Victoria's Secret & Co. (VSCO) Q2 FY25 Earnings call transcript Aug 29, 2024

In Victoria's Secret & Company's second quarter earnings call for 2024, there were several key themes and trends that emerged, providing valuable insights into the company's financial health and growth prospects. The call, led by Vice President of External Financial Reporting and Investor Relations Kevin Wynk, featured CFO and Interim CEO Timothy Johnson, who provided a detailed analysis of the company's performance and future outlook.

Improved Sales Trends

The company reported sales of $1.4 billion for the second quarter, a decrease of 1% compared to the same period last year. However, this was at the better end of expectations and represented a sequential improvement in sales trends, particularly in North America, where sales improved in both stores and digital channels. The launch of new product collections, such as the Victoria's Secret Dream Bra collection and the PINK Friday Back to Campus event, were successful in driving sales and customer engagement.

Market Share and Merchandise Categories

Victoria's Secret & Company's combined market share in the Intimates category remained at 20%, with digital market share increasing in both bras and panties, along with an overall increase in Sports Bra market share for the second consecutive quarter. The Beauty business continued to be the best-performing category, with year-over-year growth for the fourth consecutive quarter. This growth was driven by the successful introduction of new products and a focus on customer engagement through events like PINK Friday and National Underwear Day.

International Business and Adore Me

The international business experienced sales growth, driven by strong performance with franchise and travel retail partners and a growing presence in China, where profitability increased despite market challenges. Adore Me, the company's direct-to-consumer brand, continued to grow, driven by high single-digit sales in the second quarter and strong operating income.

Operational Efficiency and Cost Management

The company reported adjusted gross margin dollar growth and 80 basis points of adjusted gross margin rate expansion year-over-year, a testament to the company's focus on operational efficiency and cost management. This was achieved through disciplined inventory management and a focus on selling higher-margin products. The company also announced the appointment of Hillary Super as the next CEO, effective September 9, 2024.

Outlook and Future Growth Opportunities

Looking ahead, the company expects sales to be down approximately 1% to 52 weeks from fiscal 2023, compared to prior guidance of down low single-digits. This improvement is driven by the sequential improvement in North America and continued strength in the international business and Adore Me. The company is also optimistic about upcoming events like the Victoria's Secret Fashion Show and the launch of a major VSX Sport event, which are expected to drive sales and customer engagement.

In conclusion, Victoria's Secret & Company's second quarter earnings call for 2024 highlighted the company's resilience in the face of market challenges and its focus on operational efficiency and product innovation. The company's strong performance in North America and international markets, along with the growth of Adore Me, bodes well for its future growth prospects. The appointment of Hillary Super as the next CEO also signals a renewed commitment to driving growth and innovation within the company.