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Basis of Presentation and Description of the Business | 9 Months Ended
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Oct. 28, 2023
Organization, Consolidation and Presentation of Financial Statements [Abstract] |
Basis of Presentation and Description of the Business | Basis of Presentation and Description of the Business Corporate Structure Torrid Holdings Inc. is a Delaware corporation formed on October 29, 2019 and capitalized on February 20, 2020. Sycamore Partners Management, L.P. ("Sycamore") owns a majority of the voting power of Torrid Holdings Inc.'s outstanding common stock. Torrid Parent Inc. is a Delaware corporation formed on June 4, 2019 and is a wholly owned subsidiary of Torrid Holdings Inc. Torrid Intermediate LLC, formerly known as Torrid Inc., is a Delaware limited liability company formed on June 18, 2019 and a wholly owned subsidiary of Torrid Parent Inc. Torrid LLC is a wholly owned subsidiary of Torrid Intermediate LLC. Substantially all of Torrid Holdings Inc.'s financial position, operations and cash flows are generated through its wholly owned indirect subsidiary, Torrid LLC. Throughout these financial statements, the terms "Torrid," "we," "us," "our," the "Company" and similar references refer to Torrid Holdings Inc. and its consolidated subsidiaries. Fiscal Year Our fiscal year ends on the Saturday nearest to January 31 and each fiscal year is generally comprised of four 13-week quarters (although in years with 53 weeks, the fourth quarter is comprised of 14 weeks). Fiscal year 2023 is a 53-week year and fiscal year 2022 was a 52-week year. Fiscal years are identified according to the calendar year in which they begin. For example, references to "fiscal year 2023" or similar references refer to the fiscal year ending February 3, 2024. References to the third quarter of fiscal years 2023 and 2022 and to the three- and nine-month periods ended October 28, 2023 and October 29, 2022, respectively, refer to the 13- and 39-week periods then ended. Basis of Presentation and Principles of Consolidation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and applicable rules and regulations of the Securities and Exchange Commission ("SEC") regarding interim financial information. Accordingly, the interim financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair statement of the results for the interim periods presented have been included. Operating results for the three- and nine-month periods ended October 28, 2023 and October 29, 2022 are not necessarily indicative of the results that may be expected for any future interim periods, the fiscal year ending February 3, 2024, or for any future fiscal year. The condensed consolidated balance sheet information at January 28, 2023 has been derived from the audited consolidated financial statements at that date, but does not include all of the disclosures required by GAAP. The accompanying unaudited condensed consolidated financial statements and related footnotes should be read in conjunction with our audited consolidated financial statements and notes thereto in our Annual Report on Form 10-K for the fiscal year ended January 28, 2023. The unaudited condensed consolidated financial statements include Torrid and those of our wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. Description of Business We are a direct-to-consumer brand of apparel, intimates and accessories in North America aimed at fashionable women who are curvy and wear sizes 10 to 30. We generate revenues primarily through our e-Commerce platform www.torrid.com and our stores in the United States of America, Puerto Rico and Canada. 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 nine-month periods ended October 28, 2023 and October 29, 2022, 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 (loss)income. We incurred $0.5 million and $1.1 million of pre-opening costs during the three- and nine-month periods ended October 28, 2023, respectively. We incurred $0.2 million and $0.7 million of pre-opening costs during the three- and nine-month periods ended October 29, 2022, respectively. Change in Accounting Principle In the fourth quarter of fiscal year 2022, we made a voluntary change in our accounting policy regarding the classification of royalties, profit-sharing and marketing and promotional funds ("PLCC Funds") we receive pursuant to the Credit Card Agreement (as defined below). Historically, we recorded PLCC Funds as a reduction to selling, general and administrative expenses in the consolidated statements of operations and comprehensive (loss) income. Under the new policy, we record PLCC Funds in net sales in the consolidated statements of operations and comprehensive (loss) income. This reclassification does not have any impact on income from operations, income before provision for income taxes, net income or earnings per share and there was no cumulative effect to stockholders’ deficit or net assets. This reclassification has been retrospectively applied to all prior periods presented. The recognition of PLCC Funds in net sales is preferable because it enhances the comparability of our financial statements with those of many of our industry peers and provides greater transparency into performance metrics relevant to our industry by showing the gross impact of the funds received as net sales instead of as a reduction to selling, general and administrative expenses. The impact of this change in accounting principle is reflected in the tables below (in thousands):
| Three Months Ended October 29, 2022
| As Previously Reported |  | Change in Accounting Principle |  | As Adjusted
Net sales | $ | 290,034 |  |  | $ | 10,167 |  |  | $ | 300,201 |
Cost of goods sold | 198,263 |  |  | — |  |  | 198,263 |
Gross profit | 91,771 |  |  | 10,167 |  |  | 101,938 |
Selling, general and administrative expenses | 59,180 |  |  | 10,167 |  |  | 69,347 |
Marketing expenses | 12,638 |  |  | — |  |  | 12,638 |
Income from operations | $ | 19,953 |  |  | $ | — |  |  | $ | 19,953 |
| Nine Months Ended October 29, 2022
| As Previously Reported |  | Change in Accounting Principle |  | As Adjusted
Net sales | $ | 959,319 |  |  | $ | 27,597 |  |  | $ | 986,916 |
Cost of goods sold | 623,556 |  |  | — |  |  | 623,556 |
Gross profit | 335,763 |  |  | 27,597 |  |  | 363,360 |
Selling, general and administrative expenses | 192,539 |  |  | 27,597 |  |  | 220,136 |
Marketing expenses | 44,114 |  |  | — |  |  | 44,114 |
Income from operations | $ | 99,110 |  |  | $ | — |  |  | $ | 99,110 |

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- Definition The entire disclosure for the business description and basis of presentation concepts. Business description describes the nature and type of organization including but not limited to organizational structure as may be applicable to holding companies, parent and subsidiary relationships, business divisions, business units, business segments, affiliates and information about significant ownership of the reporting entity. Basis of presentation describes the underlying basis used to prepare the financial statements (for example, US Generally Accepted Accounting Principles, Other Comprehensive Basis of Accounting, IFRS). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 235 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//235/tableOfContent Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 275 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//275/tableOfContent Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 205 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//205/tableOfContent + Details
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