Victoria’s Secret & Co. Reports Fourth Quarter 2023 Results
- Adjusted operating income and EPS for Q4 2023 were at the high end of guidance.
- Operating cash flow of $590 million was generated in Q4 2023.
- Debt decreased by over $150 million year-over-year.
- Sales trends in North America showed improvement, with international sales up by 24%.
- Gross margin rate exceeded expectations due to inventory management and cost reductions.
- CEO emphasized strategic priorities and growth initiatives for the future.
- None.
Insights
Analyzing the financial performance of Victoria's Secret as disclosed, several key figures stand out. The company's ability to generate $590 million in operating cash flow in the fourth quarter is a strong indicator of its operational efficiency. Moreover, reducing debt by over $150 million year-over-year significantly improves the company's balance sheet and could potentially lead to a better credit rating.
The announcement of a new $250 million share repurchase authorization is a strategic move that signals confidence in the company's future to investors. Share buybacks often lead to an increase in earnings per share (EPS) and can have a positive impact on the stock price, as they typically reduce the number of shares outstanding. However, this must be balanced against the opportunity cost of investing that capital back into the business for growth initiatives.
The provided guidance for fiscal year 2024 is cautiously optimistic, acknowledging the challenges faced in the broader intimates market. This conservative approach can be seen as a risk mitigation strategy, which may reassure investors looking for stability in uncertain market conditions.
The reported 3% increase in net sales for Q4 2023, despite a 6% decrease in total comparable sales, indicates a mixed performance. The additional week in the quarter, contributing approximately $80 million in net sales, should be taken into account when comparing year-over-year performance. This extra week can distort the true underlying sales trends, which seem to be challenging given the decrease in comparable sales.
Victoria's Secret's international business performance, with a 24% increase in sales, suggests that the company's growth strategy outside North America is gaining traction. This geographical diversification could be a key driver for future growth, especially as the North American market has shown a downward trend for four consecutive quarters.
The emphasis on strategic priorities such as accelerating the core business, igniting growth and transforming the foundation indicates a long-term vision for the company. The focus on initiatives like a multi-tender loyalty program, customer experience enhancements and a reimagined merchandise strategy for PINK shows a commitment to innovation and adaptation to consumer preferences.
The significant improvement in fourth quarter gross margin rate can be attributed to disciplined inventory management and cost reductions. This is particularly noteworthy in the retail sector, where margins are often squeezed by promotional activities and inventory markdowns. Efficient supply chain management, as part of the 'transform the foundation' initiative, is essential in modern retail to maintain profitability.
Victoria's Secret's focus on giftable merchandise assortment during the holiday season and the reported strong response to marketing initiatives reflect an understanding of seasonal consumer behavior. However, the volatility in sales trends by week during the quarter suggests that the retail environment remains unpredictable and companies must be agile in their marketing and inventory strategies.
The repositioning efforts of the Victoria's Secret brand and the strategic focus discussed at the Investor Day demonstrate a proactive approach to evolving consumer tastes and the competitive landscape. The company's confidence in its leadership team and long-term financial targets suggests a clear strategic direction, which is crucial for investor confidence in a rapidly changing retail industry.
Fourth quarter adjusted operating income and adjusted diluted EPS at the high-end of guidance
Generated nearly
Announces new
Provides initial full year and first quarter 2024 guidance
REYNOLDSBURG, Ohio, March 06, 2024 (GLOBE NEWSWIRE) -- Victoria’s Secret & Co. (“Victoria’s Secret” or the “Company”) (NYSE: VSCO) today reported 2023 financial results for the fourth quarter and fiscal year ended February 3, 2024.
