Victoria’s Secret & (VSCO) - 2025 Q2 - Quarterly Report

Financial Performance - In Q2 2024, operating income increased by $36 million to $62 million, with an operating income rate of 4.4%, up from 1.8% in Q2 2023[65]. - Net sales decreased by $10 million, or 1%, to $1.417 billion compared to $1.427 billion in Q2 2023, with comparable sales down 3%[65]. - Adjusted operating income for Q2 2024 was $62 million, compared to $49 million in Q2 2023[69]. - Reported net income per diluted share was $0.40 in Q2 2024, compared to a loss of $0.02 in Q2 2023[70]. - Gross profit for Q2 2024 increased by $14 million to $501 million, with a gross profit rate of 35.4%, up from 34.1% in Q2 2023[82]. - Year-to-date 2024 net sales decreased by $57 million, or 2%, to $2.777 billion compared to $2.834 billion in year-to-date 2023[87]. - Year-to-date gross profit increased by $14 million to $1.003 billion, with a gross profit rate of 36.1%, up from 34.9% in year-to-date 2023[88]. Sales and Store Performance - North American store sales decreased by 2%, or $17 million, to $800 million compared to $817 million in Q2 2023[65]. - Direct channel sales decreased by 1%, or $4 million, to $430 million compared to $434 million in Q2 2023[65]. - Sales per average selling square foot decreased by 1% to $137 in Q2 2024, while year-to-date sales per average store decreased by 3% to $1,804[73]. - North America net sales in Q2 2024 decreased by $17 million, or 2%, to $800 million, while international net sales increased by $11 million, or 6%, to $187 million[81]. - North America year-to-date net sales decreased by $74 million, or 5%, to $1.529 billion, while international net sales increased by $36 million, or 11%, to $369 million[87]. Expenses and Income - General, administrative, and store operating expenses decreased by $22 million, or 5%, to $439 million in Q2 2024[84]. - Interest expense for year-to-date 2024 decreased by $3 million to $43 million compared to year-to-date 2023[90]. - The effective tax rate for year-to-date 2024 was 35.9%, down from 62.0% in year-to-date 2023[92]. - Net cash provided by operating activities for year-to-date 2024 was $1 million, a decrease of $18 million compared to year-to-date 2023, primarily due to an increase in net income of $27 million[99]. Capital Expenditures and Debt - Capital expenditures for year-to-date 2024 were $99 million, with an estimated total of approximately $200 million for fiscal year 2024, focusing on store capital programs and technology investments[100][101]. - Total long-term debt as of August 3, 2024, was $1,119 million, a decrease from $1,270 million as of July 29, 2023[107]. - The company entered into a Term Loan B credit facility of $400 million, maturing in August 2028, with quarterly principal payments of 0.25% starting December 2021[108]. - The company has a senior secured asset-based revolving credit facility (ABL Facility) with commitments of $750 million, expiring in August 2026, and outstanding borrowings of $145 million as of August 3, 2024[110]. Cash Flow and Liquidity - Cash and cash equivalents at the end of the period on August 3, 2024, were $169 million, compared to $131 million at the end of year-to-date 2023[98]. - The company has $483 million available under the ABL Facility as of August 3, 2024, an increase from $254 million as of July 29, 2023[96]. - Net cash used for investing activities year-to-date 2024 was $83 million, compared to $143 million in year-to-date 2023[100][101]. - The company believes its available short-term and long-term capital resources are sufficient to fund working capital and cash flow requirements over the next 12 months[93]. Strategic Initiatives - The company continues to focus on three strategic priorities: Accelerate Our Core, Ignite Growth, and Transform the Foundation[65]. - The financial impact of the Adore Me acquisition included pre-tax income of $5 million in Q2 2024, compared to a pre-tax expense of $18 million in Q2 2023[70]. - The company expects to utilize cash flows to invest in brands, talent, and strategic initiatives while repaying indebtedness over time[93]. - The March 2024 Share Repurchase Program authorized the repurchase of up to $250 million of common stock, with no shares repurchased year-to-date 2024[104]. Compliance and Ratings - The company is in compliance with all covenants under its long-term debt and borrowing facilities as of August 3, 2024[110]. - The company's credit ratings as of August 3, 2024, include Ba3 from Moody's for corporate rating and Ba2 from Moody's for senior secured debt[111].