Victoria’s Secret & Co. (“Victoria’s Secret” or the “Company”)
(NYSE: VSCO) today reported 2022 financial results for the second
quarter ended July 30, 2022.
Chief Executive Officer Martin Waters commented,
“As we celebrate our first year as an independent, publicly-traded
company, I would like to express my deepest appreciation for the
hard work and dedication of our team of associates and partners
around the world. As a company, we undertook and committed to not
simply an evolution, but a revolution of our strategy. We aspired
to and are proud to be a different company today, with a new
leadership team and a mission to welcome, celebrate, and champion
all women. We have made much progress, but recognize this
transformation is a journey, and our work continues to become the
Victoria’s Secret our customers and associates deserve – where
everyone feels seen, respected, and valued.”
Martin continued, “We continue to be the market
leader in our category and our brand transformation continues to be
well received by our customers. Even in a very difficult
macroeconomic environment, thanks to our team’s relentless focus on
execution, we were able to deliver second quarter adjusted
operating income and adjusted earnings per diluted share results
within our guidance range. We expect customers will continue to be
challenged by inflationary and other financial pressures for the
balance of 2022, and we have adjusted our inventory position and
cost structure accordingly while allowing for continued investment
in growth initiatives. We are confident in our ability to navigate
and execute in a shifting consumer landscape with our new,
optimized leadership structure which allows for greater agility and
focus on the customer and growth initiatives.”
Second Quarter ResultsThe
Company reported net income of $70 million, or $0.83 per diluted
share for the second quarter of 2022. This result compares to net
income of $151 million, or $1.71 per share for the second quarter
of 2021.
Second quarter 2022 reported results include a
pre-tax charge of $29 million, principally severance, related to
the previously announced restructuring actions to reorganize,
streamline and improve our leadership structure. Excluding this
special item, adjusted net income was $92 million, or $1.09 per
diluted share, which was near the midpoint of the previously
communicated guidance of $0.95 to $1.25 per diluted share.
Second quarter 2022 reported operating income
was $98 million. Excluding the pre-tax charge mentioned above,
adjusted operating income was $127 million, which was in the range
of our previously communicated guidance of $125 million to $155
million and compared to $203 million in the second quarter of
2021.
The Company reported net sales of $1.521 billion
for the second quarter of 2022, a decrease of 6% compared to net
sales of $1.614 billion in the prior year second quarter. This
result was below our previously communicated guidance as customer
traffic trends decelerated across the retail environment throughout
the quarter. Total comparable sales for the second quarter of 2022
decreased 8% compared to the second quarter of 2021.
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 second quarter, the
Company invested $62 million to repurchase 1.7 million shares under
this program. Year to date, the Company has invested $171 million
to repurchase 3.9 million shares under this program. The Company
continues to expect to complete the share repurchase program by the
end of fiscal year 2022.
Full Year 2022 OutlookThe
Company is forecasting full year 2022 net sales to decrease in the
mid to high single digit range compared to last year’s full year
net sales of $6.785 billion. At this forecasted level of sales,
adjusted operating income is expected to be in the range of $525
million to $575 million, or approximately 8% to 9% of sales.
Third Quarter 2022 OutlookThe
Company is forecasting third quarter 2022 net sales to decrease in
the high single digit range compared to last year’s third quarter
net sales of $1.441 billion. Operating income is expected to be in
the range of $10 million to $40 million compared to $108 million in
the third quarter of 2021. Earnings are estimated to be in the
range of $0.00 to $0.25 per diluted share compared to earnings of
$0.81 per share last year.
Victoria’s Secret & Co. will conduct its
second quarter earnings call at 8:00 a.m. Eastern on
Thursday, August 25, 2022. To listen, call 1-800-619-9066
(international dial-in number: 1-212-519-0836); conference ID
5358727. For an audio replay, call 1-800-839-1169 (international
replay number: 1-203-369-3036); conference ID 55163 or log onto
www.victoriassecretandco.com. The materials accompanying the
earnings call have been posted on the Investors 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 nearly 1,350 retail stores in approximately 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 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 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: |
Yana Sinkevich |
Brooke Wilson |
investorrelations@victoria.com |
communications@victoria.com |
Total Sales (Millions):
|
SecondQuarter2022 |
|
SecondQuarter2021 |
|
%Inc/(Dec) |
|
Year-to-Date2022 |
|
Year-to-Date2021 |
|
%Inc/(Dec) |
|
|
|
|
|
|
|
|
|
|
|
|
Stores – North America |
$ |
968.5 |
|
$ |
1,036.9 |
|
(6.6 |
%) |
|
$ |
1,899.4 |
|
$ |
1,969.7 |
|
(3.6 |
%) |
Direct |
|
413.7 |
|
|
468.8 |
|
(11.8 |
%) |
|
|
834.3 |
|
|
989.7 |
|
(15.7 |
%) |
International1 |
|
139.0 |
|
|
108.1 |
|
28.6 |
% |
|
|
271.3 |
|
|
208.7 |
|
30.0 |
% |
Total |
$ |
1,521.2 |
|
$ |
1,613.8 |
|
(5.7 |
%) |
|
$ |
3,005.0 |
|
$ |
3,168.1 |
|
(5.1 |
%) |
1 – Results include consolidated joint venture sales in China,
royalties associated with franchised stores and wholesale
sales.