Chief Executive Officer Martin Waters commented on the fourth quarter, “I am grateful for the hard work and dedication of our team of associates and partners around the world who executed our strategies, delighted our customers and delivered solid financial results in the all-important holiday quarter. Sales trends during the quarter were volatile by week, but we were encouraged by the improving quarterly sales trend in North America. We were particularly pleased with our early holiday sales in November and during the peak days and weekends leading up to Christmas, both in our stores and through digital channels, led by strong response to our giftable merchandise assortment, improved customer experiences and marketing messages. Our international business continued its strong performance with sales up
Martin continued, “With the long-term health of the business in mind, we remain committed to our strategic priorities: 1) Accelerate Our Core; 2) Ignite Growth; and 3) Transform the Foundation. As we look into the new year, we recognize the broader intimates market in North America has been down for four consecutive quarters and we are planning the business appropriately conservative in the near-term. At the same time, we are focused on delivering on multiple initiatives to drive growth in our business, including: our multi-tender loyalty program, new customer experience enhancements in our digital business, product improvements and launches to enhance the Victoria’s Secret brand and a reimagined merchandise strategy for PINK. At our Investor Day in October 2023, we discussed our focus on accelerating our core, and our initiatives designed to leverage our market leadership position and unlock our opportunity to convert our significant cultural influence into long-term financial growth. We believe our strategies will position the business to deliver the potential of our category-defining Victoria’s Secret and PINK brands, and I believe we have the right leadership team in place at the right time for our business to be successful. We remain confident in our brand repositioning efforts and are committed to delivering our long-term financial targets and returning value to our shareholders.”
Fourth Quarter 2023 Results
The Company reported net income of
Excluding the impact of the items described at the conclusion of this press release, fourth quarter 2023 adjusted net income was
The Company reported net sales of
The Company estimates the extra week in the fourth quarter 2023 represented approximately
Adjusted net income and adjusted operating income are non-GAAP financial measures. At the conclusion of this press release, we have included more information regarding these non-GAAP financial measures, including a reconciliation of each non-GAAP financial measure to the most directly comparable financial measure reported in accordance with GAAP.
Full Year 2023 Results
The Company reported net income of
Excluding the impact of the items described at the conclusion of this press release, fiscal year 2023 adjusted net income was
The Company reported net sales of
Liquidity and Capital Allocation
In the fourth quarter of 2023, the Company generated
The Company today announced that its Board of Directors approved a new share repurchase program (“March 2024 Share Repurchase Program”) authorizing the repurchase of up to
Full Year and First Quarter 2024 Outlook
The Company is forecasting 52-week fiscal year 2024 net sales to be about
The Company is forecasting first quarter 2024 net sales to decrease mid-single digits compared to last year’s first quarter net sales of
Forecasted adjusted operating income and adjusted net income (loss) per diluted share for the full year and first quarter 2024 excludes the financial impact of purchase accounting items related to the Adore Me acquisition, including expense (income) related to changes in the estimated fair value of contingent consideration and performance-based payments, as well as the amortization of intangible assets. The Company is not able to provide a reconciliation of forward-looking adjusted operating income or adjusted net income (loss) per diluted share to the most directly comparable forward-looking GAAP financial measures because the Company is unable to provide a meaningful or accurate reconciliation or estimation of certain reconciling items without unreasonable effort, due to the inherent difficulty in forecasting the timing of, and quantifying, the various purchase accounting items that are necessary for such reconciliation.
Victoria’s Secret & Co. will conduct its fourth quarter earnings call at 8:00 a.m. Eastern on Thursday, March 7, 2024. To listen, call 1-800-619-9066 (international dial-in number: 1-212-519-0836); conference ID 5358727. For an audio replay, call 1-800-813-5529 (international replay number: 1-203-369-3826); conference ID 5358727 or log onto www.victoriassecretandco.com. The materials accompanying the earnings call have been posted on the Investors section of the Company’s website. The audio replay will be available approximately two hours after the conclusion of the call.
About Victoria’s Secret & Co.
