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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 30, 2022
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For transition period from         to
Commission File Number 001-40571
TORRID HOLDINGS INC.
(Exact name of registrant as specified in its charter)
Delaware84-3517567
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification Number)
18501 East San Jose Avenue
City of Industry, California
(Address of principal executive offices)
91748
(Zip Code)
(626) 667-1002
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common stock, par value $0.01 per shareCURVNew York Stock Exchange
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer☐Accelerated filer☐
Non-accelerated filer☒Smaller reporting company☐
Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No ☒
As of September 2, 2022, there were approximately 103,620,060 shares of the registrant's common stock outstanding.



Table of Contents

PAGE
Item 1.
Condensed Consolidated Balance Sheets as of July 30, 2022 and January 29, 2022
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.


FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements that are subject to risks and uncertainties. All statements other than statements of historical fact included in this Quarterly Report on Form 10-Q are forward-looking statements. Forward-looking statements give our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as "anticipate," "estimate," "expect," "project," "plan," "intend," "believe," "may," "will," "should," "can have," "likely" and other words and terms of similar meaning (including their negative counterparts or other various or comparable terminology) in connection with any discussion of the timing or nature of future operating or financial performance or other events. For example, all statements we make relating to our estimated and projected costs, expenditures, cash flows, growth rates and financial results, our plans and objectives for future operations, growth or initiatives, strategies or the expected outcome or impact of pending or threatened litigation are forward-looking statements. These forward-looking statements are not guarantees of future performance, conditions or results, and involve a number of known and unknown risks, uncertainties, assumptions and other important factors, many of which are outside our control, that could cause actual results or outcomes to differ materially from those discussed in the forward-looking statements, including:
•successfully manage risks relating to the spread of COVID-19, including any adverse impacts on our supply chain, workforce, facilities, customer services and operations;
•changes in consumer spending and general economic conditions;
•inflationary pressures with respect to labor and raw materials and global supply chain constraints that could increase our expenses;
•our ability to identify and respond to new and changing product trends, customer preferences and other related factors;
•our dependence on a strong brand image;
•damage to our reputation arising from our use of social media, email and text messages;
•increased competition from other brands and retailers;
•our reliance on third parties to drive traffic to our website;
•the success of the shopping centers in which our stores are located;
•our ability to adapt to consumer shopping preferences and develop and maintain a relevant and reliable omni-channel experience for our customers;
•our dependence upon independent third parties for the manufacture of all of our merchandise;
•availability constraints and price volatility in the raw materials used to manufacture our products;
•interruptions of the flow of our merchandise from international manufacturers causing disruptions in our supply chain;
•our sourcing a significant amount of our products from China;
•shortages of inventory, delayed shipments to our e-Commerce customers and harm to our reputation due to difficulties or shut-down of our distribution facilities (including as a result of COVID-19);
•our reliance upon independent third-party transportation providers for substantially all of our product shipments;
•our growth strategy;
•our leasing substantial amounts of space;
•our failure to attract and retain employees that reflect our brand image, embody our culture and possess the appropriate skill set;
•our reliance on third-parties for the provision of certain services, including distribution and real estate management;
•our dependence upon key executive management;
•our reliance on information systems;
•system security risk issues that could disrupt our internal operations or information technology services;
•unauthorized disclosure of sensitive or confidential information, whether through a breach of our computer system or otherwise;
•our failure to comply with federal and state laws and regulations and industry standards relating to privacy, data protection, advertising and consumer protection;
3

•payment-related risks that could increase our operating costs or subject us to potential liability;
•claims made against us resulting in litigation;
•changes in laws and regulations applicable to our business;
•regulatory actions or recalls arising from issues with product safety;
•our inability to protect our trademarks or other intellectual property rights;
•our substantial indebtedness and lease obligations;
•restrictions imposed by our indebtedness on our current and future operations;
•changes in tax laws or regulations or in our operations that may impact our effective tax rate;
•the possibility that we may recognize impairments on long-lived assets;
•our failure to maintain adequate internal controls; and
•the threat of war, terrorism or other catastrophes that could negatively impact our business, including as a result of the current conflict between Russia and Ukraine.
The outcome of the events described in any of our forward-looking statements are also subject to risks, uncertainties and other factors described in the sections entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on March 30, 2022 and in our other filings with the SEC and public communications. You should evaluate all forward-looking statements made in this Quarterly Report on Form 10-Q in the context of these risks and uncertainties.
We derive many of our forward-looking statements from our operating budgets and forecasts, which are based upon many detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and, it is impossible for us to anticipate all factors that could affect our actual results. We caution you that the important factors referenced above may not contain all of the factors that are important to you. In addition, we cannot assure you that we will realize the results or developments we expect or anticipate or, even if substantially realized, that they will result in the consequences or affect us or our operations in the way we expect. The forward-looking statements included in this Quarterly Report on Form 10-Q are made only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments.
Investors and others should note that we may announce material information to our investors using our investor relations website (https://investors.torrid.com), SEC filings, press releases, public conference calls and webcasts. We use these channels, as well as social media, to communicate with our investors and the public about our company, our business and other issues. It is possible that the information that we post on social media could be deemed to be material information. We therefore encourage investors to visit these websites from time to time. 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.
4

Part I - Financial Information
Item 1. Financial Statements (Unaudited)
TORRID HOLDINGS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(In thousands, except share and per share data)
July 30, 2022January 29, 2022
Assets
Current assets:
Cash and cash equivalents$22,985 $29,025 
Restricted cash318 262 
Inventory180,738 170,608 
Prepaid expenses and other current assets17,549 14,686 
Prepaid income taxes1,684 6,345 
Total current assets223,274 220,926 
Property and equipment, net119,529 127,565 
Operating lease right-of-use assets191,917 209,637 
Deposits and other noncurrent assets8,557 7,100 
Deferred tax assets4,873 4,873 
Intangible asset8,400 8,400 
Total assets$556,550 $578,501 
Liabilities and stockholders' deficit
Current liabilities:
Accounts payable$79,048 $77,448 
Accrued and other current liabilities110,749 138,708 
Operating lease liabilities46,285 45,716 
Borrowings under credit facility5,950 — 
Current portion of term loan16,144 20,519 
Due to related parties20,268 14,622 
Income taxes payable1,270 — 
Total current liabilities279,714 297,013 
Noncurrent operating lease liabilities187,827 207,049 
Term loan312,769 320,841 
Deferred compensation5,842 6,873 
Other noncurrent liabilities9,054 5,044 
Total liabilities795,206 836,820 
Commitments and contingencies (Note 15)
Stockholders' deficit
Common shares: $0.01 par value; 1,000,000,000 shares authorized; 103,601,333 shares issued and outstanding at July 30, 2022; 107,857,625 shares issued and outstanding at January 29, 2022
1,036 1,078 
Additional paid-in capital122,886 118,286 
Accumulated deficit(362,639)(377,759)
Accumulated other comprehensive income61 76 
Total stockholders' deficit(238,656)(258,319)
Total liabilities and stockholders' deficit$556,550 $578,501 
The accompanying notes are an integral part of these condensed consolidated financial statements.

5

TORRID HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
(UNAUDITED)
(In thousands, except per share data)
Three Months Ended
July 30, 2022		Three Months Ended
July 31, 2021		Six Months Ended
July 30, 2022		Six Months Ended
July 31, 2021
Net sales$340,876 $332,870 $669,285 $658,617 
Cost of goods sold222,030 183,150 425,293 363,965 
Gross profit118,846 149,720 243,992 294,652 
Selling, general and administrative expenses65,928 179,041 133,359 288,954 
Marketing expenses13,502 10,728 31,476 20,253 
Income (loss) from operations39,416 (40,049)79,157 (14,555)
Interest expense6,697 12,662 12,961 17,286 
Interest income, net of other expense (income)48 49 76 (60)
Income (loss) before provision for income taxes32,671 (52,760)66,120 (31,781)
Provision for (benefit from) income taxes9,961 (91,547)19,344 (83,493)
Net income$22,710 $38,787 $46,776 $51,712 
Comprehensive income:
Net income$22,710 $38,787 $46,776 $51,712 
Other comprehensive income (loss):
Foreign currency translation adjustment25 (21)(15)190 
Total other comprehensive income (loss)25 (21)(15)190 
Comprehensive income$22,735 $38,766 $46,761 $51,902 
Net earnings per share:
Basic$0.22 $0.35 $0.45 $0.47 
Diluted$0.22 $0.35 $0.44 $0.47 
Weighted average number of shares:
Basic103,836 110,016 105,031 110,008 
Diluted103,953 110,016 105,126 110,008 
The accompanying notes are an integral part of these condensed consolidated financial statements.

6

TORRID HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
(UNAUDITED)
(In thousands)
Six Months Ended July 30, 2022
Common SharesAdditional
Paid-In Capital		Accumulated
Deficit		Accumulated
Other
Comprehensive
Income (Loss)		Total
Stockholders'
Deficit
SharesAmount
Balance at January 29, 2022107,858 $1,078 $118,286 $(377,759)$76 $(258,319)
Net income— — — 24,066 — 24,066 
Issuance of common shares and withholding tax payments related to vesting of restricted stock awards39 — (178)— — (178)
Share-based compensation— — 2,480 — — 2,480 
Repurchase and retirement of common stock(2,919)(29)— (22,836)— (22,865)
Other comprehensive loss— — — — (40)(40)
Balance at April 30, 2022104,978 $1,049 $120,588 $(376,529)$36 $(254,856)
Net income— — — 22,710 — 22,710 
Issuance of common shares and withholding tax payments related to vesting of restricted stock awards and restricted stock units74 1 (227)— — (226)
Issuance of common shares related to employee stock purchase plan95 1 350 — — 351 
Share-based compensation— — 2,175 — — 2,175 
Repurchase and retirement of common stock(1,546)(15)— (8,820)— (8,835)
Other comprehensive income— — — — 25 25 
Balance at July 30, 2022103,601 $1,036 $122,886 $(362,639)$61 $(238,656)

Six Months Ended July 31, 2021
Common SharesAdditional
Paid-In Capital		Accumulated
Deficit		Accumulated
Other
Comprehensive
(Loss) Income		Total 
Stockholders'
Deficit
SharesAmount
Balance at January 30, 2021110,000 $1,100 $10,326 $(74,591)$(8)$(63,173)
Net income— — — 12,925 — 12,925 
Capital contribution from Torrid Holding LLC for incentive units— — 39,779 — — 39,779 
Other comprehensive income— — — — 211 211 
Balance at May 1, 2021110,000 1,100 50,105 (61,666)203 (10,258)
Net income— — — 38,787 — 38,787 
Capital distribution to Torrid Holding LLC— — (50,105)(249,895)— (300,000)
Capital contribution from Torrid Holding LLC for incentive units— — 111,387 — — 111,387 
Issuance of common shares and withholding tax payments related to vesting of restricted stock units56 1 (1,111)— — (1,110)
Share-based compensation— — 3,622 — — 3,622 
Other comprehensive loss— — — — (21)(21)
Balance at July 31, 2021110,056 $1,101 $113,898 $(272,774)$182 $(157,593)
The accompanying notes are an integral part of these condensed consolidated financial statements.

7

TORRID HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
Six Months Ended July 30, 2022Six Months Ended July 31, 2021
OPERATING ACTIVITIES
Net income$46,776 $51,712 
Adjustments to reconcile net income to net cash provided by operating activities:
Write down of inventory1,363 401 
Operating right-of-use assets amortization20,672 20,550 
Depreciation and other amortization18,891 17,928 
Write off of unamortized original issue discount and deferred financing costs for Amended Term Loan Credit Agreement— 5,231 
Share-based compensation4,655 154,788 
Deferred taxes— 1,539 
Other82 514 
Changes in operating assets and liabilities:
Inventory(11,585)(4,631)
Prepaid expenses and other current assets(2,863)(1,596)
Prepaid income taxes4,661 (24,314)
Income taxes receivable— (87,061)
Deposits and other noncurrent assets(1,539)(2,114)
Accounts payable883 (4,802)
Accrued and other current liabilities(27,116)9,054 
Operating lease liabilities(20,628)(25,344)
Other noncurrent liabilities4,156 254 
Deferred compensation(1,031)990 
Due to related parties5,646 2,715 
Income taxes payable1,270 (9,336)
Net cash provided by operating activities44,293 106,478 
INVESTING ACTIVITIES
Purchases of property and equipment(11,444)(5,891)
Net cash used in investing activities(11,444)(5,891)
FINANCING ACTIVITIES
Capital distribution to Torrid Holding LLC— (300,000)
Proceeds from revolving credit facility423,900 — 
Principal payments on revolving credit facility(417,950)— 
Deferred financing costs for revolving credit facility— (688)
Repurchase of common stock(31,700)— 
Principal payments on New Term Loan Credit Agreement and repayment of Amended Term Loan Credit Agreement and related costs(13,125)(212,775)
Proceeds from New Term Loan Credit Agreement, net of original issue discount and deferred financing costs— 340,509 
Proceeds from issuances under share-based compensation plans463 — 
Withholding tax payments related to vesting of restricted stock units and awards(414)— 
Net cash used in financing activities(38,826)(172,954)
Effect of foreign currency exchange rate changes on cash, cash equivalents and restricted cash(7)(83)
Decrease in cash, cash equivalents and restricted cash(5,984)(72,450)
Cash, cash equivalents and restricted cash at beginning of period29,287 123,215 
Cash, cash equivalents and restricted cash at end of period$23,303 $50,765 
SUPPLEMENTAL INFORMATION
Cash paid during the period for interest related to the revolving credit facility and term loans$13,637 $11,648 
Cash paid during the period for income taxes$13,413 $35,164 
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Property and equipment purchases included in accounts payable and accrued liabilities$3,578 $946 
The accompanying notes are an integral part of these condensed consolidated financial statements.
8


