Investment management firm Minot Light Capital Partners released its investment letter for the third quarter of 2025, highlighting a challenging period for several of its holdings, including Torrid Holdings Inc. (NYSE:CURV). Despite generating a net return of 7.6% for its limited partners, the firm underperformed against benchmarks, particularly the micro-cap benchmark’s impressive 17.1% return.
Torrid Holdings, a retailer specializing in apparel and accessories for curvy women, reported a troubling one-month return of -20.91%. Over the past year, its shares have plummeted by 80.27%, closing at $0.9807 per share on December 23, 2025. The company currently holds a market capitalization of $97.282 million.
In the investor letter, Minot Light Capital Partners expressed concern regarding Torrid’s performance. The letter noted, “Our biggest negative contributor this quarter was Torrid Holdings.” The firm referenced its previous analysis of Torrid, stating that while the earnings report did not reveal catastrophic results, the numbers were negatively impacted by tariffs and a softer consumer market.
Minot Light remains cautiously optimistic about Torrid’s future, citing potential for margin expansion by streamlining its store base and retaining revenue from closed stores through adjacent sales channels and online platforms. The company anticipates meaningful expansion in EBITDA margins and free cash flow beyond 2026, though this will now be measured from a lower base.
Despite these factors, the firm acknowledged troubling trends in the stock’s price. Shares of Torrid have continued to decline following a secondary offering by Sycamore Partners, which was initially thought to prompt only a temporary downturn. “Stock price action like this is certainly very concerning to us,” Minot Light noted. The firm emphasized that while it struggles to reconcile the rapid decline with the company’s fundamentals, the risks inherent in micro-cap retail investments can escalate quickly, particularly when leverage is involved.
At current prices around $1.50, Minot Light sees significant upside potential if Torrid achieves its projected EBITDA and free cash flow goals in the coming years. The firm posits that under favorable circumstances, Torrid could potentially buy back its entire company or settle its debts within four years, possibly pursuing a combination of both strategies.
As of the end of the third quarter, Torrid Holdings was not among the 30 Most Popular Stocks Among Hedge Funds. According to Minot Light’s database, only seven hedge fund portfolios included Torrid, a notable drop from fifteen in the previous quarter. While acknowledging the inherent risks and potential of investing in Torrid, Minot Light expressed a stronger conviction in alternative options, specifically in artificial intelligence stocks, which they believe offer greater promise for substantial returns in a shorter timeframe.
For those interested in hedge fund insights, additional investor letters from various funds can be explored on Minot Light Capital Partners’ Q3 2025 page.
In conclusion, while Torrid Holdings faces significant challenges and uncertainty, the future may hold potential for recovery should the company successfully navigate its operational shifts and market conditions.
