thi-20241102

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 November 2, 2024


☐			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)


Delaware						84-3517567
(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 class

Trading Symbol

Name of each exchange on which registered

Common stock, par value $0.01 per share

CURV

New 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 December 9, 2024, there were approximately 104,756,572 shares of the registrant’s common stock outstanding.

Table of Contents


		PAGE
	Part I - Financial Information
Item 1.	Financial Statements (unaudited)
	Condensed Consolidated Balance Sheets as of November 2, 2024 and February 3, 2024	5
	Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income for the three and nine months ended November 2, 2024 and October 28, 2023	6
	Condensed Consolidated Statements of Stockholders’ Deficit for the nine months ended November 2, 2024 and October 28, 2023	7
	Condensed Consolidated Statements of Cash Flows for the nine months ended November 2, 2024 and October 28, 2023	9
	Notes to Unaudited Condensed Consolidated Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32
Item 4.	Controls and Procedures	32
	Part II - Other Information
Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	34
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34
Item 3.	Defaults Upon Senior Securities	34
Item 4.	Mine Safety Disclosures	34
Item 5.	Other Information	34
Item 6.	Exhibits	35
Signatures		36

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and are subject to the safe harbor created thereby under the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical or current fact included in this Quarterly Report on Form 10-Q are forward-looking statements. Forward-looking statements reflect 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). 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. All forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those that we expected, including:

•the adverse impact of rulemaking changes implemented by the Consumer Financial Protection Bureau on our income streams, profitability and results of operations;

•changes in consumer spending and general economic conditions;

•the negative impact on interest expense as a result of steep interest rates;

•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;

•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 facility;

•our reliance upon independent third-party transportation providers for substantially all of our product shipments;

•our growth strategy;

•our failure to attract and retain employees that reflect our brand image, embody our culture and possess the appropriate skill set;

•damage to our reputation arising from our use of social media, email and text messages;

•our reliance on third-parties for the provision of certain services, including real estate management;

•our dependence upon key members of our executive management team;

•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, third-party computer systems we rely on, 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;

•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 of long-lived assets;

•our failure to maintain adequate internal control over financial reporting; and

•the threat of war, terrorism or other catastrophes, including natural disasters, that could negatively impact our business.

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 April 2, 2024 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 caution you that the important factors referenced above may not include 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 outcomes 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 except to the extent required by law. 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.

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)


	November 2, 2024		February 3, 2024
Assets
Current assets:
Cash and cash equivalents	$	43,953	$	11,735
Restricted cash	399		399
Inventory	138,261		142,199
Prepaid expenses and other current assets	33,343		22,229
Prepaid income taxes	6,617		2,561
Total current assets	222,573		179,123
Property and equipment, net	85,569		103,516
Operating lease right-of-use assets	149,732		162,444
Deposits and other noncurrent assets	18,027		14,783
Deferred tax assets	8,681		8,681
Intangible asset	8,400		8,400
Total assets	$	492,982	$	476,947
Liabilities and stockholders' deficit
Current liabilities:
Accounts payable	$	77,478	$	46,183
Accrued and other current liabilities	116,650		107,750
Operating lease liabilities	36,312		42,760
Borrowings under credit facility	—		7,270
Current portion of term loan	16,144		16,144
Due to related parties	4,330		9,329
Income taxes payable	62		2,671
Total current liabilities	250,976		232,107
Noncurrent operating lease liabilities	145,126		155,825
Term loan	276,445		288,553
Deferred compensation	3,735		5,474
Other noncurrent liabilities	5,986		6,705
Total liabilities	682,268		688,664
Commitments and contingencies (Note 15)
Stockholders' deficit
Preferred shares: $0.01 par value; 5,000,000 shares authorized; zero shares issued and outstanding at November 2, 2024 and February 3, 2024	—		—
Common shares: $0.01 par value; 1,000,000,000 shares authorized; 104,732,148 shares issued and outstanding at November 2, 2024; 104,204,554 shares issued and outstanding at February 3, 2024	1,049		1,043
Additional paid-in capital	138,532		135,140
Accumulated deficit	(328,281)		(347,587)
Accumulated other comprehensive loss	(586)		(313)
Total stockholders' deficit	(189,286)		(211,717)
Total liabilities and stockholders' deficit	$	492,982	$	476,947

The accompanying notes are an integral part of these condensed consolidated financial statements.

