Following much media hype about the company’s plans to bring back its runway show this fall, Victoria’s Secret & Co. sounded a down note on Wednesday after reporting that the company fell into the red for the first quarter.
The company reported a net loss of $4 million, or 5 cents per diluted share for the first quarter. That was in contrast to the net income of $1 million, or 1 cent per diluted share for the first quarter of last year. Operating income dipped to $26 million compared to operating income of $28 million in the first quarter of last year.
Victoria’s Secret reported first-quarter net sales of nearly $1.36 billion — a 3.4 percent decline compared to $1.41 billion in the year-ago quarter. Total comparable sales for the first quarter of 2024 decreased by 5 percent. Gross profits were $501.3 million as opposed to $502.3 million last year. Costs were $858.1 million compared to $904.9 million for the same period last year.
The company is forecasting second-quarter 2024 net sales to decrease in the low-single-digit range compared to last year’s second-quarter net sales of nearly $1.43 billion. At this forecasted level of sales, adjusted operating income for the second quarter of 2024 is expected to be in the range of $30 million to $45 million. Adjusted net income for the second quarter of 2024 is estimated to be in the range of 5 cents to 20 cents per diluted share.
Victoria’s Secret reaffirmed its full-year outlook Wednesday and is forecasting 52-week fiscal-year 2024 net sales to be about $6 billion, or potentially down low-single digits versus a comparative 52 weeks from fiscal year 2023. At this forecasted level of sales, adjusted operating income for fiscal-year 2024 is expected to be between $250 million and $275 million.
Revealing the first-quarter results Wednesday afternoon, chief executive officer Martin Waters said he was encouraged that they were higher than the company’s previously announced preliminary results, which had called for adjusted operating income up to $40 million. Citing “sequential improvement” in North America store and direct business for the Victoria’s Secret and Pink brands, Waters chalked that up to meaningful new merchandise.
In North America, net sales for Victoria’s Secret stores dropped by 7.2 percent to $729.1 million compared to the first quarter of last year. During that same selling period, direct sales dipped by 3.4 percent to $448.8 million. Conversely, international first-quarter net sales strengthened by 15.6 percent to $181.5 million versus $157.1 million.
Comp sales for stores and direct were down 5 percent, and stores alone declined by 8 percent. With 828 stores globally, Victoria’s Secret has closed three company-operated stores in the U.S. in recent months and now has 805. In addition, through a joint venture in China, there are now 35 beauty and accessories outposts and 36 full assortment ones. Victoria’s Secret also has 310 partner-operated beauty and accessories stores and 163 full assortment ones. There are also six Adore Me stores. Combined, these entities comprise 1,370 locations — a slight decrease compared to the 1,378 there were as of early February.
Acknowledging the challenging retail environment and “very competitive” promotional environment in North America, he said gross market rate was up compared to last year, inventory had been managed and was “disciplined with traffic-driving offerings.” In-store traffic improved “noticeably” and investments in the digital business that were designed to improve the customer experience led to digital sales outpacing stores, Waters said.
“With some caution around the broader retail environment in North America, we are planning the business appropriately conservative in the near-term, but are encouraged by the start to May and the second quarter,” said Waters.
Describing the brands as being “strong around the globe,” he said that “with the long-term health of the business in mind, we are focused 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.”
Victoria’s Secret stock closed Wednesday at $22.61, a slight uptick of 1.12 percent.
