CURV Q3 2025 Earnings Summary

Overall summary: Results were below expectations with comps down 8.3% and margins pressured by higher digital promotions, driven primarily by assortment missteps in tops and a tariff-related pause in footwear. Management outlined clear corrective actions, including chase orders to restore core assortments, reintroduction of footwear with improved economics, and continued store optimization that is already lowering SG&A. Guidance was reduced, and management is positioning for sequential improvement in Q4 with more meaningful EBITDA margin expansion and liquidity gains expected in fiscal 2026.

Growth

• Denim delivered mid-single-digit growth on top of last year's double-digit increase
• Non-denim, dresses, and intimates posted positive comps
• Sub-brands on track to deliver ~$80M in FY2025 sales, driving acquisition/reactivation and attachment
• Footwear reintroduced in mid-November; targeted to return to ~$40M sales in 2026 with improved profitability
• Planned 3 new bra launches in 2026 to drive acquisition and loyalty

Business development

• Rebalanced assortment strategy; 2026 plan includes ~30% opening price point mix while maintaining quality
• Enhanced loyalty and private label credit card value proposition; 95% of customers in loyalty
• Expanded influencer/community marketing; digital-first model search yielded 5 finalists across age cohorts
• Footwear sourcing and SKU mix restructured to mitigate tariff exposure

Financials

• Q3 net sales $235.2M vs. $263.8M LY; comps -8.3% (footwear pause drove ~400 bps of decline)
• Gross profit $82.2M; gross margin 34.9% vs. 36.1% LY (promotional pressure, deleverage)
• SG&A $66.3M, down $8.6M YoY; 28.2% of sales, a 30 bps improvement
• Adjusted EBITDA $9.8M (4.2% margin) vs. $19.6M (7.4%) LY
• Net loss $6.4M ($0.06/share) vs. net loss $1.2M ($0.01/share) LY
• Inventory $128.8M, down 6.8% YoY; cash $17.2M
• Revolver: $14.9M drawn with ~$86.2M availability
• Marketing spend $15.7M, up $2.7M YoY
• FY2025 guidance: net sales $995M–$1.002B; adjusted EBITDA $59M–$62M; capex $13M–$15M

Capital & funding

• Operating expense savings of ~$18M YTD from store closures (through Q3)
• Expect enhanced free cash flow and liquidity in FY2026 from store optimization and more variable cost structure
• Ample liquidity with revolver availability of ~$86.2M; disciplined capex of $13M–$15M guided for FY2025

Operations & strategy

• Store optimization on track: 15 closures in Q3; 74 YTD; plan to close ~180 stores in FY2025 aligned with lease expirations
• Strong retention from closures; ~70% of demand originates online
• Merchandising course correction: enhanced guardrails and assortment planning with CEO oversight
• Chase orders placed to backfill core tops/wovens; receipts begin January; expect sequential improvement by end of Q4 and acceleration into Q1 2026
• Rebalanced Spring/Summer 2026 buying across categories, fits, fabrics, end uses
• Balanced marketing approach across funnel; refined mix toward higher-return, personalized channels

Market & outlook

• Sales at low end of guidance; digital channel required higher promotions
• Footwear pause led to lower basket sizes and traffic; estimated ~$12.5M sales impact in Q3 (of which ~$10M was anticipated)
• Early footwear reintroduction showing encouraging trends
• Expect SG&A leverage, adjusted EBITDA margin expansion, and liquidity benefits in FY2026 from store optimization
• Intimates innovation (3 bra launches) and opening price points expected to support share gains in 2026

Risks & headwinds

• Merchandising missteps in tops and jackets pressured sales and required elevated promotions
• Tariff-driven footwear disruption reduced attachment rates and transaction frequency
• Softer digital demand and promotional intensity pressured margins
• Execution risk around assortment rebalancing and chase orders
• Potential traffic and sales risk from accelerated store closures despite planned customer migration

Sentiment: cautious