TORRID HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE (LOSS) INCOME

(UNAUDITED)

(In thousands, except per share data)


	Three Months Ended				Nine Months Ended
	November 2, 2024		October 28, 2023		November 2, 2024		October 28, 2023
Net sales	$	263,766	$	275,408	$	828,175	$	858,406
Cost of goods sold	168,609		183,906		507,339		553,585
Gross profit	95,157		91,502		320,836		304,821
Selling, general and administrative expenses	74,899		71,881		228,203		212,700
Marketing expenses	13,056		12,739		38,875		38,988
Income from operations	7,202		6,882		53,758		53,133
Interest expense	8,784		9,757		27,303		28,831
Other income, net of other expense	(362)		267		(376)		238
(Loss) income before (benefit from) provision for income taxes	(1,220)		(3,142)		26,831		24,064
(Benefit from) provision for income taxes	(26)		(394)		7,525		8,375
Net (loss) income	$	(1,194)	$	(2,748)	$	19,306	$	15,689
Comprehensive (loss) income:
Net (loss) income	$	(1,194)	$	(2,748)	$	19,306	$	15,689
Other comprehensive loss:
Foreign currency translation adjustment	(86)		(271)		(273)		(214)
Total other comprehensive loss	(86)		(271)		(273)		(214)
Comprehensive (loss) income	$	(1,280)	$	(3,019)	$	19,033	$	15,475
Net (loss) earnings per share:
Basic	$	(0.01)	$	(0.03)	$	0.18	$	0.15
Diluted	$	(0.01)	$	(0.03)	$	0.18	$	0.15
Weighted average number of shares:
Basic	104,698		104,081		104,489		103,937
Diluted	104,698		104,081		105,679		104,170

The accompanying notes are an integral part of these condensed consolidated financial statements.

TORRID HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(UNAUDITED)

(In thousands)


	Nine Months Ended November 2, 2024
	Common Shares			Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Stockholders' Deficit
	Shares	Amount
Balance at February 3, 2024	104,205	$	1,043	$	135,140	$	(347,587)	$	(313)	$	(211,717)
Net income	—	—		—		12,172		—		12,172
Issuance of common shares and withholding tax payments related to vesting of restricted stock awards and restricted stock units	141	1		(297)		—		—		(296)
Share-based compensation	—	—		1,290		—		—		1,290
Other comprehensive loss	—	—		—		—		(89)		(89)
Balance at May 4, 2024	104,346	1,044		136,133		(335,415)		(402)		(198,640)
Net income	—	—		—		8,328		—		8,328
Issuance of common shares and withholding tax payments related to vesting of restricted stock awards and restricted stock units	184	2		(125)		—		—		(123)
Issuance of common shares related to exercise of stock options	60	1		233		—		—		234
Issuance of common shares related to employee stock purchase plan	47	1		230		—		—		231
Share-based compensation	—	—		1,122		—		—		1,122
Other comprehensive loss	—	—		—		—		(98)		(98)
Balance at August 3, 2024	104,637	$	1,048	$	137,593	$	(327,087)	$	(500)	$	(188,946)
Net loss	—	—		—		(1,194)		—		(1,194)
Issuance of common shares and withholding tax payments related to vesting of restricted stock awards and restricted stock units	53	1		(145)		—		—		(144)
Issuance of common shares related to exercise of stock options	42	—		135		—		—		135
Share-based compensation	—	—		949		—		—		949
Other comprehensive loss	—	—		—		—		(86)		(86)
Balance at November 2, 2024	104,732	$	1,049	$	138,532	$	(328,281)	$	(586)	$	(189,286)

TORRID HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(UNAUDITED)

(In thousands)


	Nine Months Ended October 28, 2023
	Common Shares			Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Stockholders' Deficit
	Shares	Amount
Balance at January 28, 2023	103,775	$	1,038	$	128,205	$	(359,206)	$	(261)	$	(230,224)
Net income	—	—		—		11,808		—		11,808
Issuance of common shares and withholding tax payments related to vesting of restricted stock awards and restricted stock units	53	1		(124)		—		—		(123)
Share-based compensation	—	—		2,377		—		—		2,377
Other comprehensive loss	—	—		—		—		(170)		(170)
Balance at April 29, 2023	103,828	1,039		130,458		(347,398)		(431)		(216,332)
Net income	—	—		—		6,629		—		6,629
Issuance of common shares and withholding tax payments related to vesting of restricted stock awards and restricted stock units	121	1		(64)		—		—		(63)
Issuance of common shares related to employee stock purchase plan	95	1		219		—		—		220
Share-based compensation	—	—		1,662		—		—		1,662
Other comprehensive income	—	—		—		—		227		227
Balance at July 29, 2023	104,044	$	1,041	$	132,275	$	(340,769)	$	(204)	$	(207,657)
Net loss	—	—		—		(2,748)		—		(2,748)
Issuance of common shares and withholding tax payments related to vesting of restricted stock awards and restricted stock units	58	1		(64)		—		—		(63)
Share-based compensation	—	—		1,503		—		—		1,503
Other comprehensive loss	—	—		—		—		(271)		(271)
Balance at October 28, 2023	104,102	$	1,042	$	133,714	$	(343,517)	$	(475)	$	(209,236)

The accompanying notes are an integral part of these condensed consolidated financial statements.

