Victoria’s Secret & Co. (“Victoria’s Secret” or the “Company”)
(NYSE: VSCO) today reported financial results for the third quarter
ended October 30, 2021.
The Company reported net income of $75.2
million, or diluted earnings per share of $0.81 in the third
quarter of 2021, compared to previously communicated guidance of
$0.60 to $0.70 per diluted share. This result compares to net
income of $143.4 million, or earnings per share of $1.62 and
adjusted net income of $72.6 million, or adjusted earnings per
share of $0.82 for the period ended October 31, 2020.
Third quarter 2021 operating income was $107.9
million compared to operating income of $127.4 million and adjusted
operating income of $97.5 million in last year’s third quarter.
Third quarter 2021 operating income growth of 11% over adjusted
operating income in last year’s third quarter was driven by solid
total sales growth of 7% and gross margin dollar growth of 14%.
The Company reported net sales of $1.441 billion
for the third quarter of 2021, an increase of 7% compared to net
sales of $1.353 billion for last year’s third quarter. Third
quarter 2021 sales decreased 9% compared to sales of $1.577 billion
in the third quarter of 2019 and reflect the net closure of
approximately 260 company-operated stores since the third quarter
of 2019. Total comparable sales for the third quarter of 2021
increased 4% compared to the third quarter of 2019.
CEO Martin Waters commented, “I am very pleased
with our solid third quarter performance which reflects growth in
all core categories. Our work to transform our brand, deepen
our customer connections and improve our operational
fundamentals is gaining positive traction. We continue to
improve our merchandise assortment and expand our already strong
customer file. I'm proud of the commitment and resilience
demonstrated by our teams, who delivered these results in
challenging circumstances, and in doing so are demonstrating the
power of a healthy culture. We continue to monitor
global supply chain issues and believe our close partnerships
with our vendors and our work to get ahead of the curve will help
mitigate those challenges. Looking ahead, the leadership team and I
believe we have the right strategy and a dedicated team focused on
driving long-term growth and creating value for our
shareholders.”
Fourth Quarter 2021 OutlookThe
Company is forecasting fourth quarter 2021 sales to be in the range
of flat to up 3% versus last year’s fourth quarter sales of $2.100
billion and diluted earnings per share to be in the range of $2.35
to $2.65.
Victoria’s Secret & Co. will conduct its
third quarter earnings call at 8:00 a.m. Eastern on
November 18. To listen, call 1-800-619-9066 (international
dial-in number: 1-212-519-0836); conference ID 5358727. For an
audio replay, call 1-800-839-8275 (international replay number:
1-203-369-3606); conference ID 175361 or log
onto www.victoriassecretandco.com. The materials
accompanying the earnings call have been posted on the investor
relations section of the Company’s website. The audio replay will
be available approximately two hours after the conclusion of the
call.
About Victoria’s
SecretVictoria’s Secret is the world’s largest intimates
specialty retailer offering a wide assortment of modern,
fashion-inspired collections including signature bras, panties,
lingerie, casual sleepwear, athleisure and swim, as well as
award-winning prestige fragrances and body care. With nearly 1,400
retail stores worldwide and a predominately female workforce of
more than 25,000, Victoria’s Secret boasts the largest team of
specialty trained bra fit experts worldwide. Victoria’s Secret is
committed to inspiring women around the world with products and
experiences that uplift and champion them and their journey while
creating lifelong relationships and advocating for positive
change.
Safe Harbor Statement Under the Private Securities
Litigation Reform Act of 1995
We caution that any forward-looking statements
(as such term is defined in the Private Securities Litigation
Reform Act of 1995) contained in this press release or made by our
Company or our management involve risks and uncertainties and are
subject to change based on various factors, many of which are
beyond our control. Accordingly, our future performance and
financial results may differ materially from those expressed or
implied in any such forward-looking statements. Words such as
“estimate,” “project,” “plan,” “believe,” “expect,” “anticipate,”
“intend,” “planned,” “potential” and any similar expressions may
identify forward-looking statements. Risks associated with the
following factors, among others, in some cases have affected and in
the future could affect our financial performance and actual
results and could cause actual results to differ materially from
those expressed or implied in any forward-looking statements
included in this press release or otherwise made by our company or
our management:
- the spin-off from Bath & Body
Works, Inc. (f/k/a L Brands, Inc.) may not be tax-free for U.S.
