Victoria’s Secret & Co. (“Victoria’s Secret” or the “Company”)
(NYSE: VSCO) today reported financial results for the second
quarter ended August 3, 2024.
Interim Chief Executive Officer and Chief
Financial and Administrative Officer Timothy (TJ) Johnson
commented, “Our financial results for the second quarter came in at
the high end of expectations and we delivered year-over-year
quarterly operating income growth for the first time since 2021. We
were encouraged by the continued sequential improvement in
quarterly sales results in North America for the fourth consecutive
quarter, as sales trends improved in both our stores and digital
channels. Our customers responded to new merchandise deliveries and
events with particular success in the launch of our Victoria’s
Secret Dream bra collection, in apparel with our PINK Friday back
to campus event in late July and consistent, steady improvement of
VS sport as merchandise flowed to stores and digital. Improving
product acceptance and disciplined inventory management led to
gross margin dollar growth and rate expansion, and our teams
continue to be relentlessly focused on improving our cost
structure, driving a decrease in SG&A dollars and leverage
year-over-year. In addition to improving trends for Victoria’s
Secret and PINK, we experienced sales growth in the high-single
digits for both our International business and Adore Me.”
TJ continued, “We are encouraged our North
America business trends have continued to improve as we’ve moved
through August and the start of the third quarter. Early customer
feedback on our fall assortments is encouraging for both the
Victoria’s Secret and PINK brands, and our beauty business has
continued solid performance and is driving traffic to our stores.
Strategically, we have several exciting events planned for the
balance of the third quarter including a major VSX sport launch and
the return of our Victoria’s Secret Fashion show to kickoff the
all-important holiday season. While we are optimistic about the
positive signs we’re seeing in our business, we recognize the
consumer environment remains challenging and our customer is
pressured economically. We remain focused on what we can control
which is leveraging our market position in intimates and delivering
on multiple initiatives to drive growth in our business over the
longer-term.”
Second Quarter 2024 ResultsThe
Company reported net income of $32 million, or $0.40 per diluted
share for the second quarter of 2024. This result compares to a net
loss of $1 million, or $0.02 per diluted share for the second
quarter of 2023. Second quarter 2024 operating income was $62
million compared to $26 million in the second quarter of 2023.
Excluding the impact of the items described at
the conclusion of this press release, second quarter 2024 adjusted
net income was $31 million, or $0.40 per diluted share, and
adjusted operating income was $62 million. Adjusted operating
income was at the high-end of the range of our preliminary results
announced on August 14 which estimated adjusted operating income of
$57 million to $62 million, and adjusted net income per diluted
share was slightly above our preliminary results range of $0.34 to
$0.39. Second quarter 2023 adjusted net income was $19 million, or
$0.24 per diluted share, and adjusted operating income was $49
million.
The Company reported net sales of $1.417 billion
for the second quarter of 2024, a decrease of 1% compared to net
sales of $1.427 billion for the second quarter of 2023 and at the
better-end of our preliminary results range which estimated a net
sales decrease of 1% to 2%. Total comparable sales for the second
quarter of 2024 decreased 3%.
Full Year and Third Quarter 2024
OutlookThe Company is raising its full year outlook and is
now forecasting 52-week fiscal year 2024 net sales to be down
approximately 1%, compared to prior guidance of down low-single
digits, to a comparative 52-weeks from fiscal year 2023. At this
forecasted level of sales, adjusted operating income for fiscal
year 2024 is now expected to be in the range of $275 million to
$300 million, compared to prior guidance of $250 million to $275
million.
The Company is forecasting third quarter 2024
net sales to increase low-single digits compared to last year’s
third quarter net sales of $1.265 billion. At this forecasted level
of sales, adjusted operating loss for the third quarter of 2024 is
expected to be in the range of $40 million to $60 million. Adjusted
net loss per share for the third quarter of 2024 is estimated to be
in the range of $0.60 to $0.80.
