Victoria’s Secret & Co. (“Victoria’s Secret” or the “Company”)
(NYSE: VSCO) today reported 2022 financial results for the first
quarter ended April 30, 2022.
Commenting on results, Chief Executive Officer Martin Waters
stated, "We are pleased with our first quarter results and our
team’s strong execution. Against the backdrop of significant global
headwinds and a challenging inflationary environment, we delivered
sales results at the high end of our guidance range and better than
expected adjusted earnings per diluted share. Our performance is a
testament to the hard work and relentless focus of our team.
Powered by our brand revolution, we have strengthened our emotional
connection with our customer and further enhanced our leadership in
bras through innovative product launches, while diligently focusing
on the efficiency of our retail operations."Martin continued, "As a
result of our deliberate actions, we have stabilized the business
and delivered over $1 billion in EBITDA for the trailing
twelve-month period. Looking ahead, I believe we have the focused
strategy, resilient and expert talent, and customer connection that
we need to sustain and grow our dominant position as the
market leader in the intimates merchandise category. We are well
prepared to continue to address macro challenges through
merchandise and marketing that delights our customers, new business
initiatives designed to expand our customer base and grow sales,
and disciplined financial management. Our Board and our entire team
are aligned on our key priorities and are swiftly working together
to advance them to create value for our shareholders and other
stakeholders."
First Quarter ResultsThe
Company reported net income of $80.8 million, or earnings per
diluted share of $0.93 in the first quarter of 2022. This result
compares to net income of $174.0 million, or earnings per share of
$1.97 for the first quarter of 2021.
First quarter 2022 reported results include a pre-tax charge of
$21.7 million related to a certain occupancy-related legal matter.
Excluding this special item, adjusted earnings per diluted share
for the first quarter 2022 were $1.11, which was above the
previously communicated guidance of $0.70 to $0.95 per diluted
share.
First quarter 2022 reported operating income was $94.1 million.
Excluding the special item mentioned above, adjusted operating
income was $115.8 million, which was above the previously
communicated guidance of $80 million to $110 million and was down
compared to $225.7 million in the first quarter of 2021. The
decrease in operating income compared to last year reflects
incremental supply chain cost pressures and anniversarying last
year’s federal stimulus benefits.
The Company reported net sales of $1.484 billion for the first
quarter of 2022, a decrease of 4.5% compared to net sales of $1.554
billion in the prior year first quarter. This result was at the
high end of the previously communicated guidance of sales in the
range of a decrease of 4% to 8%. Total comparable sales for the
first quarter of 2022 decreased 8% compared to the first quarter of
2021. Excluding the estimated first quarter 2021 benefit of $75
million related to government stimulus payments, net sales were
essentially flat year over year.
At the conclusion of this press release, we have
included a reconciliation of reported to adjusted results.
Capital AllocationOn March 2, 2022, the Company
announced a share repurchase program providing for the repurchase
of up to $250 million of the Company’s common stock
during the year. During the first quarter, the Company invested
approximately $110 million to repurchase approximately 2.2 million
shares under this program. The Company expects to complete the
repurchase program by the end of the fiscal year.
Second Quarter 2022 OutlookThe
Company is forecasting second quarter 2022 sales to be up
low-single digits to down low-single digits compared to last year’s
second quarter 2021 sales of $1.614 billion. At this forecasted
level of sales, operating income is expected to be in the range of
$125 million to $155 million compared to $202.7 million in 2021. At
this forecasted level of operating income, earnings per diluted
share are estimated to be in the range of $0.95 to $1.25 compared
to earnings per share of $1.71 last year.
Victoria’s Secret & Co. will conduct its first quarter
earnings call at 8:00 a.m. Eastern on Wednesday, June 1,
2022. To listen, call 1-800-619-9066 (international dial-in
number: 1-212-519-0836); conference ID 5358727. For an audio
replay, call 1-800-834-5839 (international replay number:
1-203-369-3351); conference ID 226791 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 Secret & Co.Victoria’s
Secret & Co. (NYSE: VSCO) is a Fortune 500 specialty retailer
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. VS&Co is
comprised of market leading brands, Victoria’s Secret and
Victoria’s Secret PINK, that share a common purpose of inspiring
and uplifting our customers in every stage of their lives. We are
committed to empowering our more than 30,000 associates across a
global footprint of over 1,350 retail stores in more than 70
countries. We provide our customers with products and experiences
that make them feel good inside and out while driving positive
change through the power of our products, platform and
advocacy.
