitor this metric each year. 34 Comparable Sales.
We use historical redemption rates to estimate the value of future award redemptions and we recognize the estimated value of these future awards as a reduction of revenue in the consolidated statements of operations and comprehensive income (loss) in the period the points are earned by the customer.
We use historical redemption rates to estimate the value of future award redemptions and we recognize the estimated value of these future awards as a reduction of revenue in the consolidated statements of operations and comprehensive income (loss) in the period the points are earned by the customer. 48 Inventory Inventory consists of finished goods merchandise held for sale to our customers.
Inventory Inventory consists of finished goods merchandise held for sale to our customers. Inventory is valued at the lower of moving average cost or net realizable value. In the normal course of business, we record inventory reserves based on past and projected sales performance, as well as the inventory on hand.
Inventory is valued at the lower of moving average cost or net realizable value. In the normal course of business, we record inventory reserves based on past and projected sales performance, as well as the inventory on hand.
Fiscal Year Ended (in thousands, except net sales per active customer, number of stores and percentages) January 28, 2023 January 29, 2022 January 30, 2021 Active customers (as of end of period) (A) 3,902 3,821 3,182 Net sales per active customer (A) $ 330 $ 340 $ 309 Comparable sales (B) (3) % 31 % (7) % Number of stores (as of end of period) 639 624 608 Net income (loss) $ 50,209 $ (29,944) $ 24,532 Adjusted EBITDA (C) $ 152,350 $ 245,853 $ 100,797 (A) Active customers and net sales per active customer calculated on a preceding four quarters basis.
Fiscal Year Ended (in thousands, except net sales per active customer, number of stores and percentages) February 3, 2024 January 28, 2023 January 29, 2022 Active customers (as of end of period) (A) 3,761 3,902 3,821 Net sales per active customer (A) $ 306 $ 330 $ 340 Comparable sales (B) (12) % (3) % 31 % Number of stores (as of end of period) 655 639 624 Net income (loss) $ 11,619 $ 50,209 $ (29,944) Adjusted EBITDA (C) $ 106,219 $ 152,350 $ 245,853 (A) Active customers and net sales per active customer calculated on a preceding four quarters basis.
The increase in cash used in investing activities was primarily as a result of an increase in capital expenditures related to the opening of new stores, store relocations and investments in our West Jefferson, Ohio distribution center during fiscal year 2021, compared to fiscal year 2020.
The increase in cash used in investing activities was primarily as a result of an increase in capital expenditures related to the 42 opening of new stores, partially offset by a decrease in investments in our West Jefferson, Ohio distribution center during fiscal year 2023, compared to fiscal year 2022.
We consider the carrying amounts of the Existing ABL Facility, as amended, to approximate fair value because it is carried at a market observable interest rate that resets periodically and is categorized as Level 2 in the fair value hierarchy. 43 Availability under the Existing ABL Facility, as amended, at the end of fiscal year 2022 was $134.2 million, which reflects borrowings of $8.4 million.
We consider the carrying amounts of the Existing ABL Facility, as amended, to approximate fair value because it is carried at a market observable interest rate that resets periodically and is categorized as Level 2 in the fair value hierarchy.
The proportion of net sales, excluding PLCC Funds (as defined in “Note 2–Summary of Significant Accounting Policies”), that we are able to attribute to active customers was 97% for fiscal year 2022, 97% for fiscal year 2021 and 98% for fiscal year 2020.
We have improved our customer tracking capabilities and have maintained the proportion of our net sales attributable to active customers over time. The proportion of net sales, excluding PLCC Funds (as defined in “Note 2–Summary of Significant Accounting Policies”), that we are able to attribute to active customers was 97% for each of fiscal years 2023, 2022 and 2021.
Failure to effectively attract customers on a cost-efficient basis would adversely impact our profitability and operating results. New requirements for consumer disclosures regarding privacy practices, and new application tracking transparency framework that requires opt-in consent for certain types of tracking were implemented by third party providers in 2021, which has increased the difficulty and cost of acquiring and retaining customers.
New requirements for consumer disclosures regarding privacy practices, and new application tracking transparency framework that requires opt-in consent for 35 certain types of tracking were implemented by third party providers in 2021, which has increased the difficulty and cost of acquiring and retaining customers. These changes may adversely affect our results of operations. Customer Migration from Single to Omni-channel.
Our business has experienced growth over recent periods due, in part, to an increase in the plus-size population. Slower or negative growth in this demographic, in particular among women ages 25 to 40, specific to certain geographic markets, income levels or overall, could adversely affect our results of operations. Growth in Brand Awareness.
The growth of our business is impacted, in part, by the size of the plus-size population. Slower or negative growth in this demographic, specific to certain geographic markets, income levels or overall, could adversely affect our results of operations. Growth in Brand Awareness.
