Victoria’s Secret & (US:VSCO)2025-12-05 12:16Financial Performance - Net sales in Q3 2025 increased by 9% to $1.472 billion compared to Q3 2024, with a 34% increase in international channel sales[106] - For the third quarter of 2025, net sales increased by $125 million, or 9%, to $1.472 billion compared to $1.347 billion in the third quarter of 2024[128] - Year-to-date 2025 net sales increased by $160 million, or 4%, to $4.284 billion compared to $4.124 billion in year-to-date 2024[144] - North America year-to-date net sales increased by $58 million, or 3%, to $2.325 billion, despite a decrease in traffic[145] - International year-to-date net sales rose by $124 million, or 22%, to $691 million, driven by increases in sales in China and franchise royalties[147] Operating Income and Expenses - Operating loss improved by $28 million to $19 million in Q3 2025, with the operating loss rate improving to (1.3%) from (3.5%) in Q3 2024[107] - Gross profit for the third quarter of 2025 increased by $68 million to $536 million, with a gross profit rate rising to 36.4% from 34.8%[132] - General, administrative, and store operating expenses increased by $40 million, or 8%, to $555 million, primarily due to higher marketing and store selling expenses[136] - For year-to-date 2025, general, administrative, and store operating expenses increased by $58 million, or 4%, to $1.487 billion compared to year-to-date 2024[152] Sales Performance - Sales per average selling square foot increased by 8% to $137 in Q3 2025 compared to Q3 2024[120] - Comparable sales in North America increased, driven by higher average transaction value and conversion rates[106] - North America store net sales rose by $40 million, or 5%, to $778 million, driven by an increase in average transaction value despite flat overall traffic[129] - International net sales surged by $67 million, or 34%, to $265 million, primarily due to increases in sales in China and sourcing sales to partners[131] Tax and Losses - Adjusted net loss per diluted share was $(0.27) in Q3 2025, compared to $(0.50) in Q3 2024[116] - The effective tax rate for the third quarter of 2025 was 16.0%, down from 21.3% in the third quarter of 2024[139] - The effective tax rate for year-to-date 2025 was (42.9%), a significant increase from (7.8%) in year-to-date 2024, primarily due to additional tax expenses related to share-based compensation[155] Cash Flow and Debt - Net cash used for operating activities in year-to-date 2025 was $174 million, a decrease of $75 million compared to year-to-date 2024, driven by lower net operating cash outflows associated with working capital changes[162] - Net cash used for investing activities year-to-date 2025 was $163 million, consisting solely of capital expenditures related to store capital programs and technology investments[164] - Net cash provided by financing activities year-to-date 2025 was $360 million, primarily from borrowings of $545 million under the ABL Facility[167] - As of November 1, 2025, total long-term debt was $1.347 billion, a decrease from $1.414 billion as of November 2, 2024[173] Capital Expenditures and Investments - The company expects capital expenditures to be approximately $200 million for fiscal year 2025, focusing on store capital programs and technology investments[166] - The company’s investment portfolio primarily consisted of money market funds and bank deposits, with no material risk to principal associated with interest rate changes[195] Compliance and Credit Ratings - The company was in compliance with all covenants under its long-term debt and borrowing facilities as of November 1, 2025[183] - The company's credit ratings as of November 1, 2025, were Ba3 from Moody's and BB from S&P for corporate ratings, with a stable outlook[184] Strategic Focus - The company continues to focus on its strategic plan, including enhancing its Bra Authority and fueling growth in beauty[110] Store Operations - The total number of company-operated stores decreased by 61 to 1,404 as of November 1, 2025, with 12 new stores opened and 26 closed in the U.S.[121] Security Incident - A security incident in May 2025 estimated to have negatively impacted Q2 2025 net sales by approximately $20 million[113] Working Capital and Liquidity - The company had a working capital of $454 million as of November 1, 2025, compared to $260 million as of November 2, 2024[159] - The availability under the ABL Facility was $358 million as of November 1, 2025, down from $533 million as of February 1, 2025[160] Long-term Debt Structure - The principal value of the company's outstanding long-term debt was $984 million as of November 1, 2025, with an estimated fair value of $960 million[197] - The company’s long-term debt includes $375 million under the ABL Facility and $384 million under the Term Loan Facility, both of which have variable interest rates based on Term SOFR[196] - The company amended its ABL Facility, extending the maturity date to May 2030 and reducing the applicable interest rates on borrowings to 1.50%-1.75% for Term SOFR loans and 0.50%-0.75% for alternate base rate loans[178] Accounting Standards - The company is evaluating the impact of recently issued accounting standards on its consolidated financial statements, with no material changes expected from the standards adopted in 2025[186][189]