Forecasted adjusted operating income (loss) and
adjusted net income (loss) per diluted share for the third quarter
and full year 2024 exclude the financial impact of severance and
related charges as a result of organizational leadership changes
and purchase accounting items related to the Adore Me acquisition,
including expense (income) related to changes in the estimated fair
value of contingent consideration and performance-based payments,
as well as the amortization of intangible assets. The Company is
not able to provide a reconciliation of forward-looking adjusted
operating income (loss) or adjusted net income (loss) per diluted
share to the most directly comparable forward-looking GAAP
financial measures because the Company is unable to provide a
meaningful or accurate reconciliation or estimation of certain
reconciling items without unreasonable effort, due to the inherent
difficulty in forecasting the timing of, and quantifying, the
various purchase accounting items that are necessary for such
reconciliation.
Quarterly Earnings Conference
CallVictoria’s Secret & Co. will conduct its second
quarter earnings call at 8:00 a.m. Eastern on Thursday,
August 29, 2024. To listen, call 1-800-619-9066 (international
dial-in number: 1-212-519-0836); conference ID 5358727. For an
audio replay, call 1-800-839-2204 (international replay number:
1-203-369-3032); conference ID 6787842 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
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 supporting women in all they
do, and Adore Me, a technology-led, digital first innovative
intimates brand serving women of all sizes and budgets at all
phases of life. We are committed to empowering our approximately
30,000 associates across a global footprint of more than 1,370
retail stores in nearly 70 countries. We strive to provide the best
products to help women express their confidence, sexiness and power
and use our platform to celebrate the extraordinary diversity of
women’s experiences.
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, and any future
performance or financial results expressed or implied by such
forward-looking statements are not guarantees of future
performance. 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,” “will,” “target,” “goal,” “project,” “plan,”
“believe,” “seek,” “strive,” “expect,” “anticipate,” “intend,”
“continue,” “potential” and any similar expressions are intended to
identify forward-looking statements. Risks associated with the
following factors, among others, could affect our results of
operations and financial performance and cause actual results to
differ materially from those expressed or implied in any
forward-looking statements:
- we may not realize all of the
expected benefits of the spin-off from Bath & Body Works, Inc.
(f/k/a L Brands, Inc.);
- general economic conditions,
inflation, and changes in consumer confidence and consumer spending
patterns;
- 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;
- our ability to successfully
implement our strategic plan;
- 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 traffic to our
stores and the availability of suitable store locations on
satisfactory terms;
- our ability to successfully operate
and expand internationally and related risks;
- the operations and performance of
our franchisees, licensees, wholesalers and joint venture
partners;
- our ability to successfully operate
and grow our direct channel business;
- our ability to protect our
reputation and the image and value of our brands;
- our ability to attract customers
with marketing, advertising and promotional programs;
- 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, remain
current with fashion trends, and develop and launch new
merchandise, product lines and brands successfully;
- our ability to realize the
potential benefits and synergies sought with the acquisition of
AdoreMe, Inc.;
- our ability to incorporate
artificial intelligence into our business operations successfully
and ethically while effectively managing the associated risks;
- our ability to source materials and
produce, distribute and sell merchandise on a global basis,
including risks related to:
- political instability and
geopolitical conflicts;
- environmental hazards and natural
disasters;
- significant health hazards and
pandemics;
- delays or disruptions in shipping
and transportation and related pricing impacts; and
- disruption due to labor
disputes;
- our geographic concentration of
production and distribution facilities in central Ohio and
Southeast Asia;
- the ability of our vendors to
manufacture and deliver products in a timely manner, meet quality
standards and comply with applicable laws and regulations;
- fluctuations in freight, product
input and energy costs;
- 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 comply with
regulatory requirements; and
- legal, 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. Additional
information regarding these and other factors can be found in “Item
1A. Risk Factors” in our Annual Report on Form 10-K filed with the
Securities and Exchange Commission on March 22, 2024.
