Why Closing Stores Doesn't Mean Closing Doors

When Torrid announced 151 store closures in 2025, the headlines wrote themselves. Retail apocalypse. Brand in decline. Another e-commerce casualty.

Then the company reported $1 billion in sales and $63.6 million in Adjusted EBITDA, exceeding expectations.

What most people read as failure was something else entirely.

The Economics of Letting Go

Torrid identified up to 180 "structurally unproductive stores" for closure, with these locations averaging roughly $350,000 in annual sales. These weren't random cuts. They were surgical removals of locations dragging margins while demand shifted to higher-margin digital channels and stronger physical stores.

The customers didn't disappear. They migrated.

When a store closes, demand redistributes across channels in ways that improve the business. A portion moves online through app and loyalty-driven journeys. Another portion re-routes to nearby higher-performing stores, making fewer visits but with higher basket sizes. A meaningful segment becomes hybrid omnichannel users who browse online, buy in-store, use stores for fit and returns, and transact digitally.

Then there's the segment that drops off entirely: low-frequency, promotion-driven shoppers.

Most retailers would panic about losing customers. The unit economics tell a different story.

A low-frequency, promotion-driven shopper often has a negative contribution margin once you fully load the costs. They buy only during deep discounts, compressing gross margin. They have higher return rates, creating reverse logistics costs and inventory write-downs. They require repeated paid re-acquisition through email, SMS, and paid social. When you model this, a $100 basket at 40-50% off nets down to roughly $50 revenue. Subtract cost of goods ($30-$35), fulfillment and returns ($10-$20 blended), and marketing ($10-$15), and you're at breakeven or worse before allocating store overhead.

By contrast, a higher-intent, full-price or lightly promoted omnichannel customer has better retention, lower return friction, and minimal incremental marketing cost. Their lifetime value compounds.

Losing that low-quality segment isn't demand destruction. The move removes volume that dilutes margin and consumes capacity.

When the Old Playbook Broke

There wasn't a single moment when retailers realized chasing every transaction was destroying value. A stacked inflection between 2018 and 2022 flipped the economics hard enough that the old "chase every dollar" model stopped working.

Pre-2018, retailers hid unprofitable volume behind cheap customer acquisition through Facebook and Google arbitrage, relatively stable mall rents, and forgiving return economics.

Then three things broke in sequence.

First, digital acquisition costs spiked. Privacy changes like Apple's iOS 14.5 and signal loss made paid marketing far less efficient. Customer acquisition costs have increased 60% over the past five years across both B2B and B2C businesses.

Second, COVID forced a real-world experiment. Stores closed and retailers discovered demand didn't disappear. The demand shifted online with better margins.

Third, post-2021 cost inflation in labor, logistics, and returns made low-quality, promo-driven volume visibly unprofitable at the contribution level.

By the time traffic returned, finance teams had clean data showing a chunk of customers were dilutive, not accretive. The mindset changed because retailers were forced to confront that some volume was destroying EBITDA. Once you see this clearly in the numbers, you don't go back.

Why Physical Stores Still Matter

If demand shifted online with better margins during COVID, why didn't this translate into permanent digital dominance? Why keep physical stores?

The COVID period revealed two different jobs that retail channels perform, and digital only solved one of them.

Online is highly efficient at capturing intent: repeat purchases, known sizes, replenishment. But physical stores still outperform at creating and converting intent, especially in apparel where fit confidence, discovery, and immediacy matter.

Businesses with strong omnichannel operations retain 89% of their customers, compared to 33% for companies that lag behind.

Research shows 73% of customers engage in omnichannel shopping, and 80% of consumers use multiple channels to complete a purchase. Customers who engage both channels have higher lifetime value, lower return rates, and larger baskets. Stores reduce uncertainty through try-on and styling while acting as service nodes for returns, exchanges, and pickup that lower friction for digital.

Pure e-commerce carries hidden costs: returns, reverse logistics, and paid acquisition that erode margin at scale.

The post-COVID equilibrium isn't digital dominance. It's fewer, higher-performing stores embedded in an omnichannel system where stores do the high-impact conversion work and digital does the scalable fulfillment.

Creating Intent vs. Capturing Intent

Creating intent in-store means changing the customer's decision set in real time.

A customer walks into a Torrid store intending to replace black leggings. The associate brings multiple fits, suggests a top that complements body shape, and the fitting room becomes a guided feedback loop. The customer sees what works on their body, gains confidence, and reframes what they want beyond what they need.

That moment of physical try-on combined with human validation and immediate comparison expands a $40 intent into a $120 basket and introduces new categories the customer wouldn't have searched for.

Digital approximates discovery with recommendations, but doesn't replicate embodied certainty: fit, feel, silhouette. Digital doesn't replicate the psychological unlock that happens when someone sees themselves differently in the mirror.

That's intent creation: helping customers decide differently.

The Plus-Size Advantage

For Torrid, operating in plus-size apparel amplifies both the challenge and the opportunity.

Sizing variance is higher across brands. Fit is more sensitive to cut and fabric. The cost of a bad purchase through returns and dissatisfaction is greater. Stores and fit expertise matter more than in straight-size retail. That's operationally harder: more SKUs, more fit complexity, higher service expectations.

But the flip side creates real advantage.

When Torrid gets fit right, the company earns disproportionate loyalty and repeat behavior. The US plus-sized women's market is worth $81 billion and is expanding three times faster than the overall women's apparel industry. The global plus-size clothing market was valued at $23.6 billion in 2024 and is estimated to reach $37.4 billion by 2033.

Torrid has spent years building a fit system and customer memory loop: size conventions, fabric patterns, body-shape familiarity, store associate guidance, returns history. Once a customer learns their Torrid fit, the risk-adjusted cost of trying a new brand remains high: time, uncertainty, potential returns, disappointment.

Add community and identity alignment, loyalty programs (Torrid reported that 95% of customers are engaged in its loyalty program), and omnichannel convenience, and the lock-in becomes behavioral.

While surface-level competition is increasing in plus-size, the real moat is predictability and confidence, which are harder for new entrants to replicate quickly than offering more SKUs.

Torrid isn't managing more complexity. The company is converting that complexity into customer lock-in and stronger lifetime value, which is why pruning weak stores and doubling down on high-confidence experiences improves both retention and margins.

What Retail Success Looks Like Now

Around 15,000 retail locations shuttered across the United States in 2025, nearly double the 7,325 that closed in 2024. Torrid exists within a broader industry reckoning where the winners aren't avoiding closures. They're executing them strategically.

Store closure and rationalization analysis assesses which retail locations should be closed or consolidated to improve overall company profitability and operational efficiency. This represents a fundamental shift from "coverage" to "contribution" as the key retail metric.

William Blair analysts noted that management taking a broader cut to store closures "is a positive step in freeing up capital to invest in new product and marketing." GlobalData Managing Director Neil Saunders stated the closures are "largely sensible, since they will free up capital to invest in things like better marketing and product developments."

What looks like contraction is a deliberate move from legacy "store footprint equals growth" thinking to a tighter, omnichannel model where every location has to earn its keep.

The metrics that matter now are profitability per square foot, customer lifetime value across channels, and contribution margin by customer segment.

Torrid closed 151 stores and plans to close up to 30 more. The company also launched five sub-brands that generated approximately $70 million in sales, demonstrating how resources redirected from unprofitable real estate fund higher-margin innovation.

Closing stores doesn't mean closing doors. The move means opening the right ones.