Core Insights - Victoria's Secret & Co. reported in-line earnings for Q1 with adjusted earnings per share of 9 cents and quarterly sales of $1.35 billion, remaining flat year over year [1] - CEO Hillary Super expressed satisfaction with the business's performance, highlighting strength in the Beauty segment and PINK apparel, as well as new offerings in sport and swim [2] Financial Guidance - The company has lowered its FY25 adjusted operating income guidance to a range of $270 million to $320 million, down from a previous forecast of $300 million to $350 million, and anticipates a net tariff impact of approximately $50 million for the fiscal year [3] - Victoria's Secret reaffirmed its FY2025 sales guidance of $6.20 billion to $6.30 billion, compared to the $6.24 billion consensus estimate [3] Q2 Expectations - For Q2, Victoria's Secret expects adjusted earnings per share to range between 0 cents and 15 cents, missing the consensus estimate of 30 cents, and forecasts sales between $1.38 billion and $1.41 billion, slightly below the $1.42 billion estimate [4] - Following the earnings announcement, shares fell 5.4% to close at $21.00 [4] Analyst Ratings - B of A Securities analyst Alice Xiao maintained an Underperform rating on Victoria's Secret and lowered the price target from $20 to $18 [6] - Barclays analyst Adrienne Yih maintained an Overweight rating and raised the price target from $22 to $23 [6]

Company Performance - Shares of Victoria's Secret & Co. (NYSE: VSCO) have experienced significant volatility, more than doubling in late 2024 before losing half of their value from the highs [1] - The uneven performance has attracted the attention of activist investors [1] Investment Insights - The article discusses the potential for contrarian bets based on macro views and stock-specific turnaround stories to achieve outsized returns with a favorable risk/reward profile [1]

Financial Performance - Victoria's Secret reported fiscal Q1 2025 net sales of $1.353 billion, approximately flat year over year, with adjusted operating income of $32 million and adjusted EPS of $0.09, exceeding guidance [1] - The company maintained its full-year net sales target of $6.2 billion to $6.3 billion but guided for adjusted EPS of $1.80 to $2.20, down from $2.69 in 2024, due to tariff headwinds and ongoing strategic investments [1] Strategic Leadership Changes - A major leadership overhaul was executed between January and May, establishing a brand president model and hiring new executives with sector expertise [2] - New appointments include Anne Stevenson as president of Victoria's Secret, Ali Dillon as president of Pink, and Amy Kaczurek as president of Beauty, alongside a new chief marketing officer and executive creative director [3] Category Performance - The Pink apparel segment recorded its third consecutive quarter of positive comparable sales, with improvements in margin and average unit retail price, driven by faster fashion cycles and enhanced customer engagement [4] - The beauty segment achieved its seventh consecutive quarter of growth, representing about 25% of the business, with strong international performance indicating opportunities for future expansion [5] Cost Management and Financial Strategy - The company reduced its adjusted SG&A rate by 120 basis points year-over-year to 32.8%, better than the guidance range, through cost-cutting measures and a strategic shift in marketing spending [6][8] - Victoria's Secret renewed its $750 million asset-based lending facility at lower interest rates, enhancing liquidity and financial flexibility [6][8] Future Outlook - Management maintained net sales guidance for fiscal 2025 of $6.2 billion to $6.3 billion, with operating income expected between $270 million and $320 million, and adjusted EPS projected at $1.80 to $2.20 [9] - Plans include opening 16 new North American stores, closing 30 to 40 locations, and renovating 40 locations to the "Store of the Future" model, which will comprise a significant portion of the store base by year-end [9]

Core Viewpoint - Victoria's Secret is planning to reduce promotional deals to mitigate the impact of tariffs on its operating income, which is expected to decrease by $50 million in the 2025 fiscal year due to these tariffs [2][5]. Group 1: Tariff Impact - President Trump's tariffs are projected to significantly affect Victoria's Secret's operating income, with an estimated hit of $50 million during the 2025 fiscal year [2]. - The company is currently facing a 30% tariff on imports from China and a 10% tariff on many goods from other countries, which has prompted a reevaluation of its sourcing and pricing strategies [5]. Group 2: Promotional Strategy Changes - The CFO, Scott Sekella, indicated that the company will optimize its promotions, leading to fewer gift-with-purchase deals and a reduction in traditional discounts [3][4]. - Victoria's Secret will adopt a "strategic, case-by-case" approach to price increases in response to tariffs, rather than applying uniform price hikes across all product categories [4]. Group 3: Sourcing Adjustments - To offset the tariff impact, Victoria's Secret is exploring new suppliers and negotiating with existing ones to minimize costs [5]. - The company has already written off some raw materials sourced from China in the first quarter due to the tariffs [5].