TORRID HOLDINGS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1. Basis of Presentation and Description of the Business
Corporate Structure
Torrid Holdings Inc. is a Delaware corporation formed on October 29, 2019 and capitalized on February 20, 2020. Sycamore Partners Management, L.P. ("Sycamore") owns a majority of the voting power of Torrid Holdings Inc.'s outstanding common stock. Prior to the IPO (as defined below), Torrid Holdings Inc. was a wholly owned subsidiary of Torrid Holding LLC, which is majority-owned by investment funds managed by Sycamore. Torrid Parent Inc. is a Delaware corporation formed on June 4, 2019 and is a wholly owned subsidiary of Torrid Holdings Inc. Torrid Intermediate LLC, formerly known as Torrid Inc., is a Delaware limited liability company formed on June 18, 2019 and a wholly owned subsidiary of Torrid Parent Inc. Torrid LLC is a wholly owned subsidiary of Torrid Intermediate LLC. Substantially all of Torrid Holdings Inc.'s financial position, operations and cash flows are generated through its wholly owned indirect subsidiary, Torrid LLC.
Throughout these financial statements, the terms "Torrid," "we," "us," "our," the "Company" and similar references refer to Torrid Holdings Inc. and its consolidated subsidiaries.
Reorganization
On July 1, 2021, Torrid Holding LLC, our then parent, completed a reorganization pursuant to which (i) Torrid Holding LLC contributed, assigned, transferred and delivered its issued and outstanding equity interest in Torrid Parent Inc. to Torrid, and (ii) Torrid assumed the obligations of Torrid Holding LLC under the related party promissory notes due to Torrid Parent Inc. (together, the "Reorganization"). The Reorganization was accounted for as a combination of entities under common control in accordance with subsections of Accounting Standards Codification ("ASC") 805-50, Business Combinations ("ASC 805-50"). Consequently, the equity interests of Torrid Parent Inc. contributed by Torrid Holding LLC to Torrid were recorded at historical carrying amounts and our financial position, results of operations and cash flows prior to the Reorganization have been adjusted to reflect the retrospective combination of the entities for all periods presented as if the combination had been in effect since the inception of common control.
Stock Split
On June 22, 2021, Torrid's stockholder approved an amendment to Torrid's certificate of incorporation to (i) effect a 110,000-for-1 stock split of all shares of the issued and outstanding common stock, which was effected on June 22, 2021 and (ii) authorize 5.0 million shares of preferred stock. All share and per-share data in the financial statements and notes to the financial statements has been retroactively adjusted to reflect the stock split for all periods presented. The par value of the common stock was not adjusted as a result of the stock split.
Initial Public Offering
Our registration statement on Form S-1 related to our initial public offering ("IPO") was declared effective on June 30, 2021, and our common stock began trading on the New York Stock Exchange on July 1, 2021. On July 6, 2021, subsequent to the Reorganization, we completed the IPO and certain of our shareholders sold 12,650,000 shares of common stock at a public offering price of $21.00 per share, including 1,650,000 shares of common stock after full exercise of the underwriters' option, for net proceeds of $248.4 million, after deducting underwriting discounts of $17.3 million. The offering costs of approximately $6.0 million were borne by us. We did not receive any proceeds from the sale of our shares of common stock by the selling stockholders.
Fiscal Year
Our fiscal year ends on the Saturday nearest to January 31 and each fiscal year is generally comprised of four 13-week quarters (although in years with 53 weeks, the fourth quarter is comprised of 14 weeks). Fiscal years 2022 and 2021 are 52-week years. Fiscal years are identified according to the calendar year in which they begin. For example, references to "fiscal year 2022" or similar references refer to the fiscal year ending January 28, 2023. References to the second quarter of fiscal years 2022 and 2021 and to the three- and six-month periods ended July 30, 2022 and July 31, 2021, respectively, refer to the 13- and 26-week periods then ended.

9

Basis of Presentation and Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and applicable rules and regulations of the Securities and Exchange Commission ("SEC") regarding interim financial information. Accordingly, the interim financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair statement of the results for the interim periods presented have been included. Operating results for the three- and six-month periods ended July 30, 2022 and July 31, 2021 are not necessarily indicative of the results that may be expected for any future interim periods, the fiscal year ending January 28, 2023, or for any future year.
The condensed consolidated balance sheet information at January 29, 2022 has been derived from the audited consolidated financial statements at that date, but does not include all of the disclosures required by GAAP. The accompanying unaudited condensed consolidated financial statements and related footnotes should be read in conjunction with our audited consolidated financial statements and notes thereto in our Annual Report on Form 10-K for the year ended January 29, 2022. The unaudited condensed consolidated financial statements include Torrid and those of our wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.
Description of Business
We are a direct-to-consumer brand of apparel, intimates and accessories targeting the 25- to 40-year-old woman who is curvy and wears sizes 10 to 30. We generate revenues primarily through our e-Commerce platform www.torrid.com and our stores in the United States of America, Puerto Rico and Canada.
COVID-19
Our business operations, including net sales, were substantially affected by COVID-19 in fiscal year 2020. While our business operations improved during fiscal year 2021, there is uncertainty regarding the extent of future impacts of COVID-19 on our business, including the duration and impact on overall customer demand. 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.
During the fiscal years 2022 and 2021, global supply chain disruption caused significant product delays resulting in limited product availability to our customers. Increased port congestion, COVID-19-related factory closures, most notably in the Asia-Pacific region where we source a significant amount of product, and increased shipping costs impacted our results of operations for the six-months ended July 30, 2022.
Segment Reporting
We have determined that we have one reportable segment, which includes the operation of our e-Commerce platform and stores. The single segment was identified based on how the Chief Operating Decision Maker, who we have determined to be our Chief Executive Officer, manages and evaluates performance and allocates resources. Revenues and long-lived assets related to our operations in Canada and Puerto Rico during the three- and six-month periods ended July 30, 2022 and July 31, 2021, and as of the end of the same periods, were not material, and therefore are not reported separately from domestic revenues and long-lived assets.
Store Pre-Opening Costs
Costs incurred in connection with the opening of new stores, store remodels or relocations are expensed as incurred in selling, general and administrative expenses in our condensed consolidated statements of operations and comprehensive income. We incurred $0.3 million and $0.5 million of pre-opening costs during the three- and six-month periods ended July 30, 2022, respectively. The amounts incurred during the three- and six-month periods ended July 31, 2021 were not material.
Note 2. Accounting Standards
Recently Adopted Accounting Standards during the Six-Month Period Ended July 30, 2022
We did not adopt any new accounting standards during the six-month period ended July 30, 2022.
10

Accounting Pronouncements Not Yet Adopted
We have considered all recent accounting pronouncements and have concluded that there are no recent accounting pronouncements not yet adopted that are applicable to us, based on current information.
Note 3. Inventory
Our inventory is comprised solely of finished goods and is valued at the lower of moving average cost or net realizable value. 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. Physical inventory counts are conducted at least once during the year to determine actual inventory on hand and shrinkage. We accrue our estimated inventory shrinkage for the period between the last physical count and current balance sheet date.
Note 4. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consist of the following (in thousands):
July 30, 2022January 29, 2022
Prepaid and other information technology expenses5,974 5,692 
Prepaid advertising1,540 700 
Prepaid casualty insurance1,167 3,050 
Other8,868 5,244 
Prepaid expenses and other current assets$17,549 $14,686 
Note 5. Property and Equipment
Property and equipment are summarized as follows (in thousands):
July 30, 2022January 29, 2022
Property and equipment, at cost
Leasehold improvements$170,391 $168,084 
Furniture, fixtures and equipment110,665 108,261 
Software and licenses13,714 15,356 
Construction-in-progress3,920 4,743 
298,690 296,444 
Less: Accumulated depreciation and amortization(179,161)(168,879)
Property and equipment, net$119,529 $127,565 
We recorded depreciation expense related to our property and equipment in the amounts of $8.8 million and $18.1 million during the three- and six-month periods ended July 30, 2022, respectively. We recorded depreciation expense related to our property and equipment in the amounts of $8.6 million and $17.1 million during the three- and six-month periods ended July 31, 2021, respectively.
We group and evaluate long-lived assets for impairment at the individual store level, which is the lowest level at which individual cash flows can be identified. During the three- and six-month periods ended July 30, 2022 and July 31, 2021, we did not recognize any impairment charges.
Note 6. Implementation Costs Incurred in Cloud Computing Arrangements that are Service Contracts
Our cloud computing arrangements that are service contracts primarily consist of arrangements with third party vendors for our internal use of their software applications that they host. We defer implementation costs incurred in relation to such arrangements, including costs for software application coding, configuration, integration and customization, while associated process reengineering, training, maintenance and data conversion costs are expensed. Subsequent implementation costs are deferred only to the extent that they constitute major enhancements. The short-term portion of deferred implementation costs are included in prepaid expenses and other current assets in the condensed consolidated balance sheets, while the long-term portion of deferred costs are included in deposits and other noncurrent assets. Amortized implementation costs incurred in cloud
11

computing arrangements that are service contracts are recognized in selling, general and administrative expenses in the condensed consolidated statements of operations and comprehensive income.
Deferred implementation costs incurred in cloud computing arrangements that are service contracts are summarized as follows (in thousands):
July 30, 2022January 29, 2022
Internal use of third party hosted software, gross$14,840 $11,877 
Less: Accumulated amortization(5,042)(3,892)
Internal use of third party hosted software, net$9,798 $7,985 
During the three- and six-month periods ended July 30, 2022, we amortized approximately $0.5 million and $1.1 million, respectively, of implementation costs incurred in cloud computing arrangements that are service contracts. During the three- and six-month periods ended July 31, 2021, we amortized approximately $0.4 million and $0.7 million, respectively, of implementation costs incurred in cloud computing arrangements that are service contracts.
Note 7. Accrued and Other Current Liabilities
Accrued and other current liabilities consist of the following (in thousands):
July 30, 2022January 29, 2022
Accrued payroll and related expenses$19,270 $31,194 
Accrued inventory-in-transit25,290 37,156 
Accrued loyalty program13,617 13,481 
Accrued sales return allowance4,576 4,347 
Gift cards8,582 11,695 
Deferred revenue3,134 2,879 
Accrued sales and use tax5,273 4,136 
Accrued freight7,564 6,048 
Term loan interest payable166 1,762 
Accrued marketing3,773 5,419 
Accrued self-insurance liabilities2,873 2,891 
Other16,631 17,700 
Accrued and other current liabilities$110,749 $138,708 
Note 8. Leases
Our lease costs reflected in the tables below include minimum base rents, common area maintenance charges and heating, ventilation and air conditioning charges. We recognize such lease costs in the applicable expense category in either cost of goods sold, or selling, general and administrative expenses in the condensed consolidated statements of operations and comprehensive income.
Our lease costs during the three- and six-month periods ended July 30, 2022 and July 31, 2021 consist of the following (in thousands):
Three Months EndedSix Months Ended
July 30, 2022July 31, 2021July 30, 2022July 31, 2021
Operating (fixed) lease cost$12,675$11,889 $25,461 $25,007 
Short-term lease cost4220 95 30 
Variable lease cost5,5105,535 8,854 10,296 
Total lease cost$18,227$17,444 $34,410 $35,333 
In response to the COVID-19 pandemic, the Financial Accounting Standards Board issued interpretive guidance in April 2020, which provides entities the option to elect to account for lease concessions as though the enforceable rights and
12

obligations existed in the original lease terms. We elected this option; accordingly, we did not remeasure the lease liabilities or record a change to the right-of-use ("ROU") assets for any concessions we received for our retail store leases. 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 and as a result, deferred fixed lease payments during the three- and six-months ended July 30, 2022 were not material. We did not record any reduction to lease costs during the three- and six-months ended July 30, 2022. During the three- and six-month periods ended July 31, 2021 we recorded reductions to lease costs of $0.7 million and $1.0 million, respectively, as a result of negotiated lease concessions.
Other supplementary information related to our leases is reflected in the table below (in thousands except lease term and discount rate data): 
Six Months Ended
July 30, 2022July 31, 2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases$28,742 $30,023 
Right-of-use assets obtained in exchange for new operating lease liabilities$7,157 $3,501 
Decrease in right-of-use assets resulting from operating lease modifications or remeasurements$3,975 $3,439 
Weighted average remaining lease term - operating leases6 years6 years
Weighted average discount rate - operating leases6 %6 %
Note 9. Revenue Recognition
We recognize revenue when our performance obligations under the terms of a contract or an implied arrangement with a customer are satisfied, which is when the merchandise is transferred to the customer and the customer obtains control of it. The amount of revenue we recognize reflects the total consideration we expect to receive for the merchandise, which is the transaction price.
Our revenue, disaggregated by product category, consists of the following (in thousands):
Three Months EndedSix Months Ended
July 30, 2022July 31, 2021July 30, 2022July 31, 2021
Apparel$310,827 $310,976 $602,480 $612,093 
Non-apparel30,049 21,894 66,805 46,524 
Total net sales$340,876 $332,870 $669,285 $658,617 
Amounts within Apparel include revenues earned from the sale of tops, bottoms, dresses, intimates, sleep wear, swim wear and outerwear. Amounts within Non-apparel include revenues earned from the sale of accessories, footwear and beauty.
We recognize a contract liability when we receive consideration from a customer before our performance obligations under the terms of a contract or an implied arrangement with the customer are satisfied. During the six-month period ended July 30, 2022, we recognized revenue of approximately $9.3 million and $5.1 million related to our accrued loyalty program and gift cards, respectively, that existed at the beginning of fiscal year 2022. During the six-month period ended July 31, 2021, we recognized revenue of approximately $9.0 million and $4.0 million related to our accrued loyalty program and gift cards, respectively, that existed at the beginning of fiscal year 2021.
Note 10. Loyalty Program
We operate our loyalty program, Torrid Rewards, in all our stores and on www.torrid.com. Under this program, customers accumulate points based on purchase activity and qualifying non-purchase activity. Upon reaching a certain point level, customers can earn awards that may only be redeemed for merchandise. Unredeemed points typically expire after 13 months without additional purchase and qualifying non-purchase activity and unredeemed awards typically expire 45 days after issuance. 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 condensed consolidated statements of operations and
13

