Victoria’s Secret & Co. (“Victoria’s Secret” or the “Company”)
(NYSE: VSCO) today reported 2023 financial results for the first
quarter ended April 29, 2023.
Chief Executive Officer Martin Waters commented,
“The first quarter continued to be a volatile macro environment for
our customer and as the quarter progressed business became more
challenging. Sales were in-line with our original expectations;
however, we were more promotional than planned and ended the
quarter at the lower-end of our adjusted operating income guidance.
Sales performance was particularly challenging in our core
categories where there was significant decline in the overall
stores and digital intimates market in North America. Inventory
levels in our Victoria’s Secret and PINK business ended the quarter
down low-double digits compared to last year and we are prudently
positioned as we move forward. Our international business continued
its stellar growth around the globe with China as a particular
bright spot, and our recent acquisition, Adore Me, met our
expectations during its first quarter as a part of Victoria’s
Secret & Co.”
Martin continued, “While the challenging
environment is likely to continue for the balance of 2023, we
remain steadfast and focused on the three pillars of our long-term
strategy: strengthen the core, ignite growth and transform the
foundation. We are executing against initiatives in each pillar to
change the trajectory of our business as the year progresses,
including: new bra launches, reimagining our merchandise
positioning and strategy for PINK, full company rollout of our new
customer loyalty program, new customer experience initiatives in
our digital technology, and further expansion of our successful
store of the future format just to name a few. We recognize we’re
on a journey and our brand repositioning efforts will take time,
and while the environment creates some turbulence, we remain
confident in our repositioning efforts and our strategic plans for
growth. We are enthusiastic about our opportunities and are
committed to delivering our long-term financial targets and
returning value to our shareholders.”
First Quarter ResultsThe
Company reported net income of $1 million, or $0.01 per diluted
share for the first quarter of 2023. This result compares to net
income of $81 million, or $0.93 per diluted share for the first
quarter of 2022. First quarter 2023 operating income was $28
million compared to operating income of $94 million in the first
quarter of 2022.
Excluding the impact of the items described at
the conclusion of this press release, first quarter 2023 adjusted
net income was $22 million, or $0.28 per diluted share, and
adjusted operating income was $55 million, compared to adjusted net
income of $97 million, or $1.11 per diluted share, and adjusted
operating income of $116 million in the first quarter of 2022.
The Company reported net sales of $1.407 billion
for the first quarter of 2023, a decrease of 5% compared to net
sales of $1.484 billion in the prior year first quarter. Total
comparable sales for the first quarter of 2023 decreased 11%
compared to the first quarter of 2022.
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.
Capital AllocationIn January
2023, the Company announced a new share repurchase program
(“January 2023 Share Repurchase Program”) providing for the
repurchase of up to $250 million of the Company’s common stock
through the end of fiscal year 2023. As a component of the January
2023 Share Repurchase Program, the Company entered into an
accelerated share repurchase agreement (“ASR”) with Goldman Sachs
& Co. LLC (“Goldman Sachs”) to repurchase $125 million of the
Company’s common stock. Under the terms of the ASR, the Company
made a payment of $125 million to Goldman Sachs on February 2, 2023
and received an initial delivery of approximately 2.4 million
shares of the Company’s common stock. Subsequent to the end of the
first quarter, the ASR was completed, and the Company received an
additional approximately 1.3 million shares of the Company’s common
stock. The total approximately 3.7 million shares repurchased under
the ASR was based on the volume-weighted average price of the
Company’s common stock during the term of the ASR, less a discount
and subject to adjustments pursuant to the terms of the ASR.
Full Year and Second Quarter 2023
OutlookThe Company has updated its full year forecast to
reflect first quarter results and recent trends in the business and
is now forecasting full year 2023 net sales to be in the range of
flat to down low-single digits compared to last year’s net sales of
$6.344 billion. At this forecasted level of sales, we expect the
adjusted operating income rate for the full year 2023 to be in the
range of 5% to 6%.
The Company is forecasting second quarter 2023
net sales to decrease in the mid-single digit range compared to
last year’s second quarter net sales of $1.521 billion. At this
forecasted level of sales, adjusted operating income for the second
quarter of 2023 is expected to be in the range of $35 million to
$65 million. Adjusted net income for the second quarter of 2023 is
estimated to be in the range of $0.10 to $0.40 per diluted
share.