As a result, historical year-over-year growth in active customers may factor in increases attributable to our improved capabilities. We view the number of active customers as a key indicator of our growth, the reach of our e-Commerce and stores platform, the value proposition and consumer awareness of our brand and our customers' desire to purchase our products.
We view the number of active customers as a key indicator of our performance, the reach of our e-Commerce and stores platform, the value proposition and consumer awareness of our brand and our customers' desire to purchase our products. Net Sales per Active Customer.
The fair value of the New Term Loan Credit Agreement is determined using current applicable rates for similar instruments as of the balance sheet date, a Level 2 measurement (as defined in "Note 20—Fair Value Measurements").
The fair value of the New Term Loan Credit Agreement is determined using current applicable rates for similar instruments as of the balance sheet date, a Level 2 measurement (as defined in "Note 20—Fair Value Measurements"). 44 At the end of fiscal year 2023, total borrowings, net of OID and financing costs, of $304.7 million remain outstanding under the New Term Loan Credit Agreement.
Repurchases may be made from time to time, depending upon a variety of factors, including share price, corporate and regulatory requirements, and other market and business conditions, as determined by us. We may purchase shares of our common stock in the open market at current market prices at the time of purchase, in privately negotiated transactions, or by other means.
Repurchases may be made from time to time, depending upon a variety of factors, 46 including share price, corporate and regulatory requirements, and other market and business conditions, as determined by us.
The total number of stores we operate increased by 15 35 stores, or 2.4%, to 639 stores at the end of fiscal year 2022, from 624 stores at the end of fiscal year 2021. Our new store openings during fiscal year 2022 include an eight-location test concept of our intimates brand, Curve.
The total number of stores we operate increased by 15 stores, or 2.4%, to 639 stores at the end of fiscal year 2022, from 624 stores at the end of fiscal year 2021.
At the end of fiscal year 2022, total borrowings, net of OID and financing costs, of $320.8 million remain outstanding under the New Term Loan Credit Agreement. During fiscal year 2022, we recognized $26.3 million of interest expense and $1.4 million OID and financing costs related to the New Term Loan Credit Agreement.
During fiscal year 2023, we recognized $36.1 million of interest expense and $1.4 million OID and financing costs related to the New Term Loan Credit Agreement.
Rather, deferred lease payments were recorded to operating lease liabilities until paid and lease concessions were recorded in the period they were negotiated or when the lower lease expense was paid.
Rather, deferred lease payments were recorded to operating lease liabilities until paid and lease concessions were recorded in the period they were negotiated or when the lower lease expense was paid. As of the end of fiscal year 2021, we had received substantially all of the lease concessions negotiated in response to the COVID-19 pandemic.
(B) The computation of comparable sales includes results from stores that were temporarily closed due to COVID-19. (C) Please refer to "Results of Operations" for a reconciliation of net income (loss) to Adjusted EBITDA. Active Customers.
(B) Comparable sales in fiscal year 2023 compares sales in fiscal year 2023 to sales in the 53-week period ended February 4, 2023. In fiscal years 2022 and 2021, comparable sales include results from stores that were temporarily closed due to COVID-19. (C) Please refer to "Results of Operations" for a reconciliation of net income (loss) to Adjusted EBITDA.
We also need cash to fund our interest and principal payments on the New Term Loan Credit Agreement and make discretionary repurchases of our common stock. The most significant components of our working capital are cash and cash equivalents, merchandise inventories, prepaid expenses and other current assets, accounts payable, accrued and other current liabilities and operating lease liabilities.
The most significant components of our working capital are cash and cash equivalents, merchandise inventories, prepaid expenses and other current assets, accounts payable, accrued and other current liabilities and operating lease liabilities.
In addition, due to the uncertainty regarding the timing of future cash outflows associated with noncurrent unrecognized tax benefits of $3.3 million, we are unable to make a reliable estimate of the periods of cash settlement with the respective tax authorities and have not included such amounts in the contractual obligations table above. 44 Critical Accounting Estimates Our discussion of results of operations and financial condition is based upon the consolidated financial statements included elsewhere in this Annual Report on Form 10-K, which have been prepared in accordance with GAAP.
In addition, due to the uncertainty regarding the timing of future cash outflows associated with noncurrent unrecognized tax benefits of $2.1 million, we are unable to make a reliable estimate of the periods of cash settlement with the respective tax authorities and have not included such amounts in the contractual obligations table above.
Marketing Expenses Marketing expenses for fiscal year 2021 increased $1.3 million, or 2.5%, to $52.7 million, from $51.4 million for fiscal year 2020. This increase was primarily due to increased digital, store and brand marketing, partially offset by decreased direct mail program spend.