comprehensive income in the period the points are earned by the customer. As of the end of the second quarter of fiscal year 2022 and as of the end of fiscal year 2021, we had $13.6 million and $13.5 million, respectively, in deferred revenue related to our loyalty program included in accrued and other current liabilities in the condensed consolidated balance sheets. During the three-month period ended July 30, 2022, the amount recorded as a reduction of net sales was not material, and during the six-month period ended July 30, 2022, we recorded $0.1 million as a reduction of net sales. During the three- and six-month periods ended July 31, 2021, we recorded $0.3 million and $1.3 million, respectively, as a reduction of net sales. Actual results may differ from our estimates, resulting in changes to net sales.
Note 11. Related Party Transactions
Services Agreements with Hot Topic
Hot Topic Inc. ("Hot Topic") is an entity indirectly controlled by affiliates of Sycamore. From June 2, 2017 until its termination on March 21, 2019, we had a services agreement ("Third Party Services Agreement") with Hot Topic, pursuant to which Hot Topic provided us (or caused applicable third parties to provide) certain services, including information technology, distribution and logistics management, real estate leasing and construction management and other services as may have been specified. On March 21, 2019, we entered into an amended and restated services agreement ("Amended and Restated Services Agreement") with Hot Topic under which Hot Topic provides us (or causes applicable third parties to provide) substantially similar services to those provided under the Third Party Services Agreement. The term of the Amended and Restated Services Agreement is three years, unless we or Hot Topic extend the agreement, or we terminate the agreement (or certain services under the agreement). We may terminate the various services upon written notice. Rates and costs related to the services provided under the Amended and Restated Services Agreement may change with approval from both parties. Each month, we are committed to pay Hot Topic for these services and reimburse Hot Topic for certain costs it incurs in the course of providing these services. We record payments made to Hot Topic under these service agreements in the applicable expense category in either cost of goods sold, or selling, general and administrative expenses. On August 1, 2019, in connection with the IT Asset Purchase Agreement (as defined below), we entered into a services agreement ("Reverse Services Agreement") with Hot Topic, under which Torrid provided Hot Topic with certain information technology services. The term of the Reverse Services Agreement was three years, unless we or Hot Topic extended the agreement, or Hot Topic terminated the agreement. Torrid provided Hot Topic with the specified information technology services at no cost for the first three years of the Reverse Services Agreement, however Hot Topic bore certain capital and operating expenses that it incurred. Costs incurred in connection with providing the specified information technology services to Hot Topic were expensed as incurred in our condensed consolidated statements of operations and comprehensive income. During the three- and six-month periods ended July 30, 2022, we incurred costs of $0.7 million and $1.6 million, respectively, in connection with providing these information technology services to Hot Topic. During the three- and six-month periods ended July 31, 2021, we incurred costs of $0.8 million and $1.7 million, respectively, in connection with providing these information technology services to Hot Topic. In connection with the Reverse Services Agreement, we entered into an amendment to the Amended and Restated Services Agreement ("Amendment to Amended and Restated Services Agreement") with Hot Topic on August 1, 2019, pursuant to which sections pertaining to Hot Topic's provision of information technology services to Torrid were removed. On July 31, 2022, subsequent to the end of the second quarter of fiscal year 2022, we entered into a first amendment to the Reverse Services Agreement (“Amended Reverse Services Agreement”) with Hot Topic, under which Torrid provides Hot Topic with certain information technology services for a fixed fee. The term of the Amended Reverse Services Agreement is two months while both parties negotiate a longer-term amendment to the Reverse Services Agreement with modified terms and conditions.
During the three- and six-month periods ended July 30, 2022, Hot Topic charged us $0.6 million and $1.2 million, respectively, for various services under the applicable services agreements, all of which were recorded as a component of selling, general and administrative expenses. During the three- and six-month periods ended July 31, 2021, Hot Topic charged us $1.9 million and $3.8 million, respectively, for various services under the applicable services agreements, of which $1.3 million and $2.5 million were recorded as components of cost of goods sold, respectively, and the remaining $0.6 million and $1.3 million, respectively, were recorded as selling, general and administrative expenses. As of the end of the second quarter of fiscal year 2022, we owed $0.4 million to Hot Topic for these services, and as of the end of fiscal year 2021, we did not owe any amount to Hot Topic for these services.
Hot Topic incurs certain direct expenses on our behalf, such as payments to our non-merchandise vendors and each month, we pay Hot Topic for these pass-through expenses. As of the end of the second quarter of fiscal year 2022 and as of the end of fiscal year 2021, the net amount we owed Hot Topic for these expenses was $1.1 million and $1.7 million, respectively, which are included in due to related parties in our condensed consolidated balance sheets.
IT Asset Purchase Agreement with Hot Topic
On June 14, 2019, we entered into an asset purchase agreement ("IT Asset Purchase Agreement") with Hot Topic pursuant to which we purchased certain information technology assets from Hot Topic for $29.5 million on August 1, 2019.
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Funds obtained from the Term Loan Credit Agreement (as defined in "Note 12—Debt Financing Arrangements") were used to make the purchase. We accounted for the purchase in accordance with subsections of ASC 805-50, related to transactions between entities under common control. Consequently, we recorded the information technology assets we purchased from Hot Topic at their historical carrying amounts totaling $3.5 million and recognized the difference between the historical carrying amounts and the purchase price in equity. In addition, certain information technology-related obligations and personnel, along with associated assets of $1.4 million and liabilities of $0.1 million, were transferred from Hot Topic to Torrid. In connection with the IT Asset Purchase Agreement, we and Hot Topic agreed to enter into the Reverse Services Agreement and Amendment to Amended and Restated Services Agreement upon the closing date of the IT Asset Purchase Agreement, which was August 1, 2019.
Sponsor Advisory Services Agreement
On May 1, 2015, we entered into an advisory services agreement with Sycamore, pursuant to which Sycamore agreed to provide strategic planning and other related services to us. We are obligated to reimburse Sycamore for its expenses incurred in connection with providing such advisory services to us. As of the end of the second quarter of fiscal year 2022 and as of the end of fiscal year 2021, there were no amounts due, and during the three- and six-month periods ended July 30, 2022 and July 31, 2021, no amounts were paid under this agreement.
From time to time, we reimburse Sycamore for certain management expenses it pays on our behalf. During the three- and six-month periods ended July 30, 2022, we did not make any reimbursements to Sycamore. During the three- and six-month periods ended and July 31, 2021, the reimbursements we made to Sycamore for such expenses were not material. As of the end of the second quarter of fiscal year 2022, there was no amount due, and as of the end of fiscal year 2021, the amount due was not material.
Other Related Party Transactions
MGF Sourcing US, LLC, an entity indirectly controlled by affiliates of Sycamore, is one of our suppliers. During the three- and six-month periods ended July 30, 2022, cost of goods sold included $19.1 million and $36.1 million, respectively, related to the sale of merchandise purchased from this supplier. During the three- and six-month periods ended July 31, 2021, cost of goods sold included $14.3 million and $27.8 million, respectively, related to the sale of merchandise purchased from this supplier. As of the end of the second quarter of fiscal year 2022 and as of the end of fiscal year 2021, the net amounts we owed MGF for these purchases were $18.8 million and $12.1 million, respectively. This liability is included in due to related parties in our condensed consolidated balance sheets.
HU Merchandising, LLC, a subsidiary of Hot Topic, is one of our suppliers. During the three- and six-month periods ended July 30, 2022, cost of goods sold included $0.2 million and $0.3 million, respectively, related to the sale of merchandise purchased from this supplier. During the three- and six-month periods ended July 31, 2021, cost of goods sold included $0.2 million and $0.3 million, respectively, related to the sale of merchandise purchased from this supplier. As of the end of the second quarter of fiscal year 2022, the amount due was not material and as of the end of fiscal year 2021, the amount due to HU Merchandising, LLC was $0.1 million. This liability is included in due to related parties in our condensed consolidated balance sheets.
Staples, Inc., an entity indirectly controlled by affiliates of Sycamore, is one of our suppliers. During the three- and six-month periods ended July 30, 2022 and July 31, 2021, purchases from this supplier were not material. As of the end of the second quarter of fiscal year 2022 and as of the end of fiscal year 2021, the amounts due to Staples, Inc. were not material.
In April 2020, we received a letter of support from Sycamore for up to $20.0 million of additional equity funding, which, if necessary and sufficient, would be provided to further prevent noncompliance with the financial covenants in the Amended Term Loan Credit Agreement (as defined in "Note 12—Debt Financing Arrangements") through May 2021. In September 2020, we received an updated letter of support from Sycamore extending the equity funding commitment of up to $20.0 million, if necessary and sufficient, through January 2022. The letter of support was terminated as of May 6, 2021.
In March 2021, Hot Topic entered into a consulting services agreement with our Chief Financial Officer, George Wehlitz, Jr. ("CFO"), pursuant to which Hot Topic agreed to pay our CFO a consulting fee of $10,000 per month. The agreement was effective from January 3, 2021 and terminated on May 31, 2021.

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Note 12. Debt Financing Arrangements
Our debt financing arrangements consist of the following (in thousands):
July 30, 2022January 29, 2022
Existing ABL Facility, as amended$5,950 $— 
Term loan
New Term Loan Credit Agreement336,875 350,000 
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(6,606)(7,284)
Total term loan outstanding, net of unamortized original issue discount and debt financing costs328,913 341,360 
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$312,769 $320,841 

Fixed mandatory principal repayments due on the outstanding term loan are as follows as of the end of the second quarter of fiscal year 2022 (in thousands):
20228,750 
202317,500 
202417,500 
202517,500 
202617,500 
202717,500 
2028240,625 
$336,875 
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.
The New Term Loan Credit Agreement provides for term loans in an initial aggregate amount of $350.0 million, which is recorded net of an original issue discount ("OID") of $3.5 million and has a maturity date of June 14, 2028. In connection with the New Term Loan Credit Agreement, we paid financing costs of approximately $6.0 million.