federal income tax purposes;
- a loss of synergies from separating
the businesses that could negatively impact the balance sheet,
profit margins or earnings of Victoria’s Secret or that Victoria’s
Secret does not realize all of the expected benefits of the
spin-off;
- general economic conditions,
inflation, consumer confidence, consumer spending patterns and
market disruptions including pandemics or significant health
hazards, severe weather conditions, natural disasters, terrorist
activities, financial crises, political crises or other major
events, or the prospect of these events;
- the novel coronavirus (COVID-19)
global pandemic has had and is expected to continue to have an
adverse effect on our business and results of operations;
- the seasonality of our
business;
- divestitures or other dispositions
and related operations and contingent liabilities from such
businesses;
- difficulties arising from turnover
in company leadership or other key positions;
- our ability to attract, develop and
retain qualified associates and manage labor-related costs;
- the dependence on mall traffic and
the availability of suitable store locations on appropriate
terms;
- our ability to grow through new
store openings and existing store remodels and expansions;
- our ability to successfully operate
and expand internationally and related risks;
- our independent franchise, license
and wholesale partners;
- our direct channel businesses;
- our ability to protect our
reputation and our brand images;
- our ability to attract customers
with marketing, advertising and promotional programs;
- our ability to maintain, enforce
and protect our trade names, trademarks and patents;
- the highly competitive nature of
the retail industry and the segments in which we operate;
- consumer acceptance of our products
and our ability to manage the life cycle of our brands, keep up
with fashion trends, develop new merchandise and launch new product
lines successfully;
- our ability to source, distribute
and sell goods and materials on a global basis, including risks
related to:
- political instability,
environmental hazards or natural disasters;
- significant health hazards or
pandemics, which could result in closed factories, reduced
workforces, scarcity of raw materials, and scrutiny or embargoing
of goods produced in infected areas;
- duties, taxes and other
charges;
- legal and regulatory matters;
- volatility in currency exchange
rates;
- local business practices and
political issues;
- potential delays or disruptions in
shipping and transportation and related pricing impacts;
- disruption due to labor disputes;
and
- changing expectations regarding
product safety due to new legislation;
- our geographic concentration of
vendor and distribution facilities in central Ohio;
- fluctuations in foreign currency
exchange rates;
- the ability of our vendors to
deliver products in a timely manner, meet quality standards and
comply with applicable laws and regulations;
- fluctuations in product input
costs, including those caused by inflation;
- our ability to adequately protect
our assets from loss and theft;
- fluctuations in energy costs,
including those caused by inflation;
- increases in the costs of mailing,
paper, printing or other order fulfillment logistics;
- claims arising from our
self-insurance;
- our and our third-party service
providers' ability to implement and maintain information technology
systems and to protect associated data;
- our ability to maintain the
security of customer, associate, third-party and company
information;
- stock price volatility;
- our ability to pay dividends and
related effects;
- shareholder activism matters;
- our ability to maintain our credit
rating;
- our ability to service or refinance
our debt and maintain compliance with our restrictive
covenants;
- our ability to comply with laws,
regulations and technology platform rules or other obligations
related to data privacy and security;
- our ability to comply with
regulatory requirements;
- legal and compliance matters;
and
- tax, trade and other regulatory
matters.
We are not under any obligation and do not intend to make
publicly available any update or other revisions to any of the
forward-looking statements contained in this press release to
reflect circumstances existing after the date of this press release
or to reflect the occurrence of future events even if experience or
future events make it clear that any expected results expressed or
implied by those forward-looking statements will not be realized.
More information on potential factors that could affect Victoria’s
Secret results is included in Victoria’s Secret Registration
Statement on Form 10 and the second quarter of 2021 quarterly
report on Form 10-Q filed with the Securities and Exchange
Commission.
For further information, please contact:
Victoria’s Secret & Co.: |
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Investor Relations:Jason
WareInvestorrelations@victoria.com |
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Media Relations:Brooke
WilsonCommunications@victoria.com |
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Victoria’s Secret &
Co.Third Quarter 2021
Total Sales (Millions):
|
Third Quarter 2021 |
|
ThirdQuarter 2020 |
|
%Inc/(Dec) |
|
Third Quarter 2021 |
|
Third Quarter 2019 |
|
%Inc/(Dec) |
|
|
|
|
|
|
|
|
|
|
|
|
Stores – North America |
$ |
920.3 |
|
$ |
755.2 |
|
21.9 |
% |
|
$ |
920.3 |
|
$ |
1,080.9 |
|
(14.9 |
%) |
Direct |
|
406.3 |
|
|
470.0 |
|
(13.5 |
%) |
|
|
406.3 |
|
|
331.3 |
|
22.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International1 |
|
114.5 |
|
|
127.9 |
|
(10.4 |
%) |
|
|
114.5 |
|
|
165.3 |
|
(30.7 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
$ |
1,441.1 |
|
$ |
1,353.1 |
|
6.5 |
% |
|
$ |
1,441.1 |
|
$ |
1,577.5 |
|
(8.6 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 – Results include Greater China, royalties associated with
franchised stores, wholesale sales, and company-operated stores in
the U.K. (pre-joint venture).
