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]
Victoria’s Secret & (VSCO) - 2026 Q1 - Earnings Call Transcript