Comparable Sales Increase (Decrease):
|
SecondQuarter2022 |
|
SecondQuarter2021 |
|
Year-to-Date2022 |
|
Year-to-Date2021 |
|
|
|
|
|
|
|
|
Stores and Direct1 |
(8 |
%) |
|
(9 |
%) |
|
(8 |
%) |
|
6 |
% |
Stores Only2 |
(7 |
%) |
|
16 |
% |
|
(5 |
%) |
|
9 |
% |
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.
Total Stores:
|
|
|
|
|
|
|
|
|
Stores at 1/29/22 |
Opened |
Closed |
Reclassed to Joint Venture1 |
Stores at 7/30/22 |
|
|
|
|
|
|
|
|
Company-Operated: |
|
|
|
|
|
|
|
U.S. |
808 |
1 |
(6 |
) |
- |
|
803 |
Canada |
26 |
- |
- |
|
- |
|
26 |
Subtotal Company-Operated |
834 |
1 |
(6 |
) |
- |
|
829 |
|
|
|
|
|
|
|
|
China Joint Venture: |
|
|
|
|
|
|
|
Beauty & Accessories1 |
35 |
1 |
(3 |
) |
8 |
|
41 |
Full Assortment |
30 |
1 |
- |
|
- |
|
31 |
Subtotal China Joint
Venture |
65 |
2 |
(3 |
) |
8 |
|
72 |
|
|
|
|
|
|
|
|
Partner-Operated: |
|
|
|
|
|
|
|
Beauty & Accessories |
335 |
2 |
(19 |
) |
(8 |
) |
310 |
Full Assortment |
128 |
8 |
(7 |
) |
- |
|
129 |
Subtotal Partner-Operated |
463 |
10 |
(26 |
) |
(8 |
) |
439 |
|
|
|
|
|
|
|
|
Total |
1,362 |
13 |
(35 |
) |
- |
|
1,340 |
1 – Includes eight partner-operated stores.
VICTORIA'S
SECRET & CO. |
CONSOLIDATED
AND COMBINED STATEMENTS OF INCOME |
THIRTEEN
WEEKS ENDED JULY 30, 2022 AND JULY 31, 2021 |
(Unaudited) |
(In
thousands except per share amounts) |
|
|
|
|
|
|
|
|
2022 |
|
|
|
2021 |
|
Net Sales |
$ |
1,521,208 |
|
|
$ |
1,613,847 |
|
Costs of Goods Sold, Buying and Occupancy |
|
(985,957 |
) |
|
|
(944,261 |
) |
Gross Profit |
|
535,251 |
|
|
|
669,586 |
|
General, Administrative and Store Operating Expenses |
|
(437,739 |
) |
|
|
(466,855 |
) |
Operating Income |
|
97,512 |
|
|
|
202,731 |
|
Interest Expense |
|
(12,968 |
) |
|
|
(2,812 |
) |
Other Loss |
|
(1,328 |
) |
|
|
(907 |
) |
Income Before Income Taxes |
|
83,216 |
|
|
|
199,012 |
|
Provision for Income Taxes |
|
16,005 |
|
|
|
47,928 |
|
Net Income |
|
67,211 |
|
|
|
151,084 |
|
Less: Net Loss Attributable to Noncontrolling Interest |
|
(2,715 |
) |
|
|
- |
|
Net Income Attributable to Victoria's Secret & Co. |
$ |
69,926 |
|
|
$ |
151,084 |
|
Net Income
Per Diluted Share Attributable to Victoria's Secret & Co. |
|
$ |
0.83 |
|
|
$ |
1.71 |
|
Weighted Average Shares Outstanding 1 |
|
84,292 |
|
|
|
88,303 |
|
|
|
|
|
|
1 - Reported Weighted Average Shares Outstanding reflects diluted
shares in the second 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. |
CONSOLIDATED
AND COMBINED STATEMENTS OF INCOME |
TWENTY-SIX
WEEKS ENDED JULY 30, 2022 AND JULY 31, 2021 |
(Unaudited) |
(In
thousands except per share amounts) |
|
|
|
|
|
|
|
|
2022 |
|
|
|
2021 |
|
Net Sales |
$ |
3,005,014 |
|
|
$ |
3,168,067 |
|
Costs of Goods Sold, Buying and Occupancy |
|
(1,948,257 |
) |
|
|
(1,826,341 |
) |
Gross Profit |
|
1,056,757 |
|
|
|
1,341,726 |
|
General, Administrative and Store Operating Expenses |
|
(865,122 |
) |
|
|
(913,309 |
) |
Operating Income |
|
191,635 |
|
|
|
428,417 |
|
Interest Expense |
|
(25,382 |
) |
|
|
(3,742 |
) |
Other Loss |
|
(5,037 |
) |
|
|
(1,098 |
) |
Income Before Income Taxes |
|
161,216 |
|
|
|
423,577 |
|
Provision for Income Taxes |
|
17,861 |
|
|
|
98,462 |
|
Net Income |
|
143,355 |
|
|
|
325,115 |
|
Less: Net Loss Attributable to Noncontrolling Interest |
|
(7,394 |
) |
|
|
- |
|
Net Income Attributable to Victoria's Secret & Co. |