The elected interest rate on July 30, 2022 was approximately 9%.
As of the end of the second quarter of fiscal year 2022, we were compliant with our debt covenants under the New Term Loan Credit Agreement.
As of July 30, 2022, the fair value of the New Term Loan Credit Agreement was approximately $323.4 million. 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 19—Fair Value Measurements").
As of the end of the second quarter of fiscal year 2022, total borrowings, net of OID and financing costs, of $328.9 million remain outstanding under the New Term Loan Credit Agreement. During the three- and six-month periods ended July 30, 2022, we recognized $5.8 million and $11.3 million, respectively, of interest expense related to the New Term Loan Credit Agreement. During the three- and six-month periods ended July 30, 2022, we recognized $0.3 million and $0.6 million, respectively, of OID and financing costs related to the New Term Loan Credit Agreement. During the three- and six-month periods ended July 31, 2021, we recognized $2.9 million of interest expense and recognized $0.2 million of OID and financing costs related to the New Term Loan Credit Agreement. The OID and financing costs are amortized over the New Term Loan Credit Agreement's seven-year term and are reflected as a direct deduction of the face amount of the term loan in our condensed
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consolidated balance sheets. We recognize interest payments, together with amortization of the OID and financing costs, in interest expense in our condensed consolidated statements of operations and comprehensive income.
Term Loan Credit Agreement
On June 14, 2019, we entered into a term loan credit agreement ("Term Loan Credit Agreement") with Cortland Capital Market Services LLC, as agent, KKR Credit Advisors (US) LLC, as structuring advisor, and the lenders party thereto (the "Lenders"). On September 17, 2020, we entered into an amended term loan credit agreement ("Amended Term Loan Credit Agreement") with the Lenders, pursuant to which the definition of total debt used in the calculation of the maximum ratio of our total debt to EBITDA (as defined in the Amended Term Loan Credit Agreement) was amended. All other material terms of the Term Loan Credit Agreement remained substantially the same. In September 2020, in conjunction with the Amended Term Loan Credit Agreement, we prepaid $35.0 million of the outstanding Amended Term Loan Credit Agreement Principal (as defined below), associated accrued interest of $0.2 million and an amendment fee of $0.5 million. On June 14, 2021, we utilized the proceeds from the New Term Loan Credit Agreement to pay the remaining outstanding Amended Term Loan Credit Agreement Principal (as defined below) of $207.5 million, associated accrued interest of $1.2 million and a prepayment penalty of $2.1 million.
The Amended Term Loan Credit Agreement provided for term loans in an initial aggregate amount of $260.0 million ("Amended Term Loan Credit Agreement Principal"), which was recorded net of an original issue discount of $2.9 million and had a maturity date of December 14, 2024. In connection with the Term Loan Credit Agreement, we paid financing costs of approximately $4.6 million.
During the three- and six-month periods ended July 31, 2021, we recognized $6.9 million and $11.0 million of interest expense, respectively, related to the Amended Term Loan Credit Agreement. During the three- and six-month periods ended July 31, 2021, we recognized $0.2 million and $0.4 million of OID and financing costs, respectively, related to the Amended Term Loan Credit Agreement. The OID and financing costs were amortized over the Amended Term Loan Credit Agreement's contractual term and were reflected as a direct deduction of the face amount of the term loan in our condensed consolidated balance sheets. On June 14, 2021, upon repayment of the outstanding borrowings under the Amended Term Loan Credit Agreement, we wrote off $5.2 million of unamortized OID and financing costs and incurred a $2.1 million prepayment penalty. We recognize interest payments, OID and financing costs and the prepayment penalty in interest expense in our condensed consolidated statements of operations and comprehensive income.
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. On October 23, 2017, we entered into an amended and restated credit agreement ("Existing ABL Facility"), which amended our Original ABL Facility. The Existing ABL Facility increased the aggregate commitments available under the Original ABL Facility from $50.0 million to $100.0 million (subject to a borrowing base); and increased our right to request additional commitments from up to $30.0 million to up to $30.0 million plus the aggregate principal amount of any permanent principal reductions we may take (subject to customary conditions precedent). On June 14, 2019, in conjunction with the Term Loan Credit Agreement, we entered into an amendment to the Existing ABL Facility (the "1st Amendment"). The 1st Amendment decreased the aggregate commitments available under the Existing ABL Facility from $100.0 million to $70.0 million (subject to a borrowing base), permitted indebtedness incurred pursuant to the Term Loan Credit Agreement and made certain other modifications. On September 4, 2019, we entered into another amendment to the Existing ABL Facility (the "2nd Amendment"). The 2nd Amendment permitted parent company financial statements to be used to satisfy reporting requirements and made certain other modifications. On June 14, 2021, in conjunction with the New Term Loan Credit Agreement, we entered into a third amendment to the Existing ABL Facility (the "3rd Amendment"), which amended our Existing ABL Facility, as amended. The 3rd Amendment increased the aggregate commitments available under the Existing ABL facility, as amended, from $70.0 million to $150.0 million (subject to a borrowing base) and extended the date upon which the principal amount outstanding of the loans would be due and payable in full from October 23, 2022 to June 14, 2026. All other material terms of the Existing ABL Facility, as amended, remain substantially the same as the previous agreements it replaced.
As of the end of the second quarter of fiscal year 2022, the applicable interest rate for borrowings under the Existing ABL Facility was approximately 6% per annum.
As of the end of the second quarter of fiscal year 2022, we were compliant with our debt covenants under the Existing ABL Facility, as amended.
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As of the end of the second quarter 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 $128.0 million.
We consider the carrying amounts of the Existing ABL Facility, as amended, to approximate fair value because of the variable interest rate of this facility, a Level 2 measurement (as defined in "Note 19—Fair Value Measurements").
Availability under the Existing ABL Facility, as amended, as of the end of the second quarter of fiscal year 2022 was $138.5 million, which reflects borrowings of $6.0 million. Availability under the Existing ABL Facility, as amended, at the end of fiscal year 2021 was $123.9 million, which reflects no borrowings. Standby letters of credit issued and outstanding were $5.5 million as of the end of the second quarter of fiscal year 2022 and $5.3 million as of the end of fiscal year 2021. During the third quarter of fiscal year 2017, we incurred $0.5 million of financing costs for the Existing ABL Facility, which were reduced in fiscal year 2019 by $0.1 million written off to account for the impact of our entry into the 1st Amendment. During the second quarter of fiscal year 2021, we incurred an additional $0.7 million of financing costs in connection with our entry into the 3rd Amendment. These financing costs, together with the unamortized financing costs of $0.1 million associated with the Original ABL Facility, are amortized over the five-year term of the Existing ABL Facility, as amended, and are reflected in prepaid expenses and other current assets and deposits and other noncurrent assets in our condensed consolidated balance sheets. During the three-month period ended July 30, 2022, amortization of financing costs for the Existing ABL Facility, as amended, was not material, and during the six-month period ended July 30, 2022, amortization of financing costs for the Existing ABL Facility, as amended, was $0.1 million. During the three- and six-month periods ended July 31, 2021, amortization of financing costs for the Existing ABL Facility, as amended, was not material. During the three- and six-month periods ended July 30, 2022, interest payments were $0.5 million and $0.8 million, respectively. During the three- and six-month periods ended July 31, 2021, interest payments were $0.1 million and $0.2 million, respectively. We recognize amortization of financing costs and interest payments for the revolving credit facilities in interest expense in our condensed consolidated statements of operations and comprehensive income.
Note 13. Income Taxes
Effective Tax Rate
During the three- and six-month periods ended July 30, 2022, the provision for income taxes were $10.0 million and $19.3 million, respectively. During the three- and six-month periods ended July 31, 2021, the benefit from income taxes were $91.5 million and $83.5 million, respectively. The effective tax rates for the three- and six-month periods ended July 30, 2022, were 30.5% and 29.3%, respectively. The effective tax rates for the three- and six-month periods ended July 31, 2021, were 173.5% and 262.7%, respectively. The unconventional effective tax rates during the three- and six-month periods ended July 31, 2021, were primarily due to the increase in the amount of non-deductible items associated with share-based compensation, relative to income (loss) before provision for income taxes for the three- and six-month periods ended July 31, 2021. The increase in the amount of non-deductible items associated with share-based compensation during the three- and six-month periods ended July 31, 2021, were driven by the $111.4 million remeasurement adjustment related to the increase in the value of the incentive units as indicated by the Torrid Holding LLC equity value as of June 30, 2021, following the pricing of our IPO.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") was signed into law, and has resulted in significant changes to the U.S. federal corporate tax law. The CARES Act provides numerous tax provisions and other stimulus measures, including temporary changes regarding the prior and future utilization of net operating losses, temporary changes to the prior and future limitations on interest deductions, temporary suspension of certain payment requirements for the employer portion of Social Security taxes, technical corrections from prior tax legislation for tax depreciation of certain qualified improvement property, and the creation of certain refundable employee retention credits. Additionally, several state and foreign jurisdictions have enacted additional legislation to comply with federal changes. On December 27, 2020, the Consolidated Appropriations Act ("CAA") was enacted in further response to the COVID-19 pandemic. The CAA, among other things, revised certain tax measures enacted under the CARES Act, such as the deductibility of payroll tax credits, charitable contributions for corporate taxpayers, certain meals and entertainment expenses paid or incurred in calendar years 2022 and 2021, and employment retention credit claims. On March 11, 2021, the American Rescue Plan Act ("ARPA") was signed into law with additional funding for COVID-19 pandemic relief. The ARPA includes the expansion of employment retention credit claims and other pandemic funding provisions. On August 16, 2022, the Inflation Reduction Act of 2022 ("IR Act") was enacted to reduce inflation and promote clean energy in the United States. Among other things, the IR Act introduces a 15% alternative minimum tax based on the 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 imposes a 1% excise tax on the fair market value of stock repurchases made by covered corporations after December 31, 2022. The IR Act also includes provisions intended to mitigate climate change by, among others, providing tax credit incentives for
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reductions in greenhouse gas emissions. We have considered the applicable CARES Act, CAA, ARPA and IR Act tax law changes in our tax provision for the three- and six-month periods ended July 30, 2022, and continue to evaluate the impact of these tax law changes on future periods.
Uncertain Tax Positions
The amount of income taxes we pay is subject to ongoing audits by taxing authorities. Our estimate of the potential outcome of any uncertain tax issue is subject to our assessment of the relevant risks, facts and circumstances existing at the time. We believe that we have adequately provided for reasonably foreseeable outcomes related to these matters. However, our future results may include favorable or unfavorable adjustments to our estimated tax liabilities in the period the assessments are made or resolved, which may impact our effective tax rate. As of the end of the second quarter of fiscal year 2022, the total liability for income tax associated with unrecognized tax benefits, including interest and penalties, was $4.0 million ($3.5 million, net of federal benefit). As of the end of fiscal year 2021, the total liability for income tax associated with unrecognized tax benefits, including interest and penalties, was $4.0 million ($3.5 million, net of federal benefit). Our effective tax rate will be affected by any portion of this liability we may recognize.
We believe that it is reasonably possible that $0.3 million ($0.3 million net of federal benefit) of our liability for unrecognized tax benefits, of which the associated interest and penalties are not material, may be recognized in the next 12 months due to the expiration of statutes of limitations.
IT Asset Purchase Agreement with Hot Topic
In connection with the IT Asset Purchase Agreement, we generated a tax amortizable basis of the $29.5 million purchase price, amortizable over three years commencing in fiscal year 2019. We recorded the $26.0 million variance between the $3.5 million net book value and $29.5 million tax amortizable basis of the information technology assets in equity, net of $6.7 million deferred tax.
Note 14. Share-Based Compensation
Our share-based compensation expense, by award type, consists of the following (in thousands):
Three Months EndedSix Months Ended
July 30, 2022July 31, 2021July 30, 2022July 31, 2021
Restricted stock units$253 $2,997 $754 $2,997 
Restricted stock awards1,613 553 3,290 553 
Performance stock units110 — 110 — 
Stock options169 72 363 72 
Employee stock purchase plan30 — 138 — 
Remeasurement adjustments for incentive units— 111,387 — 151,166 
Share-based compensation before income taxes2,175 115,009 4,655 154,788 
Income tax detriment (benefit)192 (785)33 (785)
Share-based compensation expense after income taxes$2,367 $114,224 $4,688 $154,003 
On June 22, 2021, in connection with our IPO, the board of directors ("Board") adopted the Torrid Holdings Inc. 2021 Long-Term Incentive Plan (the "2021 LTIP"), for employees, consultants and directors. The 2021 LTIP provides for the grant of non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units ("RSUs") including performance-based restricted stock units ("PSUs"), stock awards, dividend equivalents, other stock-based awards, cash awards and substitute awards intended to align the interests of service providers, with those of our shareholders. As of the end of the second quarter of fiscal year 2022, 10,687,500 shares were authorized for issuance under the 2021 LTIP.
On June 22, 2021, in connection with our IPO, the Board adopted the Torrid Holdings Inc. 2021 Employee Stock Purchase Plan (the "ESPP"), intended to qualify under Section 423 of the U.S. Internal Revenue Code of 1986, as amended, in order to provide all of our eligible employees with a further incentive towards ensuring our success and accomplishing our corporate goals. The ESPP allows eligible employees to contribute up to 15% of their base earnings towards purchases of common stock, subject to an annual maximum. The purchase price is 85% of the lower of (i) the fair market value of the stock on the date of enrollment and (ii) the fair market value of the stock on the last day of the related purchase period.
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Incentive Units
Prior to the IPO, Torrid Holding LLC issued 13,660,000 Class A, Class B, Class C, Class D, Class E, Class F, Class G, Class H and Class J Torrid incentive units, in the aggregate, net of forfeitures, to certain members of our management.
We recognized the impact of share-based compensation associated with incentive units issued by Torrid Holding LLC in selling, general and administrative expenses in the condensed consolidated statements of operations and comprehensive income. The share-based compensation expense and related capital contribution are reflected in our condensed consolidated financial statements as these awards were deemed to be for our benefit. The intent of the incentive units was to provide profit-sharing opportunities to management rather than equity ownership in our then parent, Torrid Holding LLC. 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. 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 the Board. 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, Compensation. The incentive units were remeasured based on the fair value of the awards at the end of each reporting period. We recorded the expense associated with changes in the fair value of these incentive units as a capital contribution from our former parent, Torrid Holding LLC, as our former parent is the legal obligor for the incentive units.
The incentive units were valued utilizing a contingent claims analysis ("CCA") methodology based on a Black-Scholes option pricing model ("OPM"). Under the OPM, each class of incentive units was modeled as a call option with a unique claim on the assets of Torrid Holding LLC. The characteristics of each class of incentive units determined the uniqueness of the claim on the assets of Torrid Holding LLC. The OPM used to value the incentive units incorporated various assumptions, including the time to liquidity event, equity volatility and risk-free interest rate of return. Equity volatility was based on the historical volatilities of comparable publicly traded companies for the time horizon equal to the time to the anticipated liquidity event; and the risk-free interest rate was for a term corresponding to the time to liquidity event. The assumptions underlying the valuation of the incentive units represented our best estimates, which involved inherent uncertainties and the application of our judgement. The most recent remeasurement of the fair value of the incentive units utilizing the CCA methodology was performed as of May 1, 2021.
During the second quarter of fiscal year 2021, we recorded a share-based compensation expense remeasurement adjustment of $111.4 million related to the increase in the value of the incentive units as indicated by the Torrid Holding LLC equity value as of June 30, 2021, following the pricing of our IPO. The vested portion of the incentive units was exchanged for 13,353,122 shares of our common stock of an equivalent fair value as the vested incentive units and the unvested portion was cancelled. As such, the fair value of these incentive units is no longer recognized in our condensed consolidated statement of operations and comprehensive income.
During the three- and six-month periods ended July 31, 2021, we recognized share-based compensation expense of $111.4 million and $151.2 million, respectively, primarily due to an increase in the Torrid Holding LLC equity value.
RSUs
RSUs are awarded to certain employees, non-employee directors and consultants and entitle the grantee to receive shares of common stock at the end of a vesting period, subject to the employee's continued employment or service as a director or consultant. In general, RSUs vest in equal installments each year over 4 years.
Pursuant to the agreements we entered into with certain members of our management, upon completion of the IPO, such employees received one-time grants of RSUs ("IPO Awards") in an aggregate amount equal to $5.7 million. 50% of the IPO Awards were fully vested on the date of grant, and the remaining 50% vest in equal installments on the first, second and third anniversaries of the date of our IPO. These members of our management must remain employed by us through each vesting date in order to vest in the applicable portions of their IPO Awards. Consequently, we recognized $2.8 million of share-based compensation expense related to these IPO Awards upon the consummation of our IPO with the remainder recognized over the three-year vesting period.
PSUs are awarded to certain employees, non-employee directors and consultants and entitle the grantee to receive shares of common stock based on the achievement of various company performance targets and market conditions. In general, PSUs vest in equal installments over a three year period subject to the achievement of the performance targets or market conditions.
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RSU activity, including IPO Awards and PSUs, under the 2021 LTIP consists of the following (in thousands except per share amounts):
SharesWeighted average grant date fair value per share
Nonvested, January 29, 2022278 $26.75 
Granted706 $4.68 
Vested(58)$27.00 
Forfeited(89)$23.41 
Nonvested, July 30, 2022837 $8.41 
As of the end of the second quarter of fiscal year 2022, unrecognized compensation expense related to unvested RSUs, including PSUs, was $6.6 million, which is expected to be recognized over a weighted average period of approximately 2.6 years.
The weighted average grant date fair value of PSUs granted during the six months ended July 30, 2022 was $3.33 per share and was estimated at the grant date using a Monte Carlo simulation following a Geometric Brownian Motion with the following weighted average assumptions:
Dividend yield— %
Expected volatility(1)
70.2 %
Risk-free interest rate(2)
2.93 %
Expected term(3)
3.00 years
Grant date fair value per share$3.33 
(1)     The expected volatility is estimated based on the historical volatility of a select peer group of similar publicly traded companies for a term that is consistent with the expected term of the PSUs.
(2)    The risk-free interest rates are based on the U.S. Treasury constant maturity interest rate whose term is consistent with the expected term of the PSUs.
(3)    The expected term of the PSUs represents the time period from the grant date and the full vesting date.
Restricted Stock Awards
Restricted stock awards are awarded to certain employees, non-employee directors and consultants, subject to the employee's continued employment or service as a director or consultant. Restricted stock awards vest over periods ranging from 2 to 4 years, subject to the employee's continued employment or service as an employee, non-employee director or consultant, as applicable, on each vesting date.