Forecasted adjusted operating income and
adjusted net income per diluted share for the full year and second
quarter 2023 excludes the financial impact of purchase accounting
items related to the Adore Me acquisition, including recognition in
gross profit of purchase accounting fair value adjustments to
acquired inventories as it is sold and 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 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
first quarter earnings call at 8:00 a.m. Eastern on
Thursday, June 1, 2023. To listen, call 1-800-619-9066
(international dial-in number: 1-212-519-0836); conference ID
5358727. For an audio replay, call 1-800-839-1171 (international
replay number: 1-203-369-3030); 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 Fortune
500 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 approximately 1,350 retail stores in
approximately 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. 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,” “target,”
“goal,” “project,” “plan,” “believe,” “seek,” “strive,” “expect,”
“anticipate,” “intend,” “potential” and any similar expressions may
identify forward-looking statements. Risks associated with the
following factors, among others, could affect our financial
performance and cause actual results to differ materially from
those expressed or implied in any forward-looking statements:
- the spin-off from Bath & Body
Works, Inc. (f/k/a L Brands, Inc.) may not be tax-free for U.S.
federal income tax purposes;
- we may not realize all of the
expected benefits of the spin-off;
- general economic conditions,
inflation, consumer confidence, consumer spending patterns and
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;
- the novel coronavirus (COVID-19)
global pandemic has had and may continue to have an adverse effect
on our business and results of operations;
- 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 mall traffic and
the availability of suitable store locations on appropriate
terms;
- our ability to successfully operate
and expand internationally and related risks;
- our independent franchise, license,
wholesale and joint venture partners;
- our direct channel business;
- our ability to protect our
reputation and the image 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, keep up
with fashion trends, develop new merchandise and launch new product
lines successfully;
- our ability to realize the
potential benefits and synergies sought with the acquisition of
AdoreMe, Inc.;
- our ability to source, distribute
and sell goods and materials on a global basis, including risks
related to:
- political instability,
environmental hazards or natural disasters;
- significant health hazards or
pandemics;
- legal and regulatory matters;
- delays or disruptions in shipping
and transportation and related pricing impacts; and
- disruption due to labor
disputes;
- our geographic concentration of
vendor and distribution facilities in central Ohio and Southeast
Asia;
- the ability of our vendors to
deliver products in a timely manner, meet quality standards and
comply with applicable laws and regulations;
- fluctuations in freight, product
input and energy costs, including those caused by inflation;
- 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:Kevin Wynkinvestorrelations@victoria.com |
|
Media Relations:Brooke
Wilsoncommunications@victoria.com |
|
|
|
Total Sales (Millions):
|
FirstQuarter2023 |
|
FirstQuarter2022 |
|
%Inc/(Dec) |
|
|
|
|
|
|
Stores – North America1 |
$ |
785.8 |
|
|
$ |
930.9 |
|
|
|
(15.6 |
%) |
Direct1 |
|
464.5 |
|
|
|
420.6 |
|
|
|
10.4 |
% |
International2 |
|
157.1 |
|
|
|
132.3 |
|
|
|
18.7 |
% |
Total |
$ |
1,407.4 |
|
|
$ |
1,483.8 |
|
|
|
(5.1 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
1 – Results for the first quarter 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):
|
FirstQuarter2023 |
|
FirstQuarter2022 |
|
|
|
|
Stores and Direct1 |
|
(11 |
%) |
|
|
(8 |
%) |
Stores
Only2 |
|
(14 |
%) |
|
|
(3 |
%) |
|
|
|
|
|
|
|
|
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 4/29/23 |
|
|
|
|
|
Company-Operated: |
|
|
|
|
U.S. |
812 |
1 |
(6) |
807 |
Canada |
25 |
- |
(1) |
24 |
Subtotal Company-Operated |
837 |
1 |
(7) |
831 |
|
|
|
|
|
China Joint Venture: |
|
|
|
|
Beauty & Accessories1 |
39 |
1 |
(2) |
38 |
Full Assortment |
33 |
1 |
- |
34 |
Subtotal China Joint
Venture |
72 |
2 |
(2) |
72 |
|
|
|
|
|
Partner-Operated: |
|
|
|
|
Beauty & Accessories |
308 |
2 |
(5) |
305 |
Full Assortment |
135 |
4 |
(6) |
133 |
Subtotal Partner-Operated |
443 |
6 |
(11) |
438 |
|
|
|
|
|
Adore Me |
6 |
- |
- |
6 |
|
|
|
|
|
Total |
1,358 |
9 |
(20) |
1,347 |
|
|
|
|
|
1 – Includes fourteen partner-operated stores at 4/29/23.