$ |
150,749 |
|
|
$ |
325,115 |
|
Net Income
Per Diluted Share Attributable to Victoria's Secret & Co. |
|
$ |
1.76 |
|
|
$ |
3.68 |
|
Weighted Average Shares Outstanding 1 |
|
85,674 |
|
|
|
88,303 |
|
|
|
|
|
|
1 - Reported Weighted Average Shares Outstanding reflects diluted
shares in the first and second quarters 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. 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. |
|
|
|
|
|
|
|
|
Second Quarter |
|
Year-to-Date |
|
|
|
|
|
2022 |
|
|
|
2021 |
|
|
2022 |
|
|
|
2021 |
|
|
Reconciliation of Reported to Adjusted Operating
Income |
|
|
|
|
|
|
|
|
|
|
Reported Operating Income - GAAP |
|
$ |
97,512 |
|
|
$ |
202,731 |
|
$ |
191,635 |
|
|
$ |
428,417 |
|
|
Occupancy-related Legal Matter (a) |
|
|
- |
|
|
|
- |
|
|
21,679 |
|
|
|
- |
|
|
Restructuring Charge (b) |
|
|
29,348 |
|
|
|
- |
|
|
29,348 |
|
|
|
- |
|
|
Adjusted Operating Income |
|
$ |
126,860 |
|
|
$ |
202,731 |
|
$ |
242,662 |
|
|
$ |
428,417 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Reported to Adjusted Net Income
Attributable to Victoria's Secret & Co. |
|
|
|
|
|
|
|
|
Reported Net Income Attributable to Victoria's Secret & Co. -
GAAP |
|
$ |
69,926 |
|
|
$ |
151,084 |
|
$ |
150,749 |
|
|
$ |
325,115 |
|
|
Occupancy-related Legal Matter (a) |
|
|
- |
|
|
|
- |
|
|
21,679 |
|
|
|
- |
|
|
Restructuring Charge (b) |
|
|
29,348 |
|
|
|
- |
|
|
29,348 |
|
|
|
- |
|
|
Tax Effect of Adjusted Items |
|
|
(7,278 |
) |
|
|
- |
|
|
(12,755 |
) |
|
|
- |
|
|
Adjusted Net Income Attributable to Victoria's Secret &
Co. |
|
$ |
91,996 |
|
|
$ |
151,084 |
|
$ |
189,021 |
|
|
$ |
325,115 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
$ |
0.83 |
|
|
$ |
1.71 |
|
$ |
1.76 |
|
|
$ |
3.68 |
|
|
Occupancy-related Legal Matter (a) |
|
|
- |
|
|
|
- |
|
|
0.19 |
|
|
|
- |
|
|
Restructuring Charge (b) |
|
|
0.26 |
|
|
|
- |
|
|
0.26 |
|
|
|
- |
|
|
Adjusted Net Income Per Diluted Share Attributable to Victoria's
Secret & Co. |
|
$ |
1.09 |
|
|
$ |
1.71 |
|
$ |
2.21 |
|
|
$ |
3.68 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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. |
|
|
(b) In the second
quarter of 2022, we recognized a $29.3 million charge ($22.1
million net of tax of $7.2 million), $16.2 million included in
general, administrative and store operating expense and $13.1
million included in buying and occupancy expense, related to
restructuring activities to reorganize our leadership
structure. |
|
VICTORIA'S
SECRET & CO. |
ADJUSTED
FINANCIAL INFORMATION |
FORECASTED
FULL YEAR ENDED JANUARY 28, 2023 |
(Unaudited,
in millions) |
|
|
|
Forecasted |
|
Full Year Ended |
|
January 28, 2023 |
Reconciliation of Operating Income to Adjusted Operating
Income |
|
Operating
Income - GAAP |
$ 474 to
524 |
Occupancy-related Legal Matter (a) |
22 |
Restructuring Charge (b) |
29 |
Adjusted
Operating Income |
$ 525 to 575 |
|
|
(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. |
(b) In the second quarter of 2022, we recognized a $29.3 million
charge ($22.1 million net of tax of $7.2 million), $16.2 million
included in general, administrative and store operating expense and
$13.1 million included in buying and occupancy expense, related to
restructuring activities to reorganize our leadership
structure. |
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