Victoria’s Secret & (US:VSCO)2024-06-07 11:30Financial Performance - In Q1 2024, net sales decreased by $48 million, or 3%, to $1.359 billion compared to $1.407 billion in Q1 2023, with comparable sales down 5%[87] - North American store sales fell by $57 million, or 7%, to $729 million, primarily due to decreases in average unit retail, traffic, and conversion[101] - Direct channel sales decreased by $15 million, or 3%, to $449 million, as an increase in conversion was offset by declines in average unit retail and traffic[101] - International net sales increased by $24 million, or 16%, to $181 million, driven by growth in China and wholesale arrangements[102] - Operating income for Q1 2024 was $26 million, down from $28 million in Q1 2023, with an operating income rate of 1.9% compared to 2.0%[96] - Gross profit decreased slightly by $1 million to $501 million, while the gross profit rate increased to 36.9% from 35.7%[103] - General, administrative, and store operating expenses rose by $1 million to $475 million, with the expense rate increasing to 34.9% from 33.7%[106] Tax and Compliance - The effective tax rate for Q1 2024 was 151.1%, significantly higher than 34.0% in Q1 2023, primarily due to additional tax expenses from share-based compensation[109] - The company is in compliance with all covenants under its long-term debt and borrowing facilities as of May 4, 2024[136] Strategic Focus - The company continues to focus on strategic priorities: Accelerate Our Core, Ignite Growth, and Transform the Foundation[88] Store Operations - The company operates a total of 1,370 stores as of May 4, 2024, with a net increase of 21 stores during the quarter[93] Cash Flow and Financing - Net cash used for operating activities in Q1 2024 was $116 million, an increase of $8 million compared to Q1 2023[117] - Capital expenditures for Q1 2024 were $39 million, down from $55 million in Q1 2023, primarily related to store capital programs and technology investments[118][119] - Cash and cash equivalents at the end of Q1 2024 were $105 million, down from $132 million at the end of Q1 2023[116] - Net cash used for financing activities in Q1 2024 was $10 million, significantly lower than $132 million in Q1 2023[121][122] - Cash paid for interest in Q1 2024 was $12 million, compared to $13 million in Q1 2023[131] Debt and Credit - Total long-term debt as of May 4, 2024, was $1,119 million, a slight decrease from $1,120 million as of February 3, 2024[131] - The company borrowed $90 million and made repayments of $15 million under the ABL Facility during the first quarter of 2024 and 2023, respectively[135] - The principal value of the company's outstanding debt as of May 4, 2024, was $990 million, with an estimated fair value of $867 million[149] - The company's credit ratings as of May 4, 2024, are Ba3 from Moody's and BB from S&P for corporate ratings[137] Investments and Obligations - The company’s contractual obligations primarily consist of long-term debt, operating leases, and purchase orders for merchandise inventory[138] - The company’s investment portfolio is primarily comprised of interest-bearing instruments, with no material risk to principal associated with interest rate changes[147] - The company maintains cash and cash equivalents primarily in bank deposits, monitoring the credit standing of financial institutions[151] Accounting Standards - The company has not adopted any new accounting standards during the first quarter of 2024 that had a material impact on its results[139]