Restricted stock award activity under the 2021 LTIP consists of the following (in thousands except per share amounts):
SharesWeighted average grant date fair value per share
Nonvested, January 29, 2022532 $27.00 
Granted— 
Vested(120)$27.00 
Forfeited— 
Nonvested, July 30, 2022412 $27.00 

As of the end of the second quarter of fiscal year 2022, unrecognized compensation expense related to unvested restricted stock awards was $10.4 million, which is expected to be recognized over a weighted average period of approximately 1.8 years.

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Stock Options
Stock options generally vest in equal installments each year over 4 years and generally expire 10 years from the grant date.
Stock option activity under the 2021 LTIP consists of the following (in thousands except per share and contractual life amounts):
SharesWeighted average exercise price per shareWeighted average remaining contractual life (years)Aggregate intrinsic value
Outstanding, January 29, 2022337 $21.03 9.4$— 
Granted604 $5.70 
Exercised— 
Forfeited(120)$17.64 
Outstanding, July 30, 2022821 $10.23 9.5$— 
Exercisable, July 30, 202257 
The weighted average grant date fair value of stock option awards granted during the six months ended July 30, 2022, was $3.24 per option and was estimated at the grant date using the Black-Scholes option pricing model with the following weighted average assumptions:
Dividend yield— %
Expected volatility(1)
58.2 %
Risk-free interest rate(2)
2.57 %
Expected term(3)
6.25 years
Grant date fair value per share$3.24 
(1)     The expected volatility is estimated based on the historical volatility of a select peer group of similar publicly traded companies for a term that is consistent with the expected term of the stock options.
(2)    The risk-free interest rates are based on the U.S. Treasury constant maturity interest rate whose term is consistent with the expected term of the stock options.
(3)    The expected term of the stock options represents the estimated period of time until exercise and is calculated using the simplified method.
As of the end of the second quarter of fiscal year 2022, unrecognized compensation expense related to unvested stock options was $3.7 million, which is expected to be recognized over a weighted average period of approximately 3.5 years.
Note 15. Commitments and Contingencies
Litigation
From time to time, we are involved in matters of litigation that arise in the ordinary course of business. Though significant litigation or awards against us could seriously harm our business and financial results, we do not at this time expect any of our pending matters of litigation to have a material adverse effect on our overall financial condition.
Indemnities, Commitments and Guarantees
During the ordinary course of business, we have made certain indemnities, commitments and guarantees under which we may be required to make payments in relation to certain transactions. These indemnities include those given to various lessors in connection with facility leases for certain claims arising from such facility or lease and indemnities to our board of directors and officers to the maximum extent permitted. Commitments include those given to various merchandise vendors and suppliers. From time to time, we have issued guarantees in the form of standby letters of credit as security for workers' compensation claims (our letters of credit are discussed in more detail in "Note 12—Debt Financing Arrangements"). The durations of these indemnities, commitments and guarantees vary. Some of these indemnities, commitments and guarantees do not provide for any limitation of the maximum potential future payments we could be obligated to make. We have not recorded any liability for these indemnities, commitments and guarantees in the accompanying condensed consolidated financial statements as no demands have been made upon us to provide indemnification under such agreements and there are no claims that we are aware of that could have a material effect on our condensed consolidated financial statements.
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Note 16. Stockholders' Deficit
Torrid was formed on October 29, 2019 and capitalized on February 20, 2020. Torrid is authorized to issue 1.0 billion shares of common stock at $0.01 par value, and 5.0 million shares of preferred stock at $0.01 par value. Torrid had 103,601,333 shares of common stock and no shares of preferred stock issued and outstanding as of July 30, 2022. Historical periods prior to the formation of Torrid have been revised to reflect our current capital structure.
On June 22, 2021, Torrid's stockholder approved an amendment to Torrid's certificate of incorporation to (i) effect a 110,000-for-1 stock split of all shares of the issued and outstanding common stock, which was effected on June 22, 2021 and (ii) authorize 5.0 million shares of preferred stock. All share and per-share data in the financial statements and notes to the financial statements has been retroactively adjusted to reflect the stock split for all periods presented. The par value of the common stock was not adjusted as a result of the stock split.
Note 17. Share Repurchases
On December 6, 2021, the Board authorized a new 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. 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. The authorization does not, however, obligate us to acquire any particular amount of shares, and the share repurchase program may be suspended or terminated at any time at our discretion. As of July 30, 2022, we had approximately $44.9 million remaining under the repurchase program.
Share repurchase activity consists of the following (in thousands except share and per share amounts):
Three Months EndedSix Months Ended
July 30, 2022July 31, 2021July 30, 2022July 31, 2021
Number of shares repurchased1,545,811 — 4,464,367 — 
Total cost$8,835 $— $31,700 $— 
Average per share cost including commissions$5.72 $7.10 

We have elected to retire shares repurchased to date. Shares retired become part of the pool of authorized but unissued shares. We have elected to record the purchase price of the retired shares in excess of par value, including transaction costs, directly as an increase in accumulated deficit.
Note 18. Earnings Per Share
Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted earnings per share is applicable only in periods of net income and is computed by dividing net income by the weighted average number of common shares outstanding for the period, inclusive of potentially dilutive common share equivalents outstanding for the period. Periods of net loss require the diluted computation to be the same as the basic computation. During the three- and six-month periods ended July 30, 2022, there were approximately 0.1 million potentially dilutive common share equivalents outstanding that were included in the computation of diluted earnings per share. During the three-month period ended July 30, 2022, there were approximately 0.9 million restricted stock awards and RSUs, including PSUs, and approximately 0.7 million stock options outstanding, which were excluded from the computation of diluted earnings per share as those awards would have been anti-dilutive or were PSUs with performance conditions that had not yet been achieved. During the six-month period ended July 30, 2022, there were approximately 0.7 million restricted stock awards and RSUs, including PSUs, and 0.6 million stock options outstanding, which were excluded from the computation of diluted earnings per share as those awards would have been anti-dilutive or were PSUs with performance conditions that had not yet been achieved. During the three- and six-month periods ended July 31, 2021, there were no potentially dilutive common share equivalents outstanding. During the three-month period ended July 31, 2021, there were approximately 0.3 million restricted stock awards and RSUs and approximately 0.1 million stock options outstanding, which were excluded from the computation of diluted earnings per share as those awards would have been anti-dilutive. During the six-month period ended July 31, 2021, there were approximately 0.1 million restricted stock awards and RSUs and approximately 0.1 million stock options outstanding, which were excluded from the computation of diluted earnings per share as those awards would have been anti-dilutive.

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Note 19. Fair Value Measurements
We carry certain of our assets and liabilities at fair value in accordance with GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.
Valuation techniques used to measure fair value require us to maximize the use of observable inputs and minimize the use of unobservable inputs. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:
Level 1: Quoted prices in active markets for identical assets or liabilities.
Level 2: Observable inputs, other than Level 1 prices, such as quoted prices for similar assets or liabilities in active markets; quoted prices for similar assets or liabilities in markets that are not active; or other inputs other than quoted prices that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities, including interest rates and yield curves, and market corroborated inputs.
Level 3: Unobservable inputs for the asset or liability that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. These are valued based on our estimates and assumptions that market participants would use in pricing the asset or liability.
Financial assets and liabilities measured at fair value on a recurring basis as of the end of the second quarter of fiscal year 2022 consisted of the following (in thousands):
July 30,
2022		Quoted Prices
in Active
Markets for
Identical
Items
(Level 1)		Significant
Other
Observable
Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)
Assets:
Money market funds (cash equivalent)$26 $26 $— $— 
Total assets$26 $26 $— $— 
Liabilities:
Deferred compensation plan liability (noncurrent)$5,842 $— $5,842 $— 
Total liabilities$5,842 $— $5,842 $— 
Financial assets and liabilities measured at fair value on a recurring basis as of the end of fiscal year 2021 consisted of the following (in thousands):
January 29,
2022		Quoted Prices
in Active
Markets for
Identical
Items
(Level 1)		Significant
Other
Observable
Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3
Assets:
Money market funds (cash equivalent)$11,411 $11,411 $— $— 
Total assets$11,411 $11,411 $— $— 
Liabilities:
Deferred compensation plan liability (noncurrent)$6,873 $— $6,873 $— 
Total liabilities$6,873 $— $6,873 $— 
The fair value of our money market funds is based on quoted prices in active markets. The deferred compensation plan liability represents the amount that would be earned by participants if the funds were invested in securities traded in active
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markets. The fair value of the deferred compensation plan liability is determined based on quoted prices of similar assets that are traded in observable markets, or represents the cash withheld by participants prior to any investment activity.
Note 20. Private Label Credit Card
We have an agreement with a third party, which is amended from time to time, to provide customers with private label credit cards ("Credit Card Agreement"). Each private label credit card bears the logo of the Torrid brand and can only be used at our store locations and on www.torrid.com. A third-party financing company is the sole owner of the accounts issued under the private label credit card program and absorbs the losses associated with non-payment by the private label card holders and a portion of any fraudulent usage of the accounts. Pursuant to the Credit Card Agreement, we receive marketing and promotional funds from the third-party financing company based on usage of the private label credit cards. These marketing and promotional funds are recorded as a reduction in selling, general and administrative expenses in the condensed consolidated statements of operations and comprehensive income. During the three- and six-month periods ended July 30, 2022, these funds amounted to $12.6 million and $17.4 million, respectively, related to these private label credit cards. During the three- and six-month periods ended July 31, 2021, these funds amounted to $4.6 million and $9.3 million, respectively.
Note 21. Deferred Compensation Plan
On August 1, 2015, we established the Torrid LLC Management Deferred Compensation Plan ("Deferred Compensation Plan") for the purpose of providing highly compensated employees a program to meet their financial planning needs. The Deferred Compensation Plan provides participants with the opportunity to defer up to 80% of their base salary and up to 100% of their annual earned bonus, all of which, together with the associated investment returns, are 100% vested from the outset. The Deferred Compensation Plan is designed to be exempt from most provisions of the Employee Retirement Security Act of 1974, as amended. All deferrals and associated earnings are our general unsecured obligations. We may at our discretion contribute certain amounts to eligible employees' accounts. To the extent participants are ineligible to receive contributions from participation in our 401(k) Plan (as defined in "Note 22—Employee Benefit Plan"), we may contribute 50% of the first 4% of participants' eligible contributions into their Deferred Compensation Plan accounts. As of the end of the second quarter of fiscal year 2022 and as of the end of fiscal year 2021, we did not have any assets of the Deferred Compensation Plan and the associated liabilities were $6.7 million and $7.2 million, respectively, included in our condensed consolidated balance sheets. As of the end of the second quarter of fiscal year 2022, $0.9 million of the $6.7 million Deferred Compensation Plan liabilities were included in accrued and other current liabilities in our condensed consolidated balance sheets. As of the end of fiscal year 2021, $0.4 million of the $7.2 million Deferred Compensation Plan Liabilities were included in accrued and other current liabilities in our condensed consolidated balance sheets.
Note 22. Employee Benefit Plan
On August 1, 2015, we adopted the Torrid 401(k) Plan ("401(k) Plan"). All employees who have been employed by us for at least 200 hours and are at least 21 years of age are eligible to participate. Employees may contribute up to 80% of their eligible compensation to the 401(k) Plan, subject to a statutorily prescribed annual limit. We may at our discretion contribute certain amounts to eligible employees' accounts. We may contribute 50% of the first 4% of participants' eligible contributions into their 401(k) Plan accounts. During the three- and six-month periods ended July 30, 2022, we contributed $0.2 million and $0.4 million, respectively, to eligible employees' 401(k) Plan accounts. During the three- and six-month periods ended July 31, 2021, we contributed $0.2 million and $0.3 million, respectively, to eligible employees' 401(k) Plan accounts.