Financial Data and Key Metrics Changes - The company reported first quarter net sales of $1,353 million and adjusted operating income of $32 million, both exceeding guidance ranges [33] - Adjusted net income per diluted share was $0.09, just shy of the upper end of guidance [33] - Total first quarter comparable sales contracted by 1% year over year, with a low single-digit decline in traffic across both stores and digital channels [34] Business Line Data and Key Metrics Changes - Both Victoria's Secret and Pink experienced slight year-over-year retail sales declines, while the beauty segment saw low single-digit growth [33] - Pink Apparel delivered consecutive quarters of positive comps and significant margin expansion, driven by improved product and customer engagement [11] - The beauty business achieved consecutive quarters of growth, driven by the success of the Bombshell fragrance [13] Market Data and Key Metrics Changes - International sales grew by 9% to nearly $200 million, with strong double-digit growth in the China market primarily driven by digital channels [34] - The North American business was essentially flat for the period, with digital channels slightly outpacing store performance [34] Company Strategy and Development Direction - The company is focused on its "Path to Potential" strategy, which includes initiatives like Recommit to PINK and Supercharge bras [9] - A new brand president model has been implemented, with key hires in leadership positions to drive growth and innovation [24][25] - The company aims to redefine brand identities and projections, particularly for Pink, to meet the next generation's preferences [29] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating a complex market environment, despite challenges such as tariffs and a recent security incident [31][47] - The company is maintaining its forecasted net sales range of $6.2 billion to $6.3 billion for fiscal year 2025, reflecting a belief in its strategic positioning [28][29] - Management highlighted the importance of agility and responsiveness to market conditions, which contributed to exceeding expectations in Q1 [22] Other Important Information - The company experienced a security incident on May 24, which led to precautionary measures, but all critical systems were back online by May 29 [7][8] - Adjusted gross margin rate was 35.2%, a decline of 170 basis points compared to the previous year, primarily due to elevated air freight rates and tariff-related adjustments [35] Q&A Session Summary Question: Marketing strategy for the rest of the year - Management discussed a focus on targeted acquisition through a segmented media plan and an evolution in brand messaging, with a more youthful expression for Pink [49][51] Question: Price increases due to tariffs - Management indicated a strategic approach to pricing, optimizing promotions while being mindful of customer price sensitivity [53][54] Question: Progress in brand evolution - Management highlighted significant progress in Pink, particularly in apparel, and emphasized the need for a more energetic expression for Victoria's Secret [58] Question: Gross margin components - Management provided insights into the factors contributing to the gross margin decline, including inbound rates and tariff-related order adjustments [60][62] Question: Intimates market performance - Management noted share growth in sports bras and beauty, while intimates faced pressure, particularly in the panties category [74] Question: Inventory growth expectations - Management expects inventory growth to continue in the mid-single digits, influenced by the European distribution center ramp-up [93]

Financial Data and Key Metrics Changes - The company reported first quarter net sales of $1,353 million and adjusted operating income of $32 million, both exceeding guidance ranges [31] - Adjusted net income per diluted share was $0.09, slightly below the upper end of the guidance range [31] - Total first quarter comparable sales contracted by 1% compared to the prior year, with a low single-digit decline in traffic across both stores and digital channels [32] Business Line Data and Key Metrics Changes - Both Victoria's Secret and Pink experienced slight year-over-year retail sales declines, while the beauty segment saw low single-digit growth [31] - Pink Apparel delivered consecutive quarters of positive comps and significant margin expansion, driven by improved product and customer engagement [11] - The beauty business achieved consecutive quarters of growth, driven by the success of the Bombshell fragrance [13] Market Data and Key Metrics Changes - International sales grew by 9% to nearly $200 million, with strong double-digit growth in the China market primarily driven by digital channels [33][34] - The North American business was essentially flat for the period, with digital channels slightly outperforming stores [31][32] Company Strategy and Development Direction - The company is focused on its "Path to Potential" strategy, which includes initiatives like Recommit to PINK, Supercharge bras, and Fuel Growth in Lifestyle Categories [8] - The company plans to redefine brand identities and projections, particularly for Pink, to meet the next generation's preferences [28] - The leadership team has been strengthened with new appointments, including brand presidents for Victoria's Secret, Pink, and Beauty, as well as a new Chief Marketing Officer [22][24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating a complex market environment, maintaining a forecasted net sales range of $6.2 billion to $6.3 billion for fiscal year 2025 [27][28] - The company anticipates continued uncertainty in the macro environment but remains pleased with the strong performance of its core business [28][44] - Management highlighted the importance of agility in responding to market challenges and opportunities, emphasizing a disciplined approach to expense management [30][44] Other Important Information - The company experienced a security incident in May, which led to temporary offline status for some internal systems and the e-commerce site, but operations have since returned to normal [6][7] - Adjusted gross margin rate was 35.2%, a decline of 170 basis points compared to the previous year, primarily due to elevated air freight rates and tariff-related adjustments [34] Q&A Session Summary Question: Marketing strategy for the rest of the year - Management indicated a focus on targeted acquisition through a segmented media plan and an evolution in creative content to push the brands further apart [47][49] Question: Price increases due to tariffs - Management stated that pricing strategies will be optimized, with a focus on promotional adjustments rather than blanket price increases across all categories [51][52] Question: Progress in brand evolution - Management highlighted significant progress in Pink, particularly in apparel, and noted ongoing efforts to energize the Victoria's Secret brand [55][57] Question: Gross margin components - Management explained that the primary headwinds for gross margin were related to inbound rates and tariff-related order adjustments, with expectations for some improvement in the back half of the year [58][59] Question: Intimates market performance - Management noted a shift in consumer behavior towards sports bras and comfort-focused products, with ongoing innovation in the pipeline [72][94]