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 U.S. Private Securities Litigation Reform Act of
1995) contained in this press release or made by us, our
management, or our spokespeople 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. Forward-looking
statements include, without limitation, statements regarding our
future operating results, the implementation and impact of our
strategic plans, and our ability to meet environmental, social, and
governance goals. Words such as “estimate,” “commit,” “target,”
“goal,” “project,” “plan,” “believe,” “seek,” “strive,” “expect,”
“anticipate,” “intend,” “potential” and any similar expressions may
identify forward-looking statements. Risks associated with the
following factors, among others, could affect our financial
performance and cause actual results to differ materially from
those expressed or implied in any forward-looking statements:
- 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 our balance sheet, profit
margins or earnings;
- we may 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 may continue to have an adverse effect on our
business and results of operations;
- the seasonality of our business;
- 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;
- our 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;
- our ability to successfully operate and
expand internationally and related risks;
- our independent franchise, license,
wholesale, and joint venture partners;
- our direct channel business;
- our ability to protect our reputation
and the image of our brands;
- 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 impacted areas;
- duties, taxes and other charges;
- legal and regulatory matters;
- volatility in currency exchange
rates;
- local business practices and political
issues;
- 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 and Southeast
Asia;
- the ability of our vendors to deliver
products in a timely manner, meet quality standards and comply with
applicable laws and regulations;
- fluctuations in freight, product input
and energy costs, including those caused by inflation;
- our ability to adequately protect our
assets from loss and theft;
- 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 and system
availability;
- our ability to maintain the security of
customer, associate, third-party and company information;
- stock price volatility;
- 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.
Except as may be required by law, we assume no 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 theoccurrence 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 our results is included in “Item 1A. Risk Factors” in our
Annual Report on Form 10-K filed with the Securities and Exchange
Commission on March 18, 2022.
For further information, please contact:
Victoria’s Secret & Co.:
Investor Relations: |
Media Relations: |
Jason Ware |
Brooke Wilson |
investorrelations@victoria.com |
communications@victoria.com |
Victoria’s Secret & Co. Total Sales
(Millions):
|
First Quarter 2022 |
|
FirstQuarter 2021 |
|
%Inc/(Dec) |
|
|
|
|
|
|
Stores – North America |
$ |
930.9 |
|
$ |
932.9 |
|
(0.2 |
%) |
Direct |
|
420.6 |
|
|
520.9 |
|
(19.3 |
%) |
International1 |
|
132.3 |
|
|
100.4 |
|
31.8 |
% |
Total |
$ |
1,483.8 |
|
$ |
1,554.2 |
|
(4.5 |
%) |
1 – Results include consolidated joint venture sales in China,
royalties associated with franchised stores and wholesale
sales.
Victoria’s Secret & Co. Comparable
Sales Increase (Decrease):
|
|
First Quarter2022 |
|
FirstQuarter2021 |
|
|
|
|
|
Stores and Direct1 |
|
(8 |
%) |
|
25 |
% |
Stores Only2 |
|
(3 |
%) |
|
3 |
% |
|
|
|
|
|
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. Please 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. and Canada, consolidated joint venture stores in China and
direct sales.2 – Results include company-operated stores in the
U.S. and Canada and consolidated joint venture stores in China.