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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion summarizes the significant factors affecting the consolidated operating results, financial condition, liquidity and cash flows of our Company as of and for the periods presented below. The following discussion and analysis should be read in conjunction with the condensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements that are based on the beliefs of our management, as well as assumptions made by, and information currently available to, our management. 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 Quarterly Report on Form 10-Q, 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 is curvy and wears sizes 10 to 30. Torrid is focused on fit and offers high quality products across a broad assortment that includes tops, bottoms, denim, dresses, intimates, activewear, footwear and accessories. Our proprietary product offering delivers a superior fit for the curvy woman that makes her love the way she looks and feels. Our style is unapologetically youthful and sexy and we are maniacally focused on fit. We believe our customer values the appeal and versatility of our curated product assortment that helps her look her best for any occasion, including weekend, casual, work and dressy, all at accessible price points. Through our product and brand experience we connect with customers in a way that other brands, many of which treat plus-size customers as an after-thought, have not.
Key Financial and Operating Metrics
We use the following metrics to assess the progress of our business, inform how we allocate our time and capital, and assess the near-term and longer-term performance of our business.
July 30, 2022July 31, 2021
Number of stores (as of end of period)627 608 
Three Months EndedSix Months Ended
(in thousands, except percentages)
July 30, 2022July 31, 2021July 30, 2022July 31, 2021
Comparable sales1 %30 %— %60 %
Net income$22,710 $38,787 $46,776 $51,712 
Adjusted EBITDA(A)
$52,088 $86,516 $103,867 $162,227 
 
(A)Please refer to "Results of Operations" for a reconciliation of net income to Adjusted EBITDA.
Comparable Sales. We define comparable sales for any given period as the sales of our e-Commerce operations and stores that we have included in our comparable sales base during that period. We include a store in our comparable sales base after it has been open for 15 full fiscal months. 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. 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.
Number of Stores. Store count reflects all stores open at the end of a reporting period. In connection with opening new stores, we incur pre-opening costs, which primarily consist of payroll, travel, training, marketing, initial opening supplies, costs of transporting initial inventory and fixtures to store locations, and occupancy costs incurred from the time of possession of a store site to the opening of that store. These pre-opening costs are included in our selling, general and administrative expenses and are expensed as incurred.
Adjusted EBITDA. Adjusted EBITDA is a supplemental measure of our operating performance that is neither required by, nor presented in accordance with GAAP and our calculation thereof may not be comparable to similarly titled measures reported by other companies. Adjusted EBITDA represents GAAP net income (loss) plus interest expense less interest income, net of other expense (income), plus provision for less (benefit from) income taxes, depreciation and amortization ("EBITDA"), and share-based compensation, non-cash deductions and charges and other expenses. We believe Adjusted EBITDA facilitates
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operating performance comparisons from period to period by isolating the effects of certain items that vary from period to period without any correlation to ongoing operating performance. We also use Adjusted EBITDA as one of the primary methods for planning and forecasting the overall expected performance of our business and for evaluating on a quarterly and annual basis actual results against such expectations. Further, we recognize Adjusted EBITDA as a commonly used measure in determining business value and, as such, use it internally to report and analyze our results and as a benchmark to determine certain non-equity incentive payments made to executives.
Adjusted EBITDA has limitations as an analytical tool. This measure is not a measurement of our financial performance under GAAP and should not be considered in isolation or as an alternative to or substitute for net income (loss), income (loss) from operations or any other performance measures determined in accordance with GAAP or as an alternative to cash flows from operating activities as a measure of our liquidity. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. Among other limitations, Adjusted EBITDA does not reflect:
 
•interest expense;
•interest income, net of other expense (income);
•provision for income taxes;
•depreciation and amortization;
•share-based compensation;
•non-cash deductions and charges; and
•other expenses.
Factors Affecting Our Performance
We believe that our performance and future success depend on a number of factors that present significant opportunities for us but also pose risks and challenges, including those discussed below and elsewhere in this Quarterly Report on Form 10-Q in the section titled "Risk Factors."
Customer Acquisition and Retention. Our success is impacted not only by efficient and profitable customer acquisition, but also by our ability to retain customers and encourage repeat purchases. It is important to maintain reasonable costs for these marketing efforts relative to the net sales and profit we expect to derive from customers. 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. These changes may adversely affect our results of operations.
Customer Migration from Single to Omni-channel. We have a history of converting customers from single-channel customers to omni-channel customers, defined as active customers who shopped both online and in-store within the last twelve months. Customers that shop across multiple channels purchase from us more frequently and spent approximately 3.4 times more per year than our single-channel customer during fiscal year 2021.
Overall Economic Trends. Consumer purchases of clothing generally remain constant or may increase during stable economic periods and decline during recessionary periods, inflationary periods and other periods when disposable income is adversely affected. Consequently, our results of operations during any given period are often impacted by the overall economic conditions in the markets which we operate. 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. 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. We intend to continue investing in our brand, with a specific focus on growing brand awareness, customer engagement, and conversion through targeted investments in performance and brand marketing. We have made significant historical investments to strengthen the Torrid brand through our marketing efforts, brand partnerships, events and expansion of our social media presence. If we fail to cost-effectively promote our brand or convert impressions into new customers, our net sales growth and profitability may be adversely affected.
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Inventory Management. Our strategy is built around a base of core products that provide our customer with year round style. At the same time, we introduce new lines of merchandise approximately 16 times per year, thus providing a consistent flow of fresh merchandise to keep our customer engaged, encourage repeat business and attract new customers. We employ a data-driven approach to design and product development, proactively and quickly incorporating sales and operational performance information alongside customer feedback from thousands of product reviews. We engage in ongoing dialogue with customers through social media and customer surveys. Shifts in inventory levels may result in fluctuations in the amount of regular price sales, markdowns, and merchandise mix, as well as gross margin.
Impact of COVID-19. The COVID-19 pandemic has caused general business disruption worldwide. The full extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations, cash flows, and financial condition will depend on future developments that are uncertain. 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. We have invested significantly to strengthen our business, including augmenting leadership across our organization and enhancing our infrastructure and technology, and have delivered significant growth as a result. 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 will also continue to selectively expand our store footprint and make investments to improve the customer experience both in-store and online. We believe that such investments will increase the number and loyalty of our customers and, as a result, yield positive financial performance in the long term.
Seasonality. While seasonality frequently impacts businesses in the retail sector, our business is generally not seasonal. Accordingly, our net sales do not fluctuate as significantly as those of other brands and retailers from quarter to quarter and any modest seasonal effect does not significantly change the underlying trends in our business. Additionally, we do not generate an outsized share of our net sales or Adjusted EBITDA during the holiday season. Typically, our Adjusted EBITDA generation is strongest in the first half of the year as we benefit from more favorable merchandise margins, lower advertising and lower shipping expenses relative to the second half of the year. The lack of net sales seasonality provides structural cost advantages relative to peers, including reduced staffing cyclicality and seasonal distribution capacity needs.
Components of Our Results of Operations
Net Sales. Net sales reflects our revenues from the sale of our merchandise, shipping and handling revenue received from e-Commerce sales and gift card breakage income, less returns, discounts and loyalty points/awards. Revenue from our stores is recognized at the time of sale and revenue from our e-Commerce channel is recognized upon shipment of the merchandise to the home of the customer; except in cases where the merchandise is shipped to a store and revenue is recognized when the customer retrieves the merchandise from the store. Net sales are impacted by the size of our active customer base, product assortment and availability, marketing and promotional activities and the spending habits of our customers. Net sales are also impacted by the migration of single-channel customers (i.e., customers shopping only in-store or online) to omni-channel customers (i.e., customers shopping both in-store and online), who on average spend significantly more than single-channel customers in a given year.
Gross Profit. Gross profit is equal to our net sales less cost of goods sold. Our cost of goods sold includes merchandise costs, freight, inventory shrinkage, payroll expenses associated with the merchandising department, distribution center expenses and store occupancy expenses, including rent, common area maintenance charges, real estate taxes and depreciation. Merchandising payroll costs and store occupancy costs included within cost of goods sold are largely fixed and do not necessarily increase as volume increases. We review our inventory levels on an ongoing basis in order to identify slow-moving merchandise and generally use markdowns to clear that merchandise. The timing and level of markdowns are driven primarily by customer acceptance of our merchandise. 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. Our historical revenue growth has been accompanied by increased selling, general and administrative expenses. For instance, we continue to make payroll investments to support our growth.
Marketing Expenses. We continue to make investments in marketing in an effort to grow and retain our active customer base and increase our brand awareness. Marketing expenses consist primarily of (i) targeted online performance marketing
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costs, such as retargeting, paid search/product listing advertising, and social media advertisements, (ii) store and brand marketing, public relations and photographic production designed to acquire, retain and remain connected to customers and (iii) payroll and benefits expenses associated with our marketing team.
Interest Expense. 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 (Benefit from) Income Taxes. Our provision for (benefit from) income taxes primarily 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.
Results of Operations
Three-Months Ended July 30, 2022 Compared to Three-Months Ended July 31, 2021
The following table summarizes our consolidated results of operations for the periods indicated (dollars in thousands):
Three Months Ended
July 30, 2022% of Net
Sales		July 31, 2021% of Net
Sales
Net sales$340,876 100.0 %$332,870 100.0 %
Cost of goods sold222,030 65.1 %183,150 55.0 %
Gross profit118,846 34.9 %149,720 45.0 %
Selling, general and administrative expenses65,928 19.3 %179,041 53.8 %
Marketing expenses13,502 4.0 %10,728 3.2 %
Income (loss) from operations39,416 11.6 %(40,049)(12.0)%
Interest expense6,697 2.0 %12,662 3.8 %
Interest income, net of other expense48 0.0 %49 0.0 %
Income (loss) before provision for income taxes32,671 9.6 %(52,760)(15.8)%
Provision for (benefit from) income taxes9,961 2.9 %(91,547)(27.5)%
Net income$22,710 6.7 %$38,787 11.7 %

The following table provides a reconciliation of net income to Adjusted EBITDA for the periods presented (dollars in thousands):
Three Months Ended
July 30, 2022July 31, 2021
Net income$22,710 $38,787 
Interest expense6,697 12,662 
Interest income, net of other expense48 49 
Provision for (benefit from) income taxes9,961 (91,547)
Depreciation and amortization(A)
8,871 8,574 
Share-based compensation(B)
2,175 115,009 
Non-cash deductions and charges(C)
1,626 35 
Other expenses(D)
— 2,947 
Adjusted EBITDA$52,088 $86,516 
  
(A)Depreciation and amortization excludes amortization of debt issuance costs and original issue discount that are reflected in interest expense.
(B)Prior to the consummation of our IPO on July 6, 2021, share-based compensation was determined based on the remeasurement of our liability-classified incentive units.
(C)Non-cash deductions and charges includes losses on property and equipment disposals and the net impact of non-cash rent expense.
(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.
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Net Sales
Net sales increased $8.0 million, or 2.4%, to $340.9 million for the three months ended July 30, 2022, from $332.9 million for the three months ended July 31, 2021. This increase was primarily driven by an increase in sales transactions, partially offset by a decrease in average sales transaction value relative to the three months ended July 31, 2021, as a result of increased promotional activity. The total number of stores we operate increased by 19 stores, or 3.1%, to 627 stores as of July 30, 2022, from 608 stores as of July 31, 2021.
Gross Profit
Gross profit for the three months ended July 30, 2022 decreased $30.9 million, or 20.6%, to $118.8 million, from $149.7 million for the three months ended July 31, 2021. This decrease was primarily due to higher net sales volumes associated with the increase in sales transactions and an increase in product costs that resulted in a $28.9 million decrease in merchandise margin. Gross profit as a percentage of net sales decreased 10.1% to 34.9% for the three months ended July 30, 2022 from 45.0% for the three months ended July 31, 2021. This decrease was primarily driven by lower merchandise margin rate driven by increased promotional activity, product costs and e-Commerce shipping costs.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the three months ended July 30, 2022 decreased $113.1 million, or 63.2%, to $65.9 million, from $179.0 million for the three months ended July 31, 2021. The decrease was primarily due to a $112.8 million decrease in share-based compensation expense and an $8.0 million increase in marketing and promotional funds received from the third-party financing company for our private label credit cards, partially offset by increases in store and e-Commerce payroll costs of $5.4 million. The decrease in share-based compensation expense during the three months ended July 30, 2022, was due to an increase in the Torrid Holding LLC equity value during the three months ended July 31, 2021. Selling, general and administrative expenses as a percentage of net sales decreased by 34.5% to 19.3% for the three months ended July 30, 2022 from 53.8% for the three months ended July 31, 2021. This decrease was driven by decreased share-based compensation expense and an increase in marketing and promotional funds received from the third-party financing company for our private label credit cards, partially offset by increases in store and e-Commerce payroll costs.

Marketing Expenses
Marketing expenses for the three months ended July 30, 2022 increased $2.8 million, or 25.9%, to $13.5 million, from $10.7 million for the three months ended July 31, 2021. This increase was primarily due to increased television and creative marketing. Marketing expenses as a percentage of net sales increased by 0.8% to 4.0% during the three months ended July 30, 2022 from 3.2% during the three months ended July 31, 2021. This increase was driven by increased television and creative marketing.
Interest Expense
Interest expense was $6.7 million for the three months ended July 30, 2022, compared to $12.7 million for the three months ended July 31, 2021. The decrease was primarily due to the write-off of $5.2 million of unamortized deferred financing costs and OID when we repaid the Amended Term Loan Credit Agreement, and the $2.1 million prepayment penalty during the three months ended July 31, 2021.
Provision for (Benefit from) Income Taxes
The provision for income taxes was $10.0 million for the three months ended July 30, 2022, compared to a benefit from income taxes of $91.5 million for the three months ended July 31, 2021. Our effective tax rate was 30.5% for the three months ended July 30, 2022 and 173.5% for the three months ended July 31, 2021. The unconventional effective tax rate for the three months ended July 31, 2021 was primarily due to the increase in the amount of non-deductible items associated with share-based compensation, relative to loss before provision for income taxes for the three months ended July 31, 2021. The increase in the amount of non-deductible items associated with share-based compensation during the three months ended July 31, 2021 was driven by a $111.4 million remeasurement adjustment related to the increase in the value of the incentive units as indicated by the Torrid Holding LLC equity value as of June 30, 2021, following the pricing of our IPO.
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Six Months Ended July 30, 2022 Compared to Six Months Ended July 31, 2021
The following table summarizes our consolidated results of operations for the periods indicated (dollars in thousands):
Six Months Ended
July 30, 2022% of Net
Sales		July 31, 2021% of Net
Sales
Net sales$669,285 100.0 %$658,617 100.0 %
Cost of goods sold425,293 63.5 %$363,965 55.3 %
Gross profit243,992 36.5 %294,652 44.7 %
Selling, general and administrative expenses133,359 20.0 %288,954 43.9 %
Marketing expenses31,476 4.7 %20,253 3.0 %
Income (loss) from operations79,157 11.8 %(14,555)(2.2)%
Interest expense12,961 1.9 %17,286 2.6 %
Interest income, net of other expense (income)76 0.0 %(60)0.0 %
Income (loss) before provision for income taxes66,120 9.9 %(31,781)(4.8)%
Provision for (benefit from) income taxes19,344 2.9 %(83,493)(12.7)%
Net income$46,776 7.0 %$51,712 7.9 %
The following table provides a reconciliation of net income to Adjusted EBITDA for the periods presented (dollars in thousands):
Six Months Ended
July 30, 2022July 31, 2021
Net income$46,776 $51,712 
Interest expense12,961 17,286 
Interest income, net of other expense76 (60)
Provision for (benefit from) income taxes19,344 (83,493)
Depreciation and amortization(A)
18,132 17,143 
Share-based compensation(B)
4,655 154,788 
Non-cash deductions and charges(C)
1,935 70 
Other expenses(D)
(12)4,781 
Adjusted EBITDA$103,867 $162,227 
  