TORRID HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(In thousands)


	Nine Months Ended November 2, 2024		Nine Months Ended October 28, 2023
OPERATING ACTIVITIES
Net income	$	19,306	$	15,689
Adjustments to reconcile net income to net cash provided by operating activities:
Write down of inventory	1,519		3,767
Operating right-of-use assets amortization	30,429		30,494
Depreciation and other amortization	27,842		28,242
Share-based compensation	4,531		5,981
Other	(957)		(1,351)
Changes in operating assets and liabilities:
Inventory	2,052		4,969
Prepaid expenses and other current assets	(11,114)		(4,578)
Prepaid income taxes	(4,056)		(2,564)
Deposits and other noncurrent assets	(3,375)		(6,433)
Accounts payable	31,876		2,969
Accrued and other current liabilities	10,775		(5,954)
Operating lease liabilities	(33,527)		(31,565)
Other noncurrent liabilities	(588)		(468)
Deferred compensation	(1,739)		507
Due to related parties	(4,999)		(5,975)
Income taxes payable	(2,609)		—
Net cash provided by operating activities	65,366		33,730
INVESTING ACTIVITIES
Purchases of property and equipment	(12,617)		(15,228)
Net cash used in investing activities	(12,617)		(15,228)
FINANCING ACTIVITIES
Proceeds from revolving credit facility	62,780		455,110
Principal payments on revolving credit facility	(70,050)		(458,390)

Principal payments on term loan	(13,125)		(13,125)
Proceeds from issuances under share-based compensation plans	704		320
Withholding tax payments related to vesting of restricted stock units and awards	(675)		(249)
Net cash used in financing activities	(20,366)		(16,334)
Effect of foreign currency exchange rate changes on cash, cash equivalents and restricted cash	(165)		(141)
Increase in cash, cash equivalents and restricted cash	32,218		2,027
Cash, cash equivalents and restricted cash at beginning of period	12,134		13,935
Cash, cash equivalents and restricted cash at end of period	$	44,352	$	15,962
SUPPLEMENTAL INFORMATION
Cash paid during the period for interest related to the revolving credit facility and term loan	$	27,080	$	24,852
Cash paid during the period for income taxes	$	14,200	$	10,976
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Property and equipment purchases included in accounts payable and accrued liabilities	$	1,450	$	3,360

The accompanying notes are an integral part of these condensed consolidated financial statements.

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. 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 2024 is a 52-week year and fiscal year 2023 was a 53-week year. Fiscal years are identified according to the calendar year in which they begin. For example, references to “fiscal year 2024” or similar references refer to the fiscal year ending February 1, 2025. References to the third quarter of fiscal years 2024 and 2023 and to the three- and nine-month periods ended November 2, 2024 and October 28, 2023, 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 November 2, 2024 and October 28, 2023 are not necessarily indicative of the results that may be expected for any future interim periods, the fiscal year ending February 1, 2025, or for any future fiscal year.

The condensed consolidated balance sheet information at February 3, 2024 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 February 3, 2024. 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. Net sales related to our operations in Canada and Puerto Rico during the three- and nine-month periods ended November 2, 2024 and October 28, 2023 were not material, and therefore are not reported separately from domestic net sales.

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 $0.2 million and $0.7 million of pre-opening costs during the three- and nine-month periods ended November 2, 2024, respectively. 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.

Note 2. Accounting Standards

Recently Adopted Accounting Standards during the Nine-Month Period Ended November 2, 2024

We did not adopt any new accounting standards during the nine-month period ended November 2, 2024.

Accounting Standards Not Yet Adopted

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). ASU 2023-07 will affect reportable segment disclosure requirements, primarily by requiring enhanced disclosures about significant segment expenses on an interim and annual basis. ASU 2023-07 will be effective for us on February 1, 2025, with the option to early adopt at any time prior to the effective date and will require adoption on a retrospective basis. We are currently evaluating the impact of the standard on our financial statements and disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). The ASU includes amendments requiring enhanced income tax disclosures, primarily related to standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. ASU 2023-09 will be effective for us on February 1, 2025, with the option to early adopt at any time prior to the effective date and will require adoption on either a prospective or retrospective basis. We are currently evaluating the impact of the standard on our financial statements and disclosures.

In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statements Expenses (“ASU 2024-03”). The ASU is intended to improve disclosures about a public business entity's expenses, primarily through additional disaggregation of income statement expenses. ASU 2024-03 will be effective for us on January 31, 2027, with the option to early adopt at any time prior to the effective date and should be applied either prospectively to financial statements issued for reporting periods after the effective date or retrospectively to any or all prior periods presented in the financial statements. We are currently evaluating the impact of the standard on our financial statements and disclosures.

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 in our stores 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):


	November 2, 2024	February 3, 2024
Prepaid and other information technology expenses	14,834	10,975
PLCC Funds receivable	2,564	2,759
Prepaid advertising	784	389
Prepaid casualty insurance	3,416	2,489
Other	11,745

SEC Form 10-Q filed by Torrid Holdings Inc.