VICTORIA'S SECRET &
CO.CONSOLIDATED STATEMENTS OF
INCOMETHIRTEEN WEEKS ENDED APRIL 29, 2023 AND
APRIL 30, 2022(Unaudited) (In
thousands except per share amounts)
|
2023 |
|
2022 |
Net Sales |
$ |
1,407,380 |
|
|
$ |
1,483,806 |
|
Costs of Goods Sold, Buying and Occupancy |
(904,986 |
) |
|
(962,300 |
) |
Gross Profit |
502,394 |
|
|
521,506 |
|
General, Administrative and Store Operating Expenses |
(474,120 |
) |
|
(427,384 |
) |
Operating Income |
28,274 |
|
|
94,122 |
|
Interest Expense |
(22,505 |
) |
|
(12,414 |
) |
Other Income (Loss) |
3 |
|
|
(3,708 |
) |
Income Before Income Taxes |
5,772 |
|
|
78,000 |
|
Provision for Income Taxes |
1,960 |
|
|
1,856 |
|
Net Income |
3,812 |
|
|
76,144 |
|
Less: Net Income (Loss) Attributable to Noncontrolling
Interest |
3,087 |
|
|
(4,679 |
) |
Net Income Attributable to Victoria's Secret & Co. |
$ |
725 |
|
|
$ |
80,823 |
|
Net Income Per Diluted Share Attributable to Victoria's Secret
& Co. |
$ |
0.01 |
|
|
$ |
0.93 |
|
Weighted Average Shares Outstanding |
79,671 |
|
|
87,057 |
|
|
|
|
|
|
|
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.
|
|
First Quarter |
|
|
|
2023 |
|
|
|
2022 |
|
Reconciliation of Reported to Adjusted Operating
Income |
|
|
|
Reported Operating Income - GAAP |
$ |
28,274 |
|
|
$ |
94,122 |
|
Restructuring Charge (a) |
|
11,125 |
|
|
|
- |
|
Adore Me Acquisition-related Items (b) |
|
9,321 |
|
|
|
- |
|
Amortization of Acquired Intangible Assets (c) |
|
6,284 |
|
|
|
- |
|
Occupancy-related Legal Matter (d) |
|
- |
|
|
|
21,679 |
|
Adjusted Operating Income |
$ |
55,004 |
|
|
$ |
115,801 |
|
|
|
|
|
|
Reconciliation of Reported to Adjusted Net Income
Attributable to Victoria's Secret & Co. |
|
|
|
Reported Net Income Attributable to Victoria's Secret & Co. -
GAAP |
$ |
725 |
|
|
$ |
80,823 |
|
Restructuring Charge (a) |
|
11,125 |
|
|
|
- |
|
Adore Me Acquisition-related Items (b) |
|
10,416 |
|
|
|
- |
|
Amortization of Acquired Intangible Assets (c) |
|
6,284 |
|
|
|
- |
|
Occupancy-related Legal Matter (d) |
|
- |
|
|
|
21,679 |
|
Tax Effect of Adjusted Items |
|
(6,640 |
) |
|
|
(5,477 |
) |
Adjusted Net Income Attributable to Victoria's Secret &
Co. |
$ |
21,910 |
|
|
$ |
97,025 |
|
|
|
|
|
|
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 |
$ |
0.01 |
|
|
$ |
0.93 |
|
Restructuring Charge (a) |
|
0.10 |
|
|
|
- |
|
Adore Me Acquisition-related Items (b) |
|
0.10 |
|
|
|
- |
|
Amortization of Acquired Intangible Assets (c) |
|
0.06 |
|
|
|
- |
|
Occupancy-related Legal Matter (d) |
|
- |
|
|
|
0.19 |
|
Adjusted Net Income Per Diluted Share Attributable to Victoria's
Secret & Co. |
$ |
0.28 |
|
|
$ |
1.11 |
|
|
|
|
|
|
(a) |
In the first quarter of 2023, we recognized a $11.1 million pre-tax
charge ($8.4 million net of tax of $2.7 million), $7.8 million
included in general, administrative and store operating expense and
$3.3 million included in buying and occupancy expense, related to
restructuring activities to continue to reorganize and improve our
organizational structure. |
(b) |
In the first quarter of 2023, we recognized a $10.4 million charge
($8.2 million net of tax of $2.2 million), $8.6 million included in
costs of goods sold, $1.1 million included in interest expense, and
$0.7 million included in general, administrative and store
operating expense, related to the financial impact of purchase
accounting items and professional service costs related to the
acquisition of Adore Me. |
(c) |
In the first quarter of 2023, we recognized $6.3 million of
amortization expense ($4.7 million net of tax of $1.6 million)
included in general, administrative and store operating expense
related to the acquisition of Adore Me. |
(d) |
In the first quarter of 2022, we recognized a $21.7 million charge
($16.2 million net of tax of $5.5 million), included in buying and
occupancy expense, related to a legal matter with a landlord
regarding a high-profile store that we surrendered to the landlord
prior to separation. |
|
|
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