8-K: Victoria's Secret & Co. Exceeds Q1 Expectations, Reaffirms Full-Year Sales Amid Tariff Headwinds

Victoria's Secret & Co. reported first-quarter 2025 results that surpassed its own guidance for sales and adjusted operating income, while reaffirming its full-year sales outlook despite a downward revision to its operating income guidance due to increased tariff impacts.

Summary

• Victoria's Secret & Co. (VS&Co) reported net sales of $1.353 billion for the first quarter of 2025, exceeding its guidance range of $1.30 billion to $1.33 billion, and remaining flat compared to $1.359 billion in Q1 2024.
• Total comparable sales for Q1 2025 decreased by 1%, an improvement from the 5% decrease in Q1 2024.
• GAAP operating income for Q1 2025 was $20 million, down from $26 million in Q1 2024.
• The company reported a GAAP net loss of $2 million, or $0.02 per diluted share, for Q1 2025, an improvement from a net loss of $4 million, or $0.05 per diluted share, in Q1 2024.
• Adjusted operating income for Q1 2025 was $32 million, surpassing the guidance range of $10 million to $30 million, but lower than $40 million in Q1 2024.
• Adjusted net income for Q1 2025 was $7 million, or $0.09 per diluted share, near the high-end of guidance, compared to $9 million, or $0.12 per diluted share, in Q1 2024.
• For the second quarter of 2025, VS&Co forecasts net sales between $1.380 billion and $1.410 billion, with adjusted operating income expected to be $15 million to $35 million, and adjusted net income per diluted share between $0.00 and $0.15.
• The full-year 2025 net sales guidance is maintained at $6.2 billion to $6.3 billion.
• Full-year 2025 adjusted operating income guidance has been revised downwards to $270 million to $320 million, from the previous range of $300 million to $350 million, primarily due to an estimated $50 million net tariff impact.

Sentiment

Score: 6

Explanation: The sentiment is moderately positive. While Q1 results exceeded guidance, the full-year operating income guidance was lowered due to tariffs, indicating ongoing external pressures. Management's tone is cautiously optimistic, focusing on agility and customer connection amidst uncertainty.

Positives

• First quarter net sales of $1.353 billion exceeded the company's previously communicated guidance range of $1.30 billion to $1.33 billion.
• Adjusted operating income for Q1 2025 was $32 million, which was above the guidance range of $10 million to $30 million.
• Adjusted net income per diluted share for Q1 2025 was $0.09, near the high-end of the guidance range.
• The company saw continued momentum in its Beauty business and ongoing strength in PINK apparel during March and April.
• Newness in sport and swim categories is helping the company reclaim its position as a full lifestyle brand.
• The company reaffirmed its full-year 2025 net sales guidance of $6.2 billion to $6.3 billion.

Negatives

• GAAP operating income decreased to $20 million in Q1 2025 from $26 million in Q1 2024.
• Adjusted operating income decreased to $32 million in Q1 2025 from $40 million in Q1 2024.
• Adjusted net income decreased to $7 million in Q1 2025 from $9 million in Q1 2024, and adjusted diluted EPS decreased to $0.09 from $0.12.
• Total comparable sales for Q1 2025 decreased by 1%.
• The full-year 2025 adjusted operating income guidance was revised downwards by $30 million at the midpoint, from $300-$350 million to $270-$320 million.
• The downward revision in full-year operating income guidance is attributed to an updated estimated net tariff impact of approximately $50 million for fiscal year 2025.
• The company experienced a net decrease of 9 stores globally, with 15 opened and 24 closed during the quarter.

Risks

• General economic conditions, inflation, and changes in consumer confidence and spending patterns.
• Market disruptions including pandemics, severe weather, natural disasters, terrorist activities, financial crises, or political crises.
• Uncertainty in the global trade environment, including the imposition or threatened imposition of tariffs or other trade restrictions.
• Ability to successfully implement strategic plans.
• Difficulties arising from changes and turnover in company leadership or other key positions.
• Ability to attract, develop, and retain qualified associates and manage labor-related costs.
• Dependence on traffic to stores and the availability of suitable store locations on satisfactory terms.
• Ability to successfully operate and expand internationally and related risks.
• Operations and performance of franchisees, licensees, wholesalers, and joint venture partners.
• Ability to successfully operate and grow the direct channel business.
• Ability to protect reputation and the image and value of brands.
• Ability to attract customers with marketing, advertising, and promotional programs.
• The highly competitive nature of the retail industry.
• Consumer acceptance of products and ability to manage brand lifecycle, remain current with fashion trends, and develop/launch new merchandise.
• Ability to integrate acquired businesses and realize benefits/synergies (e.g., Adore Me).
• Ability to incorporate artificial intelligence into business operations successfully and ethically.
• Ability to source materials and produce, distribute, and sell merchandise globally, including risks related to political instability, geopolitical conflicts, environmental hazards, shipping disruptions, foreign currency exchange rate fluctuations, and labor disputes.
• Geographic concentration of production and distribution facilities in central Ohio and Southeast Asia.
• Ability of vendors to manufacture and deliver products in a timely manner, meet quality standards, and comply with applicable laws.
• Fluctuations in freight, product input, and energy costs.
• Ability to implement and maintain information technology systems and protect data against cybersecurity incidents.
• Ability to maintain the security of customer, associate, third-party, and company information.
• Stock price volatility and shareholder activism matters.
• Ability to maintain credit rating.
• Ability to comply with regulatory requirements, and legal, tax, trade, and other regulatory matters.