(A)Depreciation and amortization excludes amortization of debt issuance costs and original issue discount that are reflected in interest expense.
(B)Prior to the consummation of our IPO on July 6, 2021, share-based compensation was determined based on the remeasurement of our liability-classified incentive units.
(C)Non-cash deductions and charges includes losses on property and equipment disposals and the net impact of non-cash rent expense.
(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.
31

Net Sales
Net sales increased $10.7 million, or 1.6%, to $669.3 million for the six months ended July 30, 2022, from $658.6 million for the six months ended July 31, 2021. This increase was primarily driven by an increase in sales transactions, partially offset by a decrease in average sales transaction value relative to the six months ended July 31, 2021, as a result of increased promotional activity. The total number of stores we operate increased by 19 stores, or 3.1%, to 627 stores as of July 30, 2022, from 608 stores as of July 31, 2021.
Gross Profit
Gross profit for the six months ended July 30, 2022, decreased $50.7 million, or 17.2%, to $244.0 million, from $294.7 million for the six months ended July 31, 2021. This decrease was primarily due to higher net sales volumes associated with the increase in sales transactions and an increase in product costs that resulted in a $48.1 million decrease in merchandise margin. Gross profit as a percentage of net sales decreased 8.3% to 36.5% for the six months ended July 30, 2022, from 44.7% for the six months ended July 31, 2021. This decrease was primarily driven by lower merchandise margin rate driven by increased promotional activity, product costs and e-Commerce shipping costs and increased distribution costs.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the six months ended July 30, 2022, decreased $155.6 million, or 53.8%, to $133.4 million, from $289.0 million for the six months ended July 31, 2021. The decrease was primarily due to a $150.1 million decrease in share-based compensation expense, a $13.4 million decrease in performance bonuses and an $8.1 million increase in marketing and promotional funds received from the third-party financing company for our private label credit cards, partially offset by increases in store and e-Commerce payroll costs of $11.0 million and other store operating costs of $3.3 million. The decrease in share-based compensation expense during the six months ended July 30, 2022 was due to an increase in the Torrid Holding LLC equity value during the six months ended July 31, 2021. Selling, general and administrative expenses as a percentage of net sales decreased by 23.9% to 20.0% for the six months ended July 30, 2022, from 43.9% for the six months ended July 31, 2021. This decrease was driven by decreased share-based compensation expense and performance bonuses and an increase in marketing and promotional funds received from the third-party financing company for our private label credit cards, partially offset by increases in store and e-Commerce payroll costs and other store operating costs.
Marketing Expenses
Marketing expenses for the six months ended July 30, 2022, increased $11.2 million, or 55.4%, to $31.5 million, from $20.3 million for the six months ended July 31, 2021. This increase was primarily due to increased television, digital, store and brand marketing, partially offset by decreased direct mail program spend. Marketing expenses as a percentage of net sales increased by 1.7% to 4.7% during the six months ended July 30, 2022, from 3.0% during the six months ended July 31, 2021. This increase was driven by increased television, digital and creative marketing, partially offset by decreased direct mail program spend.
Interest Expense
Interest expense was $13.0 million for the six months ended July 30, 2022, compared to $17.3 million for the six months ended July 31, 2021. The decrease was primarily due to the write-off of $5.2 million of unamortized deferred financing costs and OID when we repaid the Amended Term Loan Credit Agreement, and the $2.1 million prepayment penalty during the six months ended July 31, 2021.
Provision for (Benefit from) Income Taxes
The provision for income taxes for the six months ended July 30, 2022 was $19.3 million, compared to a benefit from income taxes of $83.5 million for the six months ended July 31, 2021. Our effective tax rate was 29.3% for the six months ended July 30, 2022, and 262.7% for the six months ended July 31, 2021. The unconventional effective tax rate for the six months ended July 31, 2021 was primarily due to the increase in the amount of non-deductible items associated with share-based compensation, relative to loss before provision for income taxes for six months ended July 31, 2021. The increase in the amount of non-deductible items associated with share-based compensation during the six months ended July 31, 2021 was driven by a $111.4 million remeasurement adjustment related to the increase in the value of the incentive units as indicated by the Torrid Holding LLC equity value as of June 30, 2021, following the pricing of our IPO.

32

Liquidity and Capital Resources
General
Our business relies on cash flows from operations as our primary source of liquidity. We do, however, have access to additional liquidity, if needed, through borrowings under our Existing ABL Facility, as amended. Availability under the Existing ABL Facility, as amended, as of the end of the second quarter of fiscal year 2022, was $138.5 million, which reflects borrowings of $6.0 million. Our primary cash needs are for merchandise inventories, payroll, rent for our stores, headquarters and distribution center, capital expenditures associated with opening new stores and updating existing stores, logistics and information technology. We also need cash to make discretionary repurchases of our common stock, and fund our interest and principal payments on the New Term Loan Credit Agreement. The most significant components of our working capital are cash and cash equivalents, merchandise inventories, prepaid expenses and other current assets, accounts payable and accrued and other current liabilities. 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. There can be no assurance, however, that our business will generate sufficient cash flows from operations or that future borrowings will be available under our Existing ABL Facility, as amended, or otherwise to enable us to service our indebtedness, or to make capital expenditures in the future. Our future operating performance and our ability to service or extend our indebtedness will be subject to future economic conditions and to financial, business and other factors, many of which are beyond our control.
Cash Flow Analysis
A summary of operating, investing and financing activities are shown in the following table (dollars in thousands):
Six Months Ended
July 30, 2022July 31, 2021
Net cash provided by operating activities$44,293 $106,478 
Net cash used in investing activities(11,444)(5,891)
Net cash used in financing activities(38,826)(172,954)
Net Cash Provided By Operating Activities
Operating activities consist primarily of net income adjusted for non-cash items, including depreciation and amortization and share-based compensation, the effect of working capital changes, taxes paid and lease incentives received from landlords.
Net cash provided by operating activities during the six months ended July 30, 2022 was $44.3 million compared to $106.5 million during the six months ended July 31, 2021. The decrease in cash provided by operating activities during the six months ended July 30, 2022 was primarily as a result of a decrease in share-based compensation expense added back to cash provided by operating activities as a non-cash adjustment and a decrease in accrued and other current liabilities, partially offset by a net increase in cash added back to cash provided by operating activities related to income taxes receivable, prepaid income taxes and income taxes payable. The decrease in accrued and other current liabilities was primarily as a result of decreases in accrued payroll and related expenses and accrued inventory-in-transit. The decrease in share-based compensation expense during the six months ended July 30, 2022 was due to an increase in Torrid Holding LLC's equity value during the six months ended July 31, 2021.
Net Cash Used In Investing Activities
Typical investing activities consist primarily of capital expenditures for growth (new store openings, relocations and major remodels), store maintenance (minor store remodels and investments in store fixtures), and infrastructure to support the business related primarily to information technology, our headquarters facility and our West Jefferson, Ohio distribution center.
Net cash flows used in investing activities during the six months ended July 30, 2022 was $11.4 million, compared to $5.9 million during the six months ended July 31, 2021. 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 and store relocations and investments in our West Jefferson, Ohio distribution center during the six months ended July 30, 2022, compared to the six months ended July 31, 2021.

33

Net Cash Used In Financing Activities
Financing activities consist primarily of (i) borrowings and repayments related to our Existing ABL Facility, as amended, (ii) borrowings and repayments related to the New Term Loan Credit Agreement and (iii) repurchases and retirement of our common stock.
Net cash used in financing activities during the six months ended July 30, 2022 was $38.8 million compared to $173.0 million during the six months ended July 31, 2021. The decrease in net cash used in financing activities is primarily as a result of the following activities during the six months ended July 30, 2022: (i) the absence of the $300.0 million capital distribution to Torrid Holding LLC, (ii) the absence of the $212.8 million repayment of the Amended Term Loan Credit Agreement and related costs and (iii) $6.0 million net borrowing from the Existing ABL Facility, as amended, partially offset by repurchases and retirement of common stock of $31.7 million and the absence of the $340.5 million proceeds received during the six months ended July 31, 2021 from the New Term Loan Credit agreement.
Debt Financing Arrangements
As of July 30, 2022, we had $328.9 million of outstanding indebtedness, net of unamortized original issue discount and debt financing costs, consisting of term loans under the New Term Loan Credit Agreement. As of July 30, 2022, we had $6.0 million of borrowings under the Existing ABL Facility, as amended. Please refer to "Note 12—Debt Financing Arrangements" for further discussion regarding our indebtedness.

Critical Accounting Policies and Significant Estimates
There have been no material changes to our critical accounting policies and estimates as discussed in our Annual Report on Form 10-K for the fiscal year ended January 29, 2022.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Our market risk profile as of January 29, 2022, is disclosed in our Annual Report on Form 10-K and has not materially changed. Please refer to "Note 12—Debt Financing Arrangements" for further discussion regarding our indebtedness.
Item 4. Controls and Procedures
Management's Evaluation of Disclosure Controls and Procedures
We, under the supervision of and with the participation of our management, including our Chief Executive Officer and Chief Accounting Officer, have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")). Based on that evaluation, our Chief Executive Officer and Chief Accounting Officer concluded that our disclosure controls and procedures are effective as of July 30, 2022, to ensure that information required to be disclosed in the reports that we file under the Exchange Act is recorded, processed, summarized and reported within time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Accounting Officer, as appropriate, to allow for timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There were no changes during the three months ended July 30, 2022 in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
34

Part II - Other Information

Item 1. Legal Proceedings
From time to time, we are subject to certain legal proceedings and claims in the ordinary course of business. We are not presently party to any legal proceedings the resolution of which we believe would have a material adverse effect on our business, financial condition, operating results or cash flows. We 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 1A. Risk Factors
There have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K for the fiscal year ended January 29, 2022.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On December 6, 2021, the Board authorized a new 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. 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. The authorization does not, however, obligate us to acquire any particular amount of shares, and the share repurchase program may be suspended or terminated at any time at our discretion. As of July 30, 2022, we had approximately $44.9 million remaining under the repurchase program.

The following is a summary of our repurchases of common shares during the three months ended July 30, 2022 (in thousands, except share and per share data):

Total Number of Shares PurchasedAverage Price Paid per ShareTotal Number of Shares Purchased as Part of Publicly Announced Plans or ProgramsApproximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs
(In thousands)
May 1 - May 281,107,306 $5.72 1,107,306 $47,450 
May 29 - July 2438,505 $5.71 438,505 $44,947 
July 3 - July 30— — $44,947 
Total share repurchases1,545,811 $5.72 1,545,811 

Item 3. Defaults Upon Senior Securities
None.

Item 4. Mine Safety Disclosures
Not applicable.

Item 5. Other Information
None.
35

Item 6. Exhibits

EXHIBIT INDEX
Exhibit
Number		DescriptionIncorporated by Reference
Form
Filing Date
Exhibit
3.18-KJuly 6, 20213.1
3.28-KJuly 6, 20213.2
10.1+8-KAugust 3, 202210.1
10.2+8-KMay 4, 202210.1
10.3+8-KMay 4, 202210.2
10.4+8-KMay 4, 202210.3
10.5*
10.6+*
31.1*
31.2*
32.1**
32.2**
101*Interactive Data Files (formatted in Inline XBRL)
104*Cover Page Interactive Data Files (Embedded within the Inline XBRL document and included in Exhibit 101)
+Indicates a management contract or compensatory plan or arrangement.
*
Filed herewith
**
Furnished herewith
36

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in City of Industry, California on September 7, 2022.
 
Torrid Holdings Inc.
By:/s/ Lisa Harper
Name:Lisa Harper
Title:Chief Executive Officer and Director
(Principal Executive Officer)
By:/s/ Chinwe Abaelu
Name:Chinwe Abaelu
Title:SVP, Chief Accounting Officer
(Principal Financial and Accounting Officer)


37
1 FIRST AMENDMENT TO THE SERVICES AGREEMENT This First Amendment to The Services Agreement (“First Amendment”), effective as of July 31, 2022, is made by and between Hot Topic, Inc., a California corporation (“Hot Topic”), and Torrid LLC, a California limited liability company (“Torrid”). This First Amendment is made pursuant to the Services Agreement, dated August 1, 2019 (“Services Agreement”) executed by and between Hot Topic and Torrid. Capitalized terms used herein shall have the respective definitions set forth in the Services Agreement. RECITALS WHEREAS, the Parties entered into the Services Agreement, whereby Torrid agreed to provide Hot Topic certain information technology services; WHEREAS, the Parties wish to extend the term of the Services Agreement, under the current terms and conditions, while the Parties negotiate a longer-term amendment to the Services Agreement with modified terms and conditions; NOW THEREFORE, Hot Topic and Torrid agree that the Services Agreement shall be amended as follows: 1. The Term of the Services Agreement is hereby extended up to and through October 1, 2022. The Parties may mutually agree in writing to further extensions. 2. For services provided under this First Amendment, Hot Topic will pay Torrid as follows: a. for the period July 31, 2022, through August 31, 2022, the amount of $175,000 payable by July 31, 2022 to Torrid. b. For the period September 1, 2022, through October 1, 2022, the amount of $175,000 payable by August 28, 2022 to Torrid. 3. Except as otherwise hereby amended, the Services Agreement is hereby ratified and confirmed in all other respects. By signing in the space provided below, the Parties hereto have accepted and agreed to all of the terms and conditions hereof. HOT TOPIC, INC. TORRID LLC By: By: Name: __________________________ Name: Tanner MacDiarmid Title: ___________________________ Title: CFO Date:___________________________ Date:____________________________ DocuSign Envelope ID: CEED5D7A-6FCF-4362-B815-F47ED16E1900 Mike Yerkes COO 8/26/2022 8/26/2022

 
FORM
PERFORMANCE STOCK UNIT AGREEMENT
TORRID HOLDINGS INC. 2021 LONG-TERM INCENTIVE PLAN

* * * * *

Participant: [●]    

Grant Date: [●]    

Number of Performance Stock Units Granted (“PSUs”): [●]    

Vesting Schedule: The PSUs shall vest based on achievement of the time- and performance-vesting conditions set forth on Exhibit A attached hereto.