Total Sales (Millions):
|
Year-to-Date 2021 |
|
Year-to-Date 2020 |
|
%Inc/(Dec) |
|
Year-to-Date 2021 |
|
Year-to-Date 2019 |
|
%Inc/(Dec) |
|
|
|
|
|
|
|
|
|
|
|
|
Stores – North America |
$ |
2,890.0 |
|
$ |
1,632.8 |
|
77.0 |
% |
|
$ |
2,890.0 |
|
$ |
3,462.2 |
|
(16.5 |
%) |
Direct |
|
1,396.0 |
|
|
1,391.5 |
|
0.3 |
% |
|
|
1,396.0 |
|
|
1,066.5 |
|
30.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International1 |
|
323.2 |
|
|
288.7 |
|
11.9 |
% |
|
|
323.2 |
|
|
503.9 |
|
(35.9 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
$ |
4,609.2 |
|
$ |
3,313.0 |
|
39.1 |
% |
|
$ |
4,609.2 |
|
$ |
5,032.6 |
|
(8.4 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 – Results include Greater China, royalties associated with
franchised stores, wholesale sales, and company-operated stores in
the U.K. (pre-joint venture).
Comparable Sales Increase (Decrease):
|
|
Third Quarter2021 |
|
Third Quarter2020 |
|
Year-to-Date2021 |
|
Year-to-Date2020 |
|
|
|
|
|
|
|
|
|
Stores and Direct1 |
|
0 |
% |
|
4 |
% |
|
3 |
% |
|
3 |
% |
Stores Only2 |
|
7 |
% |
|
(10 |
%) |
|
8 |
% |
|
(13 |
%) |
|
|
|
|
|
|
|
|
|
NOTE: Stores are excluded from
the comparable sales calculation when they have been closed for
four consecutive days or more. Therefore, comparable sales results
exclude periods of time that stores were closed for four
consecutive days or more as a result of the COVID-19
pandemic. Refer to our filings with the Securities and
Exchange Commission for further discussion regarding our comparable
sales calculation.1 – Results include company-operated stores in
the U.S., Canada, the U.K. (pre-joint venture) and Greater China
and direct sales.2 – Results include company-operated stores in the
U.S., Canada, the U.K. (pre-joint venture) and Greater China.
Total Company-Operated Stores:
|
Stores at1/30/21 |
Opened |
Closed |
Stores at 10/30/21 |
|
|
|
|
|
U.S. |
846 |
- |
(16 |
) |
830 |
Canada |
25 |
1 |
- |
|
26 |
Greater China - Beauty &
Accessories |
36 |
2 |
(2 |
) |
36 |
Greater China - Full
Assortment |
26 |
1 |
- |
|
27 |
Total |
933 |
4 |
(18 |
) |
919 |
|
|
|
|
|
|
Total Partner-Operated Stores:
|
|
Stores at 1/30/21 |
Opened |
Closed |
Stores at 10/30/21 |
|
|
|
|
|
|
Beauty & Accessories |
|
338 |
10 |
(13 |
) |
335 |
Full
Assortment |
|
120 |
4 |
- |
|
124 |
Total |
|
458 |
14 |
(13 |
) |
459 |
|
|
|
|
|
|
|
VICTORIA'S SECRET &
CO.CONSOLIDATED AND COMBINED STATEMENTS OF
INCOMETHIRTEEN WEEKS ENDED OCTOBER 30, 2021 AND
OCTOBER 31, 2020(Unaudited)(In
thousands except per share amounts)
|
|
2021 |
|
|
|
2020 |
|
Net Sales |
$ |
1,441,134 |
|
|
$ |
1,353,100 |
|
Costs of Goods Sold, Buying and Occupancy |
|
(876,067 |
) |
|
|
(856,315 |
) |
Gross Profit |
|
565,067 |
|
|
|
496,785 |
|
General, Administrative and Store Operating Expenses |
|
(457,153 |
) |
|
|
(369,408 |
) |
Operating Income |
|
107,914 |
|
|
|
127,377 |
|
Interest Expense |
|
(11,917 |
) |
|
|
(1,412 |
) |
Other Income |
|
632 |
|
|
|
1,113 |
|
|
|
|
|
Income Before Income Taxes |
|
96,629 |
|
|
|
127,078 |
|
Provision (Benefit) for Income Taxes |
|
21,416 |
|
|
|
(16,305 |
) |
|
|
|
|
Net Income |
$ |
75,213 |
|
|
$ |
143,383 |
|
|
|
|
|
Net Income Per Diluted Share |
$ |
0.81 |
|
|
$ |
1.62 |
|
|
|
|
|
Weighted Average Shares Outstanding 1 |
|
92,449 |
|
|
|
88,303 |
|
|
|
|
|
1 - Reported Weighted Average Shares Outstanding reflects
diluted shares in the third quarter of 2021. Prior to the third
quarter of 2021, reported Weighted Average Shares Outstanding
reflects basic shares at the separation date. This share amount is
being utilized for the calculation of basic and diluted income per
share for periods presented prior to the separation date.
