Victoria’s Secret Q1 2025 Earnings Call Highlights

Victoria’s Secret & Company ((VSCO)) has held its Q1 earnings call. Read on for the main highlights of the call.

Victoria’s Secret & Co. recently held its earnings call for the first quarter of fiscal year 2025, revealing a mixed sentiment. The company celebrated exceeding expectations in several areas, including international growth and strategic leadership hires. However, challenges such as flat net sales, security incidents, and tariff pressures were also acknowledged, painting a balanced picture of the company’s current standing.

Exceeded Expectations in Q1 2025

Victoria’s Secret & Co. reported first-quarter net sales of $1.353 billion and an adjusted operating income of $32 million, both surpassing their guidance ranges. The adjusted net income per diluted share was $0.09, reflecting a strong start to the fiscal year.

International Growth

The company saw a 9% increase in international sales, reaching nearly $200 million. This growth was driven by strong performance in digital channels, particularly in China, which showed robust double-digit growth.

Strong Performance in Beauty Segment

The Beauty segment continued its upward trajectory, achieving its seventh consecutive quarter of growth. The fifteenth anniversary of the Bombshell product line significantly contributed to this success.

Positive Momentum in Pink and VSX

Victoria’s Secret’s Pink Apparel division recorded its third consecutive quarter of positive comparable sales, while VSX sports bras experienced a 20% growth, marking a period of positive momentum for these segments.

Strategic Leadership Hires

The company announced new brand presidents and a Chief Marketing Officer, aiming to bolster sustained growth and strategic vision, indicating a proactive approach to leadership.

Store of the Future Expansion

Victoria’s Secret plans to expand its Store of the Future concept, with expectations to represent 25% of the North American fleet by the end of the year, reflecting a strategic push towards modern retail experiences.

Flat Net Sales and 1% Comparable Sales Decline

Despite the positive developments, net sales for Q1 remained flat, and total comparable sales were down by 1% compared to the previous year, highlighting areas needing improvement.

Security Incident Impact

A recent security incident required some internal systems and e-commerce sites to be taken offline, impacting the Q2 sales forecast by approximately $20 million.

Gross Margin Pressure

The adjusted gross margin rate fell by 170 basis points to 35.2%, below the guidance of 36.5%, due to elevated airfreight rates, tariff-related order adjustments, and higher GWP activity.

Tariff Headwinds

Tariff impacts are expected to result in a net impact of approximately $50 million for fiscal year 2025, with ongoing strategies to mitigate these challenges.

Challenges in Intimates and Panties

The intimates market continues to face pressure, with a decline in market share during Q1. The panties business was softer throughout the quarter, indicating challenges in these segments.

Forward-Looking Guidance

Victoria’s Secret & Co. maintained its fiscal year 2025 net sales forecast between $6.2 billion and $6.3 billion, with adjusted operating income expected to range from $270 million to $320 million. The company plans to focus on innovation in product lines, particularly in the Pink and Beauty segments. For Q2, net sales are projected between $1.38 billion and $1.41 billion, considering a $20 million impact from the recent security incident. The fiscal year guidance includes a gross tariff impact of $120 million, with mitigation efforts reducing this to a net impact of $50 million.

In summary, Victoria’s Secret & Co.’s earnings call for Q1 2025 presented a balanced view of the company’s performance. While there were significant achievements in international growth and strategic initiatives, challenges such as flat net sales and tariff pressures remain. The company remains optimistic about its future, with strategic plans in place to drive growth and innovation.