* * * * *

    THIS PERFORMANCE STOCK UNIT AWARD AGREEMENT (this “Agreement”), dated as of the Grant Date specified above, is entered into by and between Torrid Holdings Inc., a Delaware corporation (the “Company”), and the Participant specified above, pursuant to the Torrid Holdings Inc. 2021 Long-Term Incentive Plan, as in effect and as amended from time to time (the “Plan”), which is administered by the Committee; and

WHEREAS, it has been determined under the Plan that it would be in the best interests of the Company to grant the PSUs provided herein to the Participant.

NOW, THEREFORE, in consideration of the mutual covenants and promises hereinafter set forth and for other good and valuable consideration, the parties hereto hereby mutually covenant and agree as follows:
1.Incorporation By Reference; Plan Document Receipt. This Agreement is subject in all respects to the terms and provisions of the Plan (including, without limitation, any amendments thereto adopted at any time and from time to time unless such amendments are expressly intended not to apply to the Award provided hereunder), all of which terms and provisions are made a part of and incorporated in this Agreement as if they were each expressly set forth herein. Any capitalized term not defined in this Agreement shall have the same meaning as is ascribed thereto in the Plan. The Participant hereby acknowledges receipt of a copy of the Plan and that the Participant has read the Plan carefully and fully understands its content. In the event of any conflict between the terms of this Agreement and the terms of the Plan, the terms of the Plan shall control.
2.Grant of Performance Stock Unit Award. The Company hereby grants to the Participant, as of the Grant Date specified above, the number of PSUs specified above. Except as otherwise provided by the Plan, the Participant agrees and understands that nothing contained in this Agreement provides, or is intended to provide, the Participant with any protection against potential future dilution of the Participant’s interest in the Company for any reason, and no adjustments shall be made for dividends in cash or other property, distributions or other rights in respect of the shares of Common Stock underlying the PSUs, except as otherwise specifically provided for in the Plan or this Agreement.
3.Vesting; Forfeiture. The PSUs shall be subject to the vesting and forfeiture conditions set forth on Exhibit A attached hereto. The Committee shall in good faith make all determinations necessary or appropriate to determine whether any such PSUs have


vested. The Committee’s determinations shall be final, binding and conclusive, absent manifest error or bad faith.
4.Delivery of Shares.
(a)General. Subject to the provisions of Sections 4(b) and 4(c) hereof, within thirty (30) days following the vesting of the PSUs pursuant to the vesting conditions set forth on Exhibit A attached hereto, the Participant shall receive the number of shares of Common Stock that correspond to the number of PSUs that have become vested on the applicable vesting date.
(b)Blackout Periods. If the Participant is subject to any Company “blackout” policy or other trading restriction imposed by the Company on the date such distribution would otherwise be made pursuant to Section 4(a) hereof, such distribution shall be instead made on the earlier of (i) the date that the Participant is not subject to any such policy or restriction and (ii) the later of (A) the end of the calendar year in which such distribution would otherwise have been made and (B) a date that is immediately prior to the expiration of two and one-half months following the date such distribution would otherwise have been made hereunder.
(c)Deferrals. If permitted by the Company, the Participant may elect, subject to the terms and conditions of the Plan and any other applicable written plan or procedure adopted by the Company from time to time for purposes of such election, to defer the distribution of all or any portion of the shares of Common Stock that would otherwise be distributed to the Participant hereunder (the “Deferred Shares”), consistent with the requirements of Section 409A of the Code. Upon the vesting of PSUs that have been so deferred, the applicable number of Deferred Shares shall be credited to a bookkeeping account established on the Participant’s behalf (the “Account”). Subject to Section 5 hereof, the number of shares of Common Stock equal to the number of Deferred Shares credited to the Participant’s Account shall be distributed to the Participant in accordance with the terms and conditions of the Plan and the other applicable written plans or procedures of the Company, consistent with the requirements of Section 409A of the Code.
5.Dividends; Rights as Stockholder. Cash dividends on shares of Common Stock issuable hereunder shall be credited to a dividend book entry account on behalf of the Participant with respect to each PSU granted to the Participant, provided that such cash dividends shall not be deemed to be reinvested in shares of Common Stock and shall be held uninvested and without interest and paid in cash at the same time that the shares of Common Stock underlying the PSUs are delivered to the Participant in accordance with the provisions hereof. Stock dividends on shares of Common Stock shall be credited to a dividend book entry account on behalf of the Participant with respect to each PSU granted to the Participant, provided that such stock dividends shall be paid in shares of Common Stock at the same time that the shares of Common Stock underlying the PSUs are delivered to the Participant in accordance with the provisions hereof. Except as otherwise provided herein, the Participant shall have no rights as a stockholder with respect to any shares of Common Stock covered by any PSU unless and until the Participant has become the holder of record of such shares.
6.Non-Transferability. No portion of the PSUs may be sold, assigned, transferred, encumbered, hypothecated or pledged by the Participant, other than to the Company as a result of forfeiture of the PSUs as provided herein, unless and until the Participant has become the holder of record of the vested shares of Common Stock issuable hereunder.
7.Governing Law. All questions concerning the construction, validity and interpretation of this Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, without regard to the choice of law principles thereof.
2


8.Withholding of Tax. The Company shall have the power and the right to deduct or withhold, or require the Participant to remit to the Company, an amount sufficient to satisfy any federal, state, local and foreign taxes of any kind (including, but not limited to, the Participant’s FICA and SDI obligations) which the Company, in its sole discretion, deems necessary to be withheld or remitted to comply with the Code and/or any other applicable law, rule or regulation with respect to the PSUs and, if the Participant fails to do so, the Company may otherwise refuse to issue or transfer any shares of Common Stock otherwise required to be issued pursuant to this Agreement. Any minimum statutorily required withholding obligation with regard to the Participant may be satisfied by reducing the amount of cash or shares of Common Stock otherwise deliverable to the Participant hereunder.
9.Legend. The Company may at any time place legends referencing any applicable federal, state or foreign securities law restrictions on all certificates representing shares of Common Stock issued pursuant to this Agreement. The Participant shall, at the request of the Company, promptly present to the Company any and all certificates representing shares of Common Stock acquired pursuant to this Agreement in the possession of the Participant in order to carry out the provisions of this Section 9. The shares of Common Stock issued to Participant pursuant to this Agreement shall be subject, mutatis mutandis, to the terms and conditions of each other agreement previously entered into between Participant and the Company (and/or its predecessor-in-interest) that imposes transfer restrictions on other shares of Common Stock currently or formerly held by the Participant, including any such transfer restrictions limiting the number of shares of Common Stock that may be sold by Participant.
10.Securities Representations. This Agreement is being entered into by the Company in reliance upon the following express representations and warranties of the Participant. The Participant hereby acknowledges, represents and warrants that:
(d)The Participant has been advised that the Participant may be an “affiliate” within the meaning of Rule 144 under the Securities Act and in this connection the Company is relying in part on the Participant’s representations set forth in this Section 10.
(e)If the Participant is deemed an affiliate within the meaning of Rule 144 of the Securities Act, the shares of Common Stock issuable hereunder must be held indefinitely unless an exemption from any applicable resale restrictions is available or the Company files an additional registration statement (or a “re-offer prospectus”) with regard to such shares of Common Stock and the Company is under no obligation to register such shares of Common Stock (or to file a “re-offer prospectus”).
(f)If the Participant is deemed an affiliate within the meaning of Rule 144 of the Securities Act, the Participant understands that (i) the exemption from registration under Rule 144 will not be available unless (A) a public trading market then exists for the Common Stock of the Company, (B) adequate information concerning the Company is then available to the public, and (C) other terms and conditions of Rule 144 or any exemption therefrom are complied with, and (ii) any sale of the shares of Common Stock issuable hereunder may be made only in limited amounts in accordance with the terms and conditions of Rule 144 or any exemption therefrom.
11.Entire Agreement; Amendment. This Agreement, together with the Plan, contains the entire agreement between the parties hereto with respect to the subject matter contained herein, and supersedes all prior agreements or prior understandings, whether written or oral, between the parties relating to such subject matter. The Committee shall have the right, in its sole discretion, to modify or amend this Agreement from time to time in accordance with and as provided in the Plan. This Agreement may also be modified or amended by a writing signed by both the Company and the Participant. The Company shall give written notice to the
3


Participant of any such modification or amendment of this Agreement as soon as practicable after the adoption thereof.
12.Notices. Any notice hereunder by the Participant shall be given to the Company in writing and such notice shall be deemed duly given only upon receipt thereof by the General Counsel of the Company. Any notice hereunder by the Company shall be given to the Participant in writing and such notice shall be deemed duly given only upon receipt thereof at such address as the Participant may have on file with the Company.
13.No Right to Employment. Any questions as to whether and when there has been a Termination of Service and the cause of such Termination of Service shall be determined in the sole discretion of the Committee. Nothing in this Agreement shall interfere with or limit in any way the right of the Company, its Subsidiaries or its Affiliates to terminate the Participant’s employment or service at any time, for any reason and with or without Cause.
14.Transfer of Personal Data. The Participant authorizes, agrees and unambiguously consents to the transmission by the Company (or any Subsidiary) of any personal data information related to the PSUs awarded under this Agreement for legitimate business purposes (including, without limitation, the administration of the Plan). This authorization and consent is freely given by the Participant.
15.Compliance with Laws. The grant of PSUs and the issuance of shares of Common Stock hereunder shall be subject to, and shall comply with, any applicable requirements of any foreign and U.S. federal and state securities laws, rules and regulations (including, without limitation, the provisions of the Securities Act, the Exchange Act and in each case any respective rules and regulations promulgated thereunder) and any other law, rule regulation or exchange requirement applicable thereto. The Company shall not be obligated to issue the PSUs or any shares of Common Stock pursuant to this Agreement if any such issuance would violate any such requirements. As a condition to the settlement of the PSUs, the Company may require the Participant to satisfy any qualifications that may be necessary or appropriate to evidence compliance with any applicable law or regulation.
16.Binding Agreement; Assignment. This Agreement shall inure to the benefit of, be binding upon, and be enforceable by the Company and its successors and assigns. The Participant shall not assign (except in accordance with Section 6 hereof) any part of this Agreement without the prior express written consent of the Company.
17.Headings. The titles and headings of the various sections of this Agreement have been inserted for convenience of reference only and shall not be deemed to be a part of this Agreement.
18.Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same instrument.
19.Further Assurances. Each party hereto shall do and perform (or shall cause to be done and performed) all such further acts and shall execute and deliver all such other agreements, certificates, instruments and documents as either party hereto reasonably may request in order to carry out the intent and accomplish the purposes of this Agreement and the Plan and the consummation of the transactions contemplated thereunder.
20.Severability. The invalidity or unenforceability of any provisions of this Agreement in any jurisdiction shall not affect the validity, legality or enforceability of the remainder of this Agreement in such jurisdiction or the validity, legality or enforceability of any
4


provision of this Agreement in any other jurisdiction, it being intended that all rights and obligations of the parties hereunder shall be enforceable to the fullest extent permitted by law.
21.Acquired Rights. The Participant acknowledges and agrees that: (a) the Company may terminate or amend the Plan at any time; (b) the Award of PSUs made under this Agreement is completely independent of any other award or grant and is made at the sole discretion of the Company; (c) no past grants or awards (including, without limitation, the PSUs awarded hereunder) give the Participant any right to any grants or awards in the future whatsoever; and (d) any benefits granted under this Agreement are not part of the Participant’s ordinary salary, and shall not be considered as part of such salary in the event of severance, redundancy or resignation.
22.Compliance with Company Trading Policy. The Participant acknowledges and agrees that any Common Stock acquired by the Participant on account of the Award set forth herein shall be subject to each of the terms and conditions of the Company’s Trading Policy, as the same may be amended or otherwise modified from time to time, including any blackout periods, or lock-up periods imposed in connection with any primary or secondary public offering of the Company’s Common Stock. By accepting the Award, the Participant authorizes the Company to take such actions as the Company determines to be reasonably appropriate to implement the terms of the Company’s Trading Policy.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.

TORRID HOLDINGS INC.



By:                        

Name:                    

Title:                    



PARTICIPANT



    

Name:
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Exhibit A

[●]
7

EXHIBIT 31.1
CERTIFICATION BY CHIEF EXECUTIVE OFFICER PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Lisa Harper, certify that:
1.I have reviewed this Quarterly Report on Form 10-Q of Torrid Holdings Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)[omitted pursuant to Rules 13a-14(a) and 15d-14(a)]
(c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
(d)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


(b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: September 7, 2022    By:    /s/ Lisa Harper    
Lisa Harper
Chief Executive Officer
(Principal Executive Officer)

2

EXHIBIT 31.2
CERTIFICATION BY CHIEF FINANCIAL OFFICER PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Chinwe Abaelu, certify that:
1.I have reviewed this Quarterly Report on Form 10-Q of Torrid Holdings Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)[omitted pursuant to Rules 13a-14(a) and 15d-14(a)]
(c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
(d)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


(b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: September 7, 2022    By:    /s/ Chinwe Abaelu    
Chinwe Abaelu
Chief Accounting Officer
(Principal Financial Officer)


2

    EXHIBIT 32.1
CERTIFICATION BY CHIEF EXECUTIVE OFFICER PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with this Quarterly Report of Torrid Holdings Inc. (the “Company”) on Form 10-Q for the period ended July 30, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Lisa Harper, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
(1)the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: September 7, 2022    By:    /s/ Lisa Harper    
Lisa Harper
Chief Executive Officer and Director
(Principal Executive Officer)

EXHIBIT 32.2

CERTIFICATION BY CHIEF FINANCIAL OFFICER PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with this Quarterly Report of Torrid Holdings Inc. (the “Company”) on Form 10-Q for the period ended July 30, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Chinwe Abaelu, Chief Accounting Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
(1)the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: Septmeber 7, 2022    By:    /s/ Chinwe Abaelu    
Chinwe Abaelu
Chief Accounting Officer
(Principal Financial Officer)