Future Outlook

Victoria's Secret & Co. forecasts second-quarter 2025 net sales to be between $1.380 billion and $1.410 billion, with adjusted operating income in the range of $15 million to $35 million, and adjusted net income per diluted share between $0.00 and $0.15. For the full fiscal year 2025, the company maintains its net sales guidance of $6.2 billion to $6.3 billion. However, the full-year adjusted operating income guidance has been revised downwards to $270 million to $320 million, from the previous $300 million to $350 million, primarily due to an anticipated $50 million net tariff impact.

Management Comments

• Hillary Super (CEO): "I am proud of the team and their commitment to adapting and remaining flexible in this challenging and fast-changing environment. We focused on proactively managing the business ensuring we are remaining nimble and protecting investments in what matters most—the customer experience, brand health and product innovation."
• Hillary Super (CEO): "I am pleased with the strength the business demonstrated during the March and April timeframe, which included continued momentum in our powerhouse Beauty business, ongoing strength in PINK apparel, and newness in sport and swim as we reclaim our position as a full lifestyle brand."
• Hillary Super (CEO): "As we look forward, we continue to be optimistic about our future, our opportunity to further differentiate and elevate the brands with compelling storytelling and make even deeper emotional connections with our customers."
• Scott Sekella (CFO): "We remained disciplined on the fundamentals and execution in the quarter driving sales and operating income results that exceeded our expectations."
• Scott Sekella (CFO): "Though we recognize the macro environment is uncertain, we will continue to be disciplined in controlling costs and will remain agile, reading and reacting to what the customer is telling us to ensure we are building upon our solid foundation and realizing the full potential of our globally recognized brands."

Industry Context

The retail industry, particularly apparel and intimates, continues to face a challenging and uncertain macro environment, as acknowledged by VS&Co's management. The company's focus on 'reading and reacting to what the customer is telling us' and 'disciplined cost control' reflects broader industry trends where agility and efficiency are crucial for navigating fluctuating consumer spending and supply chain pressures. The positive performance in specific categories like Beauty and PINK apparel suggests that targeted product innovation and brand strength can still drive results even when overall comparable sales are slightly down. The impact of tariffs highlights ongoing global trade complexities affecting retailers with international supply chains.

Comparison to Industry Standards

• The document does not provide specific comparable companies, projects, or results to assess VS&Co's performance against global industry benchmarks. Therefore, a direct comparison to industry standards with specific companies is not possible based on the provided text.

Management Changes

Stakeholder Impact

• Shareholders: Q1 results exceeded guidance, which could be viewed positively, but the lowered full-year operating income guidance due to tariffs might temper enthusiasm. The net loss per share improved slightly.
• Employees: The company mentioned 'restructuring our executive leadership team' which could imply changes for some personnel, but also a commitment to 'attract, develop and retain qualified associates' as a risk factor.
• Customers: The company is focusing on 'customer experience, brand health and product innovation' and 'reclaiming our position as a full lifestyle brand' to deepen emotional connections, indicating efforts to enhance customer value.
• Suppliers/Vendors: The company's ability to source materials and the performance of vendors are identified as risks, suggesting potential impacts on supplier relationships due to global supply chain issues and quality standards.
• Creditors: The company's ability to maintain its credit rating is listed as a risk, which could impact creditors.

Next Steps

• Victoria's Secret & Co. will conduct its first quarter earnings call on Wednesday, June 11, 2025, at 8:30 a.m. Eastern.

Key Dates

Recommendation

Keywords

Victoria's Secret, VSCO, Retail, Lingerie, Apparel, Beauty, PINK, Earnings, Financial Results, Q1 2025, Guidance, Tariffs, Comparable Sales, Operating Income, Net Sales, Specialty Retailer, Adore Me