For further information, please contact:
Victoria’s Secret & Co.: |
|
Investor
Relations: |
Media
Relations: |
Kevin Wynk |
Brooke Wilson |
investorrelations@victoria.com |
communications@victoria.com |
|
|
Total Net Sales (Millions):
|
SecondQuarter2024 |
|
SecondQuarter2023 |
|
%Inc/(Dec) |
|
Year-to-Date2024 |
|
Year-to-Date2023 |
|
%Inc/(Dec) |
|
|
|
|
|
|
|
|
|
|
|
|
Stores – North America |
$ |
800.0 |
|
$ |
817.2 |
|
(2.1 |
%) |
|
$ |
1,529.1 |
|
$ |
1,603.0 |
|
(4.6 |
%) |
Direct |
|
430.2 |
|
|
433.9 |
|
(0.9 |
%) |
|
|
879.0 |
|
|
898.4 |
|
(2.2 |
%) |
International1 |
|
187.0 |
|
|
175.8 |
|
6.4 |
% |
|
|
368.5 |
|
|
332.9 |
|
10.7 |
% |
Total |
$ |
1,417.2 |
|
$ |
1,426.9 |
|
(0.7 |
%) |
|
$ |
2,776.6 |
|
$ |
2,834.3 |
|
(2.0 |
%) |
|
1– Results
include consolidated joint venture sales in China, royalties
associated with franchised stores and wholesale sales. |
|
Comparable Sales Increase (Decrease):
|
SecondQuarter2024 |
|
SecondQuarter2023 |
|
Year-to-Date2024 |
|
Year-to-Date2023 |
|
|
|
|
|
|
|
|
|
|
Stores and Direct1 |
(3%) |
|
(11%) |
|
(4%) |
|
(11%) |
|
Stores
Only2 |
(5%) |
|
(14%) |
|
(6%) |
|
(14%) |
|
|
|
|
|
|
|
|
|
|
NOTE: 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 at2/3/24 |
Opened |
Closed |
Storesat 8/3/24 |
|
|
|
|
|
|
|
Company-Operated: |
|
|
|
|
|
U.S. |
808 |
9 |
(24) |
793 |
|
Canada |
23 |
- |
- |
23 |
|
Subtotal
Company-Operated |
831 |
9 |
(24) |
816 |
|
|
|
|
|
|
|
China Joint
Venture: |
|
|
|
|
|
Beauty &
Accessories1 |
34 |
2 |
(2) |
34 |
|
Full
Assortment |
36 |
1 |
(1) |
36 |
|
Subtotal China
Joint Venture |
70 |
3 |
(3) |
70 |
|
|
|
|
|
|
|
Partner-Operated: |
|
|
|
|
|
Beauty &
Accessories |
307 |
16 |
(12) |
311 |
|
Full
Assortment |
156 |
18 |
(4) |
170 |
|
Subtotal
Partner-Operated |
463 |
34 |
(16) |
481 |
|
|
|
|
|
|
|
Adore Me |
6 |
- |
- |
6 |
|
|
|
|
|
|
|
Total |
1,370 |
46 |
(43) |
1,373 |
|
|
1– Includes
fourteen partner-operated stores at 8/3/24. |
|
|
VICTORIA'S SECRET & CO. |
CONSOLIDATED STATEMENTS OF INCOME (LOSS) |
THIRTEEN WEEKS ENDED AUGUST 3, 2024 AND JULY 29,
2023 |
(Unaudited) |
(In thousands except per share amounts) |
|
|
|
|
|
|
|
|
|
2024 |
|
|
|
2023 |
|
|
Net Sales |
$ |
1,417,193 |
|
|
$ |
1,426,871 |
|
|
Costs of Goods Sold, Buying and Occupancy |
|
(915,827 |
) |
|
|
(940,297 |
) |
|
Gross Profit |
|
501,366 |
|
|
|
486,574 |
|
|
General, Administrative and Store Operating Expenses |
|
(439,042 |
) |
|
|
(460,528 |
) |
|
Operating Income |
|
62,324 |
|
|
|
26,046 |
|
|
Interest Expense |
|
(21,363 |
) |
|
|
(23,967 |
) |
|
Other Income (Loss) |
|
465 |
|
|
|
(106 |
) |
|
Income Before Income Taxes |
|
41,426 |
|
|
|
1,973 |
|
|
Provision for Income Taxes |
|
9,285 |
|
|
|
2,845 |
|
|
Net Income (Loss) |
|
32,141 |
|
|
|
(872 |
) |
|
Less: Net Income Attributable to Noncontrolling Interest |
|
340 |
|
|
|
556 |
|
|
Net Income (Loss) Attributable to Victoria's Secret & Co. |
$ |
31,801 |
|
|
$ |
(1,428 |
) |
|
Net Income (Loss) Per Diluted Share Attributable to Victoria's
Secret & Co. |
|
$ |
0.40 |
|
|
$ |
(0.02 |
) |
|
Weighted Average Shares Outstanding1 |
|
79,595 |
|
|
|
77,310 |
|
|
|
|
|
|
|
|
1- Reported Weighted Average Shares Outstanding in the second
quarter of 2023 reflects basic shares due to the Net Loss. |
|
|
|
|
|
|
|
VICTORIA'S SECRET & CO. |
CONSOLIDATED STATEMENTS OF INCOME (LOSS) |
TWENTY-SIX WEEKS ENDED AUGUST 3, 2024 AND JULY 29,
2023 |
(Unaudited) |
(In thousands except per share amounts) |
|
|
|
|
|
|
|
|
|
2024 |
|
|
|
2023 |
|
|
Net Sales |
$ |
2,776,635 |
|
|
$ |
2,834,251 |
|