VICTORIA'S SECRET &
CO.CONSOLIDATED AND COMBINED STATEMENTS OF INCOME
(LOSS)THIRTY-NINE WEEKS ENDED OCTOBER 30, 2021 AND
OCTOBER 31, 2020(Unaudited)(In
thousands except per share amounts)
|
|
2021 |
|
|
|
2020 |
|
Net Sales |
$ |
4,609,201 |
|
|
$ |
3,313,041 |
|
Costs of Goods Sold, Buying and Occupancy |
|
(2,702,408 |
) |
|
|
(2,642,881 |
) |
Gross Profit |
|
1,906,793 |
|
|
|
670,160 |
|
General, Administrative and Store Operating Expenses |
|
(1,370,462 |
) |
|
|
(1,159,516 |
) |
Operating Income (Loss) |
|
536,331 |
|
|
|
(489,356 |
) |
Interest Expense |
|
(15,659 |
) |
|
|
(4,957 |
) |
Other Loss |
|
(465 |
) |
|
|
(365 |
) |
|
|
|
|
Income (Loss) Before Income Taxes |
|
520,207 |
|
|
|
(494,678 |
) |
Provision (Benefit) for Income Taxes |
|
119,878 |
|
|
|
(139,989 |
) |
|
|
|
|
Net Income (Loss) |
$ |
400,329 |
|
|
$ |
(354,689 |
) |
|
|
|
|
Net Income (Loss) Per Diluted Share |
$ |
4.46 |
|
|
$ |
(4.02 |
) |
|
|
|
|
Weighted Average Shares Outstanding1 |
|
89,685 |
|
|
|
88,303 |
|
|
|
|
|
1 - Reported Weighted Average Shares Outstanding reflects
diluted shares in the third quarter of 2021. Prior to the third
quarter of 2021, reported Weighted Average Shares Outstanding
reflects basic shares at the separation date. This share amount is
being utilized for the calculation of basic and diluted income
(loss) per share for periods presented prior to the separation
date.
VICTORIA'S SECRET & CO.
ADJUSTED FINANCIAL INFORMATION
(Unaudited)(In thousands except per share
amounts)
The Adjusted Financial Information should not be
construed as an alternative to the reported results determined in
accordance with generally accepted accounting principles. Further,
the Company’s definition of adjusted income information may differ
from similarly titled measures used by other companies. Management
believes that the presentation of adjusted financial information
provides additional information to investors to facilitate the
comparison of past and present operations. While it is not possible
to predict future results, management believes the adjusted
information is useful for the assessment of the ongoing operations
of the Company because the adjusted items are not indicative of our
ongoing operations due to their size and nature. Additionally,
management uses adjusted financial information as key performance
measures of results of operations for the purpose of evaluating
performance internally. The Adjusted Financial Information should
be read in conjunction with the Company’s historical financial
statements and notes thereto contained in the Company’s
Registration Statement on Form 10 and the second quarter of 2021
quarterly report on Form 10-Q filed with the Securities and
Exchange Commission.