Victoria’s Secret & Co. (NYSE: VSCO) is a specialty retailer of modern, fashion-inspired collections including signature bras, panties, lingerie, casual sleepwear, athleisure and swim, as well as award-winning prestige fragrances and body care. VS&Co is comprised of market leading brands, Victoria’s Secret and Victoria’s Secret PINK, that share a common purpose of inspiring and uplifting our customers in every stage of their lives, and Adore Me, a technology-led, digital-first innovative intimates brand serving women of all sizes and budgets at all phases of life. We are committed to empowering our more than 30,000 associates across a global footprint of 1,370 retail stores in nearly 70 countries. We provide our customers with products and experiences that make them feel good inside and out while driving positive change through the power of our products, platform and advocacy.
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
We caution that any forward-looking statements (as such term is defined in the U.S. Private Securities Litigation Reform Act of 1995) contained in this press release or made by us, our management, or our spokespeople involve risks and uncertainties and are subject to change based on various factors, many of which are beyond our control. Accordingly, our future performance and financial results may differ materially from those expressed or implied in any such forward-looking statements, and any future performance or financial results expressed or implied by such forward-looking statements are not guarantees of future performance. Forward-looking statements include, without limitation, statements regarding our future operating results, the implementation and impact of our strategic plans, and our ability to meet environmental, social, and governance goals. Words such as “estimate,” “commit,” “will,” “target,” “goal,” “project,” “plan,” “believe,” “seek,” “strive,” “expect,” “anticipate,” “intend,” “continue,” “potential” and any similar expressions are intended to identify forward-looking statements. Risks associated with the following factors, among others, could affect our results of operations and financial performance and cause actual results to differ materially from those expressed or implied in any forward-looking statements:
- we may not realize all of the expected benefits of the spin-off from Bath & Body Works, Inc. (f/k/a L Brands, Inc.);
- general economic conditions, inflation, and changes in consumer confidence and consumer spending patterns;
- market disruptions including pandemics or significant health hazards, severe weather conditions, natural disasters, terrorist activities, financial crises, political crises or other major events, or the prospect of these events;
- our ability to successfully implement our strategic plan;
- difficulties arising from turnover in company leadership or other key positions;
- our ability to attract, develop and retain qualified associates and manage labor-related costs;
- our dependence on traffic to our stores and the availability of suitable store locations on satisfactory terms;
- our ability to successfully operate and expand internationally and related risks;
- the operations and performance of our franchisees, licensees, wholesalers and joint venture partners;
- our ability to successfully operate and grow our direct channel business;
- our ability to protect our reputation and the image and value of our brands;
- our ability to attract customers with marketing, advertising and promotional programs;
- the highly competitive nature of the retail industry and the segments in which we operate;
- consumer acceptance of our products and our ability to manage the life cycle of our brands, remain current with fashion trends, and develop and launch new merchandise, product lines and brands successfully;
- our ability to realize the potential benefits and synergies sought with the acquisition of AdoreMe, Inc.;
- our ability to incorporate artificial intelligence into our business operations successfully and ethically while effectively managing the associated risks;
- our ability to source materials and produce, distribute and sell merchandise on a global basis, including risks related to:
- political instability and geopolitical conflicts;
- environmental hazards and natural disasters;
- significant health hazards and pandemics;
- delays or disruptions in shipping and transportation and related pricing impacts; and
- disruption due to labor disputes;
- our geographic concentration of production and distribution facilities in central Ohio and Southeast Asia;
- the ability of our vendors to manufacture and deliver products in a timely manner, meet quality standards and comply with applicable laws and regulations;
- fluctuations in freight, product input and energy costs;
- our and our third-party service providers’ ability to implement and maintain information technology systems and to protect associated data and system availability;
- our ability to maintain the security of customer, associate, third-party and company information;
- stock price volatility;
- shareholder activism matters;
- our ability to maintain our credit rating;
- our ability to comply with regulatory requirements; and
- legal, tax, trade and other regulatory matters.
Except as may be required by law, we assume no obligation and do not intend to make publicly available any update or other revisions to any of the forward-looking statements contained in this press release to reflect circumstances existing after the date of this press release or to reflect the occurrence of future events, even if experience or future events make it clear that any expected results expressed or implied by those forward-looking statements will not be realized. Additional information regarding these and other factors can be found in “Item 1A. Risk Factors” in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 17, 2023.