About this content About Emily Jarvie Emily began her career as a political journalist for Australian Community Media in Hobart, Tasmania. After she relocated to Toronto, Canada, she reported on business, legal, and scientific developments in the emerging psychedelics sector before joining Proactive in 2022. She brings a strong journalism background with her work featured in newspapers, magazines, and digital publications across Australia, Europe, and North America, including The Examiner, The Advocate, ...

Group 1 - Victoria's Secret reported quarterly earnings of $0.09 per share, matching the Zacks Consensus Estimate, down from $0.12 per share a year ago [1] - The company posted revenues of $1.35 billion for the quarter ended April 2025, slightly surpassing the Zacks Consensus Estimate by 0.14%, compared to $1.36 billion in the same quarter last year [2] - Victoria's Secret has surpassed consensus EPS estimates three times over the last four quarters and topped revenue estimates four times in the same period [2] Group 2 - The stock has underperformed, losing about 46.4% since the beginning of the year, while the S&P 500 has gained 2.7% [3] - The company's earnings outlook is mixed, with a current Zacks Rank of 3 (Hold), indicating expected performance in line with the market [6] - The current consensus EPS estimate for the upcoming quarter is $0.29 on revenues of $1.42 billion, and for the current fiscal year, it is $2.29 on revenues of $6.25 billion [7] Group 3 - The Retail - Apparel and Shoes industry is currently in the bottom 35% of over 250 Zacks industries, which may impact stock performance [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, suggesting that tracking these revisions can be beneficial for investors [5]

First Quarter Earnings June 11, 2025 Forward Looking Statements Consolidated Balance Sheets | (Unaudited – In thousands) | May 3, 2025 | May 4, 2024 | | --- | --- | --- | | ASSETS | | | | Current Assets | | | | Cash and Cash Equivalents | $138,450 | $104,583 | | Accounts Receivable, Net | 153,035 | 151,698 | | Inventories | 1,042,921 | 987,033 | | Other | 120,286 | 149,466 | | Total Current Assets | 1,454,692 | 1,392,780 | | Property and Equipment, Net | 762,911 | 804,845 | | Operating Lease Assets | 1,534, ...

Core Viewpoint - Victoria's Secret & Co. reported first quarter financial results that exceeded expectations, reaffirming its full year 2025 sales guidance [1][2]. Financial Performance - The company reported net sales of $1.353 billion for the first quarter of 2025, surpassing the guidance range of $1.30 billion to $1.33 billion, and remaining flat compared to $1.359 billion in the first quarter of 2024 [5]. - Operating income for the first quarter of 2025 was $20 million, down from $26 million in the first quarter of 2024, with a net loss of $2 million, or $0.02 per diluted share, compared to a net loss of $4 million, or $0.05 per diluted share, in the prior year [6]. - Adjusted operating income for the first quarter of 2025 was $32 million, exceeding the guidance range of $10 million to $30 million, but down from $40 million in the first quarter of 2024. Adjusted net income was $7 million, or $0.09 per diluted share, near the high end of the guidance range [7]. Sales Outlook - For the second quarter of 2025, the company forecasts net sales between $1.380 billion and $1.410 billion, compared to $1.417 billion in the same quarter last year. Adjusted operating income is expected to range from $15 million to $35 million [8]. - The full year sales guidance remains at $6.2 billion to $6.3 billion, with adjusted operating income now expected to be between $270 million and $320 million, revised down from the previous range of $300 million to $350 million due to an estimated net tariff impact of approximately $50 million [9]. Business Strategy - The CEO emphasized the company's focus on customer experience, brand health, and product innovation, highlighting the strength in the Beauty business and PINK apparel [3]. - The CFO noted a disciplined approach to cost control and agility in responding to customer needs, aiming to build on the company's solid foundation [4]. Store Performance - Total net sales for the first quarter included $721.3 million from North American stores, $433.2 million from direct sales, and $198.4 million from international sales, with a total comparable sales decrease of 1% [17]. - The company operated 1,378 stores as of May 3, 2025, after opening 15 and closing 24 stores during the quarter [22].