|
Third Quarter |
|
Year-to-Date |
|
|
2021 |
|
|
|
2020 |
|
|
|
2021 |
|
|
|
2020 |
|
Reconciliation of Reported Operating Income (Loss) to
Adjusted Operating Income (Loss) |
|
|
|
|
Reported Operating Income (Loss) - GAAP |
$ |
107,914 |
|
|
$ |
127,377 |
|
|
$ |
536,331 |
|
|
$ |
(489,356 |
) |
Asset Impairments (a) |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
213,953 |
|
Restructuring Charges (b) |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
51,236 |
|
Hong Kong Store Closure and Lease Termination (c) |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(36,287 |
) |
Establishment of Victoria's Secret U.K. and Ireland Joint Venture
(d) |
|
- |
|
|
|
(29,918 |
) |
|
|
- |
|
|
|
(29,918 |
) |
Adjusted Operating Income (Loss) |
$ |
107,914 |
|
|
$ |
97,459 |
|
|
$ |
536,331 |
|
|
$ |
(290,372 |
) |
|
|
|
|
|
|
|
|
Reconciliation of Reported Net Income (Loss) to Adjusted
Net Income (Loss) |
|
|
|
|
|
|
Reported Net Income (Loss) - GAAP |
$ |
75,213 |
|
|
$ |
143,383 |
|
|
$ |
400,329 |
|
|
$ |
(354,689 |
) |
Asset Impairments (a) |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
213,953 |
|
Restructuring Charges (b) |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
51,236 |
|
Hong Kong Store Closure and Lease Termination (c) |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(36,287 |
) |
Establishment of Victoria's Secret U.K. and Ireland Joint Venture
(d) |
|
- |
|
|
|
(29,918 |
) |
|
|
- |
|
|
|
(29,918 |
) |
Tax Effect of Adjusted Items |
|
- |
|
|
|
2,720 |
|
|
|
- |
|
|
|
(39,992 |
) |
Tax Benefit Related to a Tax Matter Associated with Foreign
Investments (e) |
|
- |
|
|
|
(43,629 |
) |
|
|
- |
|
|
|
(43,629 |
) |
Adjusted Net Income (Loss) |
$ |
75,213 |
|
|
$ |
72,556 |
|
|
$ |
400,329 |
|
|
$ |
(239,326 |
) |
|
|
|
|
|
|
|
|
Reconciliation of Reported Net Income (Loss) Per Diluted
Share to Adjusted Net Income (Loss) Per Diluted Share |
Reported Net Income (Loss) Per Diluted Share - GAAP |
$ |
0.81 |
|
|
$ |
1.62 |
|
|
$ |
4.46 |
|
|
$ |
(4.02 |
) |
Asset Impairments (a) |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1.93 |
|
Restructuring Charges (b) |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
0.46 |
|
Hong Kong Store Closure and Lease Termination (c) |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(0.28 |
) |
Establishment of Victoria's Secret U.K. and Ireland Joint Venture
(d) |
|
- |
|
|
|
(0.31 |
) |
|
|
- |
|
|
|
(0.31 |
) |
Tax Benefit Related to a Tax Matter Associated with Foreign
Investments (e) |
|
- |
|
|
|
(0.49 |
) |
|
|
- |
|
|
|
(0.49 |
) |
Adjusted Net Income (Loss) Per Diluted Share |
$ |
0.81 |
|
|
$ |
0.82 |
|
|
$ |
4.46 |
|
|
$ |
(2.71 |
) |
|
|
|
|
|
|
|
|
(a) In the second quarter of 2020, we recognized a $117.1
million charge ($98.7 million net of tax of $18.5 million),
included in buying and occupancy expenses, related to the
impairment of certain lease and store assets. In the first quarter
of 2020, we recognized a $96.8 million charge ($72.0 million net of
tax of $24.8 million), included in buying and occupancy expenses,
related to the impairment of certain store assets.
(b) In the second quarter of 2020, we recognized a $51.2
million charge ($40.2 million net of tax of $11.0 million),
included in general, administrative and store operating expenses,
related to restructuring activities.
(c) In the second quarter of 2020, we recognized a $36.3
million gain ($24.7 million net of tax of $11.6 million),
principally included in buying and occupancy expenses, related to
the closure and termination of our lease and the related liability
for the Hong Kong flagship store.
(d) In the third quarter of 2020, we recognized a $29.9
million pre-tax gain ($27.2 million net of tax of $2.7 million),
included in general, administrative and store operating expenses,
related to the establishment of a joint venture for the U.K. and
Ireland business with Next PLC.
(e) In the third quarter of 2020, we recognized a $43.6
million tax benefit related to a tax matter associated with foreign
investments.
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