For further information, please contact:
| Victoria’s Secret & Co.: | |
| Investor Relations: | Media Relations: |
| Kevin Wynk | Brooke Wilson |
| investorrelations@victoria.com | communications@victoria.com |
| Total Sales (Millions): | ||||||||||||||||||||||
| Fourth Quarter 2023 | Fourth Quarter 2022 | % Inc/ (Dec) | Full Year 2023 | Full Year 2022 | % Inc/ (Dec) | |||||||||||||||||
| Stores – North America¹ | $ | 1,154.2 | $ | 1,197.4 | (3.6 | %) | $ | 3,480.2 | $ | 3,909.5 | (11.0 | %) | ||||||||||
| Direct¹ | 734.0 | 666.8 | 10.1 | % | 2,014.8 | 1,843.0 | 9.3 | % | ||||||||||||||
| International² | 194.3 | 157.0 | 23.8 | % | 686.8 | 591.8 | 16.1 | % | ||||||||||||||
| Total | $ | 2,082.5 | $ | 2,021.2 | 3.0 | % | $ | 6,181.8 | $ | 6,344.3 | (2.6 | %) | ||||||||||
| ¹ – Results in 2023 include Adore Me sales. | ||||||||||||||||||||||
| ² – Results include consolidated joint venture sales in China, royalties associated with franchised stores and wholesale sales. | ||||||||||||||||||||||
| Comparable Sales Increase (Decrease): | ||||||||
| Fourth Quarter 2023 | Fourth Quarter 2022 | Full Year 2023 | Full Year 2022 | |||||
| Stores and Direct¹ | ( | ( | ( | ( | ||||
| Stores Only² | ( | ( | ( | ( | ||||
| NOTE: Please refer to our filings with the Securities and Exchange Commission for further discussion regarding our comparable sales calculation. | ||||||||
| ¹ – Results include company-operated stores in the U.S. and Canada, consolidated joint venture stores in China and direct sales. | ||||||||
| ² – Results include company-operated stores in the U.S. and Canada and consolidated joint venture stores in China. | ||||||||
| Total Stores: | ||||||||
| Stores at 1/28/23 | Opened | Closed | Stores at 2/3/24 | |||||
| Company-Operated: | ||||||||
| U.S. | 812 | 15 | (19) | 808 | ||||
| Canada | 25 | - | (2) | 23 | ||||
| Subtotal Company-Operated | 837 | 15 | (21) | 831 | ||||
| China Joint Venture: | ||||||||
| Beauty & Accessories¹ | 39 | 2 | (7) | 34 | ||||
| Full Assortment | 33 | 4 | (1) | 36 | ||||
| Subtotal China Joint Venture | 72 | 6 | (8) | 70 | ||||
| Partner-Operated: | ||||||||
| Beauty & Accessories | 308 | 31 | (32) | 307 | ||||
| Full Assortment | 135 | 33 | (12) | 156 | ||||
| Subtotal Partner-Operated | 443 | 64 | (44) | 463 | ||||
| Adore Me | 6 | - | - | 6 | ||||
| Total | 1,358 | 85 | (73) | 1,370 | ||||
| ¹ – Includes thirteen partner-operated stores at 2/3/24. | ||||||||
| VICTORIA'S SECRET & CO. | ||||||||
| CONSOLIDATED STATEMENTS OF INCOME | ||||||||
| FOURTEEN WEEKS ENDED FEBURARY 3, 2024 AND THIRTEEN WEEKS ENDED JANUARY 28, 2023 | ||||||||
| (Unaudited) | ||||||||
| (In thousands except per share amounts) | ||||||||
| 2023 | 2022 | |||||||
| Net Sales | $ | 2,082,452 | $ | 2,021,206 | ||||
| Costs of Goods Sold, Buying and Occupancy | (1,256,611 | ) | (1,276,938 | ) | ||||
| Gross Profit | 825,841 | 744,268 | ||||||
| General, Administrative and Store Operating Expenses | (567,475 | ) | (500,857 | ) | ||||
| Operating Income | 258,366 | 243,411 | ||||||
| Interest Expense | (26,586 | ) | (19,666 | ) | ||||
| Other Income | 956 | 2,236 | ||||||
| Income Before Income Taxes | 232,736 | 225,981 | ||||||
| Provision for Income Taxes | 49,200 | 53,890 | ||||||