Marketing Expenses Marketing expenses for fiscal year 2023 decreased by $4.4 million, or 7.4%, to $55.5 million, from $59.9 million for fiscal year 2022. This decrease was primarily due to decreased television marketing, regional marketing events and direct mail program spend, partially offset by an increase in digital marketing.
The decrease in cash provided by operating activities was primarily as a result of increases in inventory purchases and prepaid income taxes and decreases in net income (loss), operating lease liabilities and income taxes payable and a lower increase in accounts payable compared to fiscal year 2020.
Other reasons for the decrease in net cash provided by operating activities were as a result of decreases in accounts payable due to lower inventory purchases compared to prior year, and other noncurrent liabilities, and increases in deferred tax assets, prepaid income taxes, and deposits and other noncurrent assets, partially offset by a decrease in inventory purchases and a lower decrease in accrued and other current liabilities.
We have encountered inflation on our wages, transportation and product costs, and a material increase in these costs without any meaningful offsetting price increases may reduce our future profits. Additionally, the COVID-19 pandemic may continue to have a materially adverse impact on the macroeconomic environment in the United States as well as our results of operations. Demographic Changes.
Recent historic high rates of inflation have led to a softening of consumer demand. We have encountered inflation on our wages, transportation and product costs, and a material increase in these costs without any meaningful offsetting price increases may reduce our future profits. Demographic Changes.
The total number of stores we operate increased by 16 stores, or 2.6%, to 624 stores at the end of fiscal year 2021, from 608 stores at the end of fiscal year 2020. 37 Gross Profit Gross profit for fiscal year 2021 increased $196.5 million, or 57.6%, to $537.4 million, from $341.0 million for fiscal year 2020.
The total number of stores we operate increased by 16 stores, or 2.5%, to 655 stores at the end of fiscal year 2023, from 639 stores at the end of fiscal year 2022. 38 Gross Profit Gross profit for fiscal year 2023 decreased by $53.6 million, or 11.7%, to $406.0 million, from $459.5 million for fiscal year 2022.
Availability under the Existing ABL Facility, as amended, at the end of fiscal year 2022 was $123.9 million, which reflects no borrowings. Standby letters of credit issued and outstanding were $7.4 million and $5.3 million at the end of fiscal years 2022 and 2021, respectively.
Availability under the Existing ABL Facility, as amended, at the end of fiscal year 2023 was $102.7 million, which reflects borrowings of $7.3 million. Availability under the Existing ABL Facility, as amended, at the end of fiscal year 2022 was $134.2 million, which reflects borrowings of $8.4 million.
If a store is closed during a fiscal year, it is only included in the computation of comparable sales for the full fiscal months in which it was open. The computation of comparable sales includes results from stores that were temporarily closed due to COVID-19. Partial fiscal months are excluded from the computation of comparable sales.
If a store is closed during a fiscal year, it is only included in the computation of comparable sales for the full fiscal months in which it was open. The computation of fiscal year 2023 comparable sales compares sales in fiscal year 2023 to sales in the 53-week period ended February 4, 2023.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAs of January 28, 2023, we had $320.8 million of outstanding variable rate loans under the New Term Loan Credit Agreement and $8.4 million of borrowings under the Existing ABL Facility, as amended.
Biggest changeAs of February 3, 2024, we had $304.7 million of outstanding variable rate loans under the New Term Loan Credit Agreement and $7.3 million of borrowings under the Existing ABL Facility, as amended.
An increase or decrease of 1% in the variable rates on the amount outstanding under the New Term Loan Credit Agreement will increase or decrease our annual interest expense by approximately $3.3 million. Foreign Exchange Risk The reporting currency for our consolidated financial statements is U.S. dollars.
An increase or decrease of 1% in the variable rates on the amount outstanding under the New Term Loan Credit Agreement will increase or decrease our annual interest expense by approximately $3.1 million. Foreign Exchange Risk The reporting currency for our consolidated financial statements is U.S. dollars.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Interest Rate Risk We are subject to interest rate risk in connection with borrowings under our Existing ABL Facility, as amended, and New Term Loan Credit Agreement, which bear interest at a variable rate equal to LIBOR plus an applicable margin.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Interest Rate Risk We are subject to interest rate risk in connection with borrowings under our Existing ABL Facility, as amended, and New Term Loan Credit Agreement,as amended, which bear interest at a variable rate equal to SOFR plus an applicable margin.
However, these purchases are made in U.S. dollar-denominated purchase contracts. We do not currently hedge foreign currency fluctuations and do not intend to do so for the foreseeable future. 48
However, these purchases are made in U.S. dollar-denominated purchase contracts. We do not currently hedge foreign currency fluctuations and do not intend to do so for the foreseeable future. 51

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