|
Costs of Goods Sold, Buying and Occupancy |
|
(1,773,954 |
) |
|
|
(1,845,283 |
) |
|
Gross Profit |
|
1,002,681 |
|
|
|
988,968 |
|
|
General, Administrative and Store Operating Expenses |
|
(914,089 |
) |
|
|
(934,648 |
) |
|
Operating Income |
|
88,592 |
|
|
|
54,320 |
|
|
Interest Expense |
|
(43,099 |
) |
|
|
(46,472 |
) |
|
Other Income (Loss) |
|
794 |
|
|
|
(104 |
) |
|
Income Before Income Taxes |
|
46,287 |
|
|
|
7,744 |
|
|
Provision for Income Taxes |
|
16,630 |
|
|
|
4,804 |
|
|
Net Income |
|
29,657 |
|
|
|
2,940 |
|
|
Less: Net Income Attributable to Noncontrolling Interest |
|
1,498 |
|
|
|
3,643 |
|
|
Net Income (Loss) Attributable to Victoria's Secret & Co. |
$ |
28,159 |
|
|
$ |
(703 |
) |
|
Net Income (Loss) Per Diluted Share Attributable to Victoria's
Secret & Co. |
|
$ |
0.35 |
|
|
$ |
(0.01 |
) |
|
Weighted Average Shares Outstanding1 |
|
79,330 |
|
|
|
77,756 |
|
|
|
|
|
|
|
|
1- Reported Weighted Average Shares Outstanding in 2023 reflects
basic shares due to the Net Loss. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
VICTORIA'S SECRET & CO. |
|
NON-GAAP FINANCIAL INFORMATION |
|
(Unaudited) |
|
(In thousands except per share amounts) |
|
|
In addition to our results provided in accordance with GAAP,
provided below are non-GAAP financial measures that present
operating income, net income attributable to Victoria's Secret
& Co. and net income per diluted share attributable to
Victoria's Secret & Co. on an adjusted basis, which remove
certain non-recurring, infrequent or unusual items that we believe
are not indicative of the results of our ongoing operations due to
their size and nature. The intangible asset amortization excluded
from these non-GAAP financial measures is excluded because the
amortization, unlike the related revenue, is not affected by
operations of any particular period unless an intangible asset
becomes impaired or the estimated useful life of an intangible
asset is revised. We use adjusted financial information as key
performance measures of our results of operations for the purpose
of evaluating performance internally. These non-GAAP measurements
are not intended to replace the presentation of our financial
results in accordance with GAAP. Instead, we believe that the
presentation of adjusted financial information provides additional
information to investors to facilitate the comparison of past and
present operations. Further, our definition of non-GAAP financial
measures may differ from similarly titled measures used by other
companies. The table below reconciles the most directly comparable
GAAP financial measure to each non-GAAP financial measure. |
|
|
|
|
|
|
|
|
|
Second Quarter |
|
Year-to-Date |
|
|
|
|
|
|
2024 |
|
|
|
2023 |
|
|
|
2024 |
|
|
|
2023 |
|
|
|
Reconciliation of Reported to Adjusted Operating
Income |
|
|
Reported Operating Income - GAAP |
|
$ |
62,324 |
|
|
$ |
26,046 |
|
|
$ |
88,592 |
|
|
$ |
54,320 |
|
|
|
Adore Me Acquisition-related Items (a) |
|
|
(6,343 |
) |
|
|
16,366 |
|
|
|
710 |
|
|
|
25,687 |
|
|
|
Amortization of Intangible Assets (b) |
|
|
6,284 |
|
|
|
6,284 |
|
|
|
12,568 |
|
|
|
12,568 |
|
|
|
Restructuring Charge (c) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
11,125 |
|
|
|
Adjusted Operating Income |
|
$ |
62,265 |
|
|
$ |
48,696 |
|
|
$ |
101,870 |
|
|
$ |
103,700 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Reported to Adjusted Net Income (Loss)
Attributable to Victoria's Secret & Co. |
|
|
Reported Net Income (Loss) Attributable to Victoria's Secret &
Co. - GAAP |
|
$ |
31,801 |