| Net Income | 183,536 | 172,091 | ||||||
| Less: Net Income (Loss) Attributable to Noncontrolling Interest | 2,449 | (898 | ) | |||||
| Net Income Attributable to Victoria's Secret & Co. | $ | 181,087 | $ | 172,989 | ||||
| Net Income Per Diluted Share Attributable to Victoria's Secret & Co. | $ | 2.29 | $ | 2.10 | ||||
| Weighted Average Shares Outstanding | 78,909 | 82,299 | ||||||
| VICTORIA'S SECRET & CO. | ||||||||
| CONSOLIDATED STATEMENTS OF INCOME | ||||||||
| FIFTY-THREE WEEKS ENDED FEBURARY 3, 2024 AND FIFTY-TWO WEEKS ENDED JANUARY 28, 2023 | ||||||||
| (Unaudited) | ||||||||
| (In thousands except per share amounts) | ||||||||
| 2023 | 2022 | |||||||
| Net Sales | $ | 6,181,790 | $ | 6,344,298 | ||||
| Costs of Goods Sold, Buying and Occupancy | (3,939,607 | ) | (4,085,901 | ) | ||||
| Gross Profit | 2,242,183 | 2,258,397 | ||||||
| General, Administrative and Store Operating Expenses | (1,996,617 | ) | (1,780,764 | ) | ||||
| Operating Income | 245,566 | 477,633 | ||||||
| Interest Expense | (99,363 | ) | (60,376 | ) | ||||
| Other Income (Loss) | 1,184 | (419 | ) | |||||
| Income Before Income Taxes | 147,387 | 416,838 | ||||||
| Provision for Income Taxes | 31,582 | 79,175 | ||||||
| Net Income | 115,805 | 337,663 | ||||||
| Less: Net Income (Loss) Attributable to Noncontrolling Interest | 6,605 | (10,443 | ) | |||||
| Net Income Attributable to Victoria's Secret & Co. | $ | 109,200 | $ | 348,106 | ||||
| Net Income Per Diluted Share Attributable to Victoria's Secret & Co. | $ | 1.39 | $ | 4.14 | ||||
| Weighted Average Shares Outstanding | 78,554 | 84,069 | ||||||
| VICTORIA'S SECRET & CO. | ||||||||||||||||
| NON-GAAP FINANCIAL INFORMATION | ||||||||||||||||
| (Unaudited) | ||||||||||||||||
| (In thousands except per share amounts) | ||||||||||||||||
| In addition to our results provided in accordance with GAAP above and throughout this press release, provided below are non-GAAP financial measures that present operating income, net income attributable to Victoria's Secret & Co. and net income per diluted share attributable to Victoria's Secret & Co. on an adjusted basis, which remove certain special items. We believe that these special items are not indicative of our ongoing operations due to their size and nature. The intangible asset amortization excluded from these non-GAAP financial measures is excluded because the amortization, unlike the related revenue, is not affected by operations of any particular period unless an intangible asset becomes impaired or the estimated useful life of an intangible asset is revised. We use adjusted financial information as key performance measures of results of operations for the purpose of evaluating performance internally. These non-GAAP measurements are not intended to replace the presentation of our financial results in accordance with GAAP. Instead, we believe that the presentation of adjusted financial information provides additional information to investors to facilitate the comparison of past and present operations. Further, our definition of adjusted financial information may differ from similarly titled measures used by other companies. The table below reconciles the GAAP financial measures to the non-GAAP financial measures. | ||||||||||||||||
