What happened

Shares of Torrid Holdings (CURV 3.29%) were sliding today after the plus-size women's apparel retailer posted disappointing results in its third-quarter earnings report.

As of 10:11 a.m. ET on Friday, the stock was down 18.5%.

So what

Like some other apparel retailers, Torrid has seen sales and profits fade amid inventory challenges, a shift in consumer demand away from goods, and a highly promotional environment, and that trend continued in the third quarter.

Comparable sales declined 8% in the quarter, and overall revenue fell 5.3% to $290 million, missing estimates at $299.2 million. Even worse, gross margin plunged 930 basis points to 31.6%, which was primarily due to increased discounting and promotions, and higher inventory clearance. Inventory in the quarter was up 17%, forcing the company to clear merchandise.

Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) fell from $55.2 million to $32.1 million, and the company finished the quarter with earnings per share of $0.07, down from an adjusted per-share profit of $0.25 a year ago and below the consensus at $0.12.

CEO Lisa Harper said:

For the third quarter, we delivered net sales and adjusted EBITDA that were within our expectations, all while navigating a challenging and promotional macroenvironment. Customers responded favorably to our new merchandise offerings, including our Studio collection. Similar to other retailers, we experienced a slowdown in sales trends during October.

Now what

Looking ahead, the company called for revenue of $285 million to $300 million in the fourth quarter, compared to analyst estimates at $312 million. That shows the company isn't expecting to get any benefit from the holiday season. On the bottom line, it called for adjusted EBITDA of $9 million to $14 million as it sees the softening demand continuing into the fourth quarter.

While the company believes it can get back to steady growth on the top and bottom lines, that seems unlikely until the economy improves and Torrid's inventory challenges abate.