Victoria’s Secret & Co. Total
Stores:
|
|
|
|
|
|
|
|
Stores at 1/29/22 |
Opened |
Closed |
Reclassed to Joint Venture1 |
Stores at 4/30/22 |
|
|
|
|
|
|
Company-Operated: |
|
|
|
|
|
U.S. |
808 |
- |
(3) |
- |
805 |
Canada |
26 |
- |
- |
- |
26 |
Subtotal
Company-Operated |
834 |
- |
(3) |
- |
831 |
|
|
|
|
|
|
China Joint
Venture: |
|
|
|
|
|
Beauty &
Accessories1 |
35 |
- |
(2) |
8 |
41 |
Full
Assortment |
30 |
- |
- |
- |
30 |
Subtotal China
Joint Venture |
65 |
- |
(2) |
8 |
71 |
|
|
|
|
|
|
Partner-Operated: |
|
|
|
|
|
Beauty &
Accessories |
335 |
1 |
(4) |
(8) |
324 |
Full
Assortment |
128 |
3 |
- |
- |
131 |
Subtotal
Partner-Operated |
463 |
4 |
(4) |
(8) |
455 |
|
|
|
|
|
|
Total |
1,362 |
4 |
(9) |
- |
1,357 |
1 – Includes eight partner-operated stores.
VICTORIA'S
SECRET & CO. |
CONSOLIDATED
AND COMBINED STATEMENTS OF INCOME |
THIRTEEN
WEEKS ENDED APRIL 30, 2022 AND MAY 1, 2021 |
(Unaudited) |
(In
thousands except per share amounts) |
|
|
|
|
|
|
|
|
2022 |
|
|
|
2021 |
|
Net Sales |
$ |
1,483,806 |
|
|
$ |
1,554,220 |
|
Costs of Goods Sold, Buying and Occupancy |
|
(962,300 |
) |
|
|
(882,079 |
) |
Gross Profit |
|
521,506 |
|
|
|
672,141 |
|
General, Administrative and Store Operating Expenses |
|
(427,384 |
) |
|
|
(446,455 |
) |
Operating Income |
|
94,122 |
|
|
|
225,686 |
|
Interest Expense |
|
(12,414 |
) |
|
|
(929 |
) |
Other Loss |
|
(3,708 |
) |
|
|
(191 |
) |
Income Before Income Taxes |
|
78,000 |
|
|
|
224,566 |
|
Provision for Income Taxes |
|
1,856 |
|
|
|
50,534 |
|
Net Income |
|
76,144 |
|
|
|
174,032 |
|
Less: Net Loss Attributable to Noncontrolling Interest |
|
(4,679 |
) |
|
|
- |
|
Net Income Attributable to Victoria's Secret & Co. |
$ |
80,823 |
|
|
$ |
174,032 |
|
Net Income
Per Diluted Share Attributable to Victoria's Secret & Co. |
|
$ |
0.93 |
|
|
$ |
1.97 |
|
Weighted Average Shares Outstanding 1 |
|
87,057 |
|
|
|
88,303 |
|
|
|
|
|
|
1 - Reported Weighted
Average Shares Outstanding reflects diluted shares in the first
quarter of 2022. For periods prior to the separation in the third
quarter of 2021, basic shares at the separation date are being
utilized for the calculation of basic and diluted net income per
share. |
|
VICTORIA'S
SECRET & CO. |
ADJUSTED
FINANCIAL INFORMATION |
(Unaudited) |
(In
thousands except per share amounts) |
|
The non-GAAP financial
information presented in this press release 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 such non-GAAP financial measures 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
financial 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.