| Fourth Quarter | Year-to-Date | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Reconciliation of Reported to Adjusted Operating Income | ||||||||||||||||
| Reported Operating Income - GAAP | $ | 258,366 | $ | 243,411 | $ | 245,566 | $ | 477,633 | ||||||||
| Adore Me Acquisition-related Items (a) | 18,775 | 15,424 | 45,036 | 15,424 | ||||||||||||
| Amortization of Intangible Assets (b) | 6,284 | - | 25,136 | - | ||||||||||||
| Restructuring Charges (c) | - | 5,704 | 11,125 | 35,052 | ||||||||||||
| Occupancy-related Legal Matter (d) | - | - | - | 21,679 | ||||||||||||
| Happy Nation Restructuring Charge (e) | - | 15,926 | - | 15,926 | ||||||||||||
| Adjusted Operating Income | $ | 283,425 | $ | 280,465 | $ | 326,863 | $ | 565,714 | ||||||||
| Reconciliation of Reported to Adjusted Net Income Attributable to Victoria's Secret & Co. | ||||||||||||||||
| Reported Net Income Attributable to Victoria's Secret & Co. - GAAP | $ | 181,087 | $ | 172,989 | $ | 109,200 | $ | 348,106 | ||||||||
| Adore Me Acquisition-related Items (a) | 19,954 | 15,424 | 49,500 | 15,424 | ||||||||||||
| Amortization of Intangible Assets (b) | 6,284 | - | 25,136 | - | ||||||||||||
| Restructuring Charges (c) | - | 5,704 | 11,125 | 35,052 | ||||||||||||
| Occupancy-related Legal Matter (d) | - | - | - | 21,679 | ||||||||||||
| Happy Nation Restructuring Charge (e) | - | 15,926 | - | 15,926 | ||||||||||||
| Tax Effect of Adjusted Items | (3,745 | ) | (7,040 | ) | (16,879 | ) | (19,795 | ) | ||||||||
| Adjusted Net Income Attributable to Victoria's Secret & Co. | $ | 203,580 | $ | 203,003 | $ | 178,082 | $ | 416,392 | ||||||||
| Reconciliation of Reported to Adjusted Net Income Per Diluted Share Attributable to Victoria's Secret & Co. | ||||||||||||||||
| Reported Net Income Per Diluted Share Attributable to Victoria's Secret & Co. - GAAP | $ | 2.29 | $ | 2.10 | $ | 1.39 | $ | 4.14 | ||||||||
| Adore Me Acquisition-related Items (a) | 0.23 | 0.17 | 0.53 | 0.16 | ||||||||||||
| Amortization of Intangible Assets (b) | 0.06 | - | 0.24 | - | ||||||||||||
| Restructuring Charges (c) | - | 0.05 | 0.11 | 0.31 | ||||||||||||
| Occupancy-related Legal Matter (d) | - | - | - | 0.19 | ||||||||||||
| Happy Nation Restructuring Charge (e) | - | 0.15 | - | 0.14 | ||||||||||||
| Adjusted Net Income Per Diluted Share Attributable to Victoria's Secret & Co. | $ | 2.58 | $ | 2.47 | $ | 2.27 | $ | 4.95 | ||||||||
| (a) In the fourth quarter of 2023, we recognized a | ||||||||||||||||
| (b) In the fourth quarter of 2023, we recognized | ||||||||||||||||
| (c) In the first quarter of 2023, we recognized a | ||||||||||||||||
| (d) In the first quarter of 2022, we recognized a | ||||||||||||||||
| (e) In the fourth quarter of 2022, we recognized a | ||||||||||||||||
FAQ
What were Victoria's Secret's adjusted operating income and EPS for Q4 2023?
How much operating cash flow did Victoria's Secret generate in Q4 2023?
By how much did Victoria's Secret reduce its debt year-over-year?
What was the sales trend like for Victoria's Secret in North America during Q4 2023?
How did Victoria's Secret's gross margin rate perform in Q4 2023?
What growth initiatives were highlighted by Victoria's Secret's CEO for the future?