|
|
$ |
(1,428 |
) |
|
$ |
28,159 |
|
|
$ |
(703 |
) |
|
|
Adore Me Acquisition-related Items (a) |
|
|
(5,248 |
) |
|
|
17,461 |
|
|
|
2,900 |
|
|
|
27,877 |
|
|
|
Amortization of Intangible Assets (b) |
|
|
6,284 |
|
|
|
6,284 |
|
|
|
12,568 |
|
|
|
12,568 |
|
|
|
Restructuring Charge (c) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
11,125 |
|
|
|
Tax Effect of Adjusted Items |
|
|
(1,375 |
) |
|
|
(3,465 |
) |
|
|
(3,060 |
) |
|
|
(10,105 |
) |
|
|
Adjusted Net Income Attributable to Victoria's Secret &
Co. |
|
$ |
31,462 |
|
|
$ |
18,852 |
|
|
$ |
40,567 |
|
|
$ |
40,762 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Reported to Adjusted Net Income (Loss)
Per Diluted Share Attributable to Victoria's Secret &
Co. |
|
|
Reported Net Income (Loss) Per Diluted Share Attributable to
Victoria's Secret & Co. - GAAP |
|
$ |
0.40 |
|
|
$ |
(0.02 |
) |
|
$ |
0.35 |
|
|
$ |
(0.01 |
) |
|
|
Adore Me Acquisition-related Items (a) |
|
|
(0.06 |
) |
|
|
0.20 |
|
|
|
0.04 |
|
|
|
0.30 |
|
|
|
Amortization of Intangible Assets (b) |
|
|
0.06 |
|
|
|
0.06 |
|
|
|
0.12 |
|
|
|
0.12 |
|
|
|
Restructuring Charge (c) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
0.11 |
|
|
|
Adjusted Net Income Per Diluted Share Attributable to Victoria's
Secret & Co. |
|
$ |
0.40 |
|
|
$ |
0.24 |
|
|
$ |
0.51 |
|
|
$ |
0.52 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
In the second quarter of 2024 and 2023, we recognized pre-tax
income of $5.2 million and pre-tax expense of $17.5 million (income
of $5.0 million and expense of $15.6 million net of tax benefit of
$0.2 million and tax expense of $1.9 million) related to the
financial impact of purchase accounting items related to the
acquisition of Adore Me. These items include income of $6.3 million
and expense of $9.7 million, respectively, in general,
administrative and store operating expense and $1.1 million of
interest expense in both periods. Additionally, expense of $6.7
million is in costs of goods sold in the second quarter of 2023.
Year-to-date 2024 and 2023, we recognized pre-tax expense of $2.9
million and $27.9 million ($3.1 million and $23.8 million net of
tax benefit of $0.2 million and tax expense of $4.1 million)
related to the financial impact of purchase accounting items
related to the acquisition of Adore Me. These items include expense
of $0.7 million and $10.4 million, respectively, in general,
administrative and store operating expense and $2.2 million of
interest expense in both periods. Additionally, expense of $15.3
million is in costs of goods sold year-to-date 2023. |
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(b) |
In both the second quarter of 2024 and 2023, we recognized
amortization expense of $6.3 million ($4.7 million net of tax of
$1.6 million) in general, administrative and store operating
expense related to the acquisition of Adore Me. Year-to-date in
both 2024 and 2023, we recognized amortization expense of $12.6
million ($9.3 million net of tax of $3.3 million) in general,
administrative and store operating expense related to the
acquisition of Adore Me. |
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(c) |
In the first quarter of 2023, we recognized a pre-tax charge of
$11.1 million ($8.4 million net of tax of $2.7 million), $7.8
million in general, administrative and store operating expense and
$3.3 million in buying and occupancy expense, related to
restructuring activities to reorganize and improve our
organizational structure. |
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