Management uses adjusted financial information as key performance
measures of results of operations for the purpose of evaluating
performance internally. In addition, we present EBITDA and adjusted
EBITDA for the twelve-months ended April 30, 2022 which are
non-GAAP financial measures. EBITDA is defined as earnings before
interest expense, income tax expense and depreciation and
amortization. Adjusted EBITDA is EBITDA adjusted to remove certain
special items. The non-GAAP financial information should be read in
conjunction with the Company's historical financial statements and
notes thereto contained in our Annual Report on Form 10-K and our
Quarterly Reports on Form 10-Q filed with the Securities and
Exchange Commission. The table below reconciles the non-GAAP
financial measures to their most directly comparable GAAP financial
measures. |
|
|
|
|
|
|
First Quarter |
|
|
|
|
|
2022 |
|
|
|
2021 |
|
Reconciliation of Reported to Adjusted Operating
Income |
|
|
|
|
|
Reported Operating Income - GAAP |
|
$ |
94,122 |
|
|
$ |
225,686 |
|
Occupancy-related Legal Matter (a) |
|
|
21,679 |
|
|
|
- |
|
Adjusted Operating Income |
|
$ |
115,801 |
|
|
$ |
225,686 |
|
|
|
|
|
|
|
|
Reconciliation of Reported to Adjusted Net Income
Attributable to Victoria's Secret & Co. |
|
|
|
Reported Net Income Attributable to Victoria's Secret & Co. -
GAAP |
|
$ |
80,823 |
|
|
$ |
174,032 |
|
Occupancy-related Legal Matter (a) |
|
|
21,679 |
|
|
|
- |
|
Tax Effect of Adjusted Items |
|
|
(5,477 |
) |
|
|
- |
|
Adjusted Net Income Attributable to Victoria's Secret &
Co. |
|
$ |
97,025 |
|
|
$ |
174,032 |
|
|
|
|
|
|
|
|
Reconciliation of Reported to Adjusted Net Income Per
Diluted Share Attributable to Victoria's Secret &
Co. |
|
Reported Net
Income Per Diluted Share Attributable to Victoria's Secret &
Co. - GAAP |
|
|
$ |
0.93 |
|
|
$ |
1.97 |
|
Occupancy-related Legal Matter (a) |
|
|
0.19 |
|
|
|
- |
|
Adjusted Net Income Per Diluted Share Attributable to Victoria's
Secret & Co. |
|
$ |
1.11 |
|
|
$ |
1.97 |
|
|
|
|
|
|
|
|
(a) In the first quarter of 2022, we recognized a $21.7 million
charge ($16.2 million net of tax of $5.5 million), included in
buying and occupancy expense, related to a legal matter with a
landlord regarding a high-profile store that we surrendered to the
landlord prior to separation. |
|
VICTORIA'S
SECRET & CO. |
|
ADJUSTED
FINANCIAL INFORMATION |
|
TWELVE-MONTHS ENDED APRIL 30, 2022 |
|
(Unaudited,
in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter |
Third Quarter |
Fourth Quarter |
First Quarter |
Twelve-Months Ended |
|
|
|
|
|
2021 |
2021 |
2021 |
2022 |
April 30, 2022 |
|
Reconciliation
of Net Income Attributable to Victoria's Secret & Co. to
EBITDA |
|
|
|
Net Income Attributable to Victoria's Secret & Co. - GAAP |
|
|
|
$ |
151,084 |
$ |
75,213 |
$ |
246,052 |
$ |
80,823 |
$ |
553,172 |
|
Interest Expense |
|
|
|
2,812 |
|
11,917 |
|
11,765 |
|
12,414 |
|
38,908 |
|
Income Tax Expense |
|
|
|
47,928 |
|
21,416 |
|
76,859 |
|
1,856 |
|
148,059 |
|
Depreciation and Amortization |
|
|
78,123 |
|
74,862 |
|
69,573 |
|
70,288 |
|
292,846 |
|
EBITDA |
|
|
$ |
279,947 |
$ |
183,408 |
$ |
404,249 |
$ |
165,381 |
$ |
1,032,985 |
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of EBITDA to Adjusted EBITDA |
|
|
|
|
|
|
EBITDA |
|
|
$ |
279,947 |
$ |
183,408 |
$ |
404,249 |
$ |
165,381 |
$ |
1,032,985 |
|
Occupancy-related Legal Matter (a) |
|
|
- |
|
- |
|
- |
|
21,679 |
|
21,679 |
|
Adjusted EBITDA |
|
|
$ |
279,947 |
$ |
183,408 |
$ |
404,249 |
$ |
187,060 |
$ |
1,054,664 |
|
|
|
|
|
|
|
|
|
|
|
(a) In the first
quarter of 2022, we recognized a $21.7 million charge ($16.2
million net of tax of $5.5 million), included in buying and
occupancy expense, related to a legal matter with a landlord
regarding a high-profile store that we surrendered to the landlord
prior to separation. |
|
|
|
|
|
|
|
|
|
|
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