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Victoria's Secret & Co. (VSCO)·Q4 2025 Earnings Summary

Executive Summary

  • Q4 FY2024 (period ended Feb 1, 2025) delivered $2.11B net sales (+1% YoY vs a 14‑week prior year), comparable sales +5%, and GAAP EPS $2.33; adjusted EPS was $2.60, and both operating income and EPS exceeded internal expectations .
  • Mix and execution improved: sales grew across VS, PINK and Beauty, with fewer promotional days; sleep, beauty and PINK apparel led, and international retail sales grew double digits; traffic and basket size increased .
  • FY2025 outlook introduced: net sales $6.2–$6.3B and adjusted operating income $300–$350M; Q1 2025 guided to $1.30–$1.33B sales and $10–$30M adjusted OI amid unseasonal weather and macro pressure .
  • Notable items: a $26M gift‑card breakage accounting change lifted Q4 sales, gross margin and operating income; ex‑this, Q4 net sales rose ~4% and adjusted OI would have been ~$273M (slightly above guidance high end) .

What Went Well and What Went Wrong

  • What Went Well

    • Broad‑based holiday strength with fewer promos: “sales up… in all 3 brands in all channels and all markets,” and “we were able to achieve this growth with fewer promotional days” .
    • Beauty and sleep outperformed; PINK apparel inflected positively; traffic and basket up with solid conversion supported by digital enhancements .
    • International retail sales grew double digits, with strong franchise/travel retail and JV performance in China and the U.K. .

  • What Went Wrong

    • January–mid‑February softness: weather and consumer confidence pressured traffic; company under‑bought Valentine’s sleep, and pulled back marketing too far post‑fashion show (halo lasted 8–10 weeks) .
    • Cost headwinds: higher ocean/air transport in H1; assumed 10% China tariffs in H2 with a ~$10–$20M headwind baked into the guide .
    • Non‑cash/non‑core items: $21.6M equity‑method investment impairment included in GAAP; adjusted results exclude this and other Adore Me‑related and amortization items .

Financial Results

MetricQ2 2024Q3 2024Q4 2024 (ended 2/1/25)
Net Sales ($USD Billions)$1.417 $1.347 $2.106
GAAP Diluted EPS ($)$0.40 $(0.71) $2.33
Adjusted Diluted EPS ($)$0.40 $(0.50) $2.60
Operating Income ($USD Millions)$62.3 $(46.7) $267.7
Adjusted Operating Income ($USD Millions)$62.3 $(28.0) $299.3
Gross Profit ($USD Millions)$501.4 $468.3 $813.4
Gross Margin %35.4% (501.4/1,417.2) 34.8% (468.3/1,347.4) 38.6% (813.4/2,105.5)
Operating Margin %4.4% (62.3/1,417.2) -3.5% (-46.7/1,347.4) 12.7% (267.7/2,105.5)

Notes:

  • Q4 2024 included a $26M gift‑card breakage estimate change that increased sales, gross margin and operating income; ex‑this, net sales rose ~4% and adjusted OI would have been ~$273M, slightly above guidance high end .
  • Prior year Q4 was 14 weeks; company estimates the extra week in Q4 2023 added ~$80M sales, ~$20M OI and ~$0.20 EPS .

Segment/Channel Sales – Q4 2024 vs Q4 2023 ($USD Millions)

SegmentQ4 2024Q4 2023YoY %
Stores – North America$1,160.1 $1,154.2 0.5%
Direct$752.2 $734.0 2.5%
International$193.2 $194.3 (0.6%)
Total$2,105.5 $2,082.5 1.1%

KPIs

KPIQ2 2024Q3 2024Q4 2024
Comparable Sales – Stores & Direct(3%) +3% +5%
Comparable Sales – Stores Only(5%) +2% +3%
Total Stores (End of Period)1,373 1,380 1,387

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Sales (ex extra week basis)Q4 2024+2% to +4% YoY +3% to +4% YoY Raised
Adjusted Operating IncomeQ4 2024$240–$270M $260–$270M Raised
Adjusted EPSQ4 2024$2.00–$2.30 $2.20–$2.30 Raised
Net SalesFY 2025N/A$6.2–$6.3B Initial
Adjusted Operating IncomeFY 2025N/A$300–$350M Initial
Net SalesQ1 2025N/A$1.30–$1.33B Initial
Adjusted Operating IncomeQ1 2025N/A$10–$30M Initial

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q4 2024)Trend
Promotions strategyCost control and margin leverage highlighted as sales trends improved . Q3: margins up YoY with disciplined inventory .Fewer promo days drove growth; plan “promos to be down” in 2025, focusing on big box pullbacks and traffic drivers .De‑promoting while protecting traffic .
Product performanceQ2: Dream bra, PINK back‑to‑campus, VS sport improved . Q3: VSX sport launch, fashion show catalyzed demand .Holiday giftable sleep and beauty led; PINK apparel trend change; sport/swim momentum; “Very Sexy” strong .Broadening from intimates to lifestyle .
InternationalQ2: high‑single digit growth . Q3: 20%+ growth .Double‑digit retail growth; new countries; EU DC to speed digital fulfillment .Strengthening and scaling infrastructure .
Tariffs/macro/transportMinimal prior detail.Higher ocean/air costs in H1; assume 10% China tariff in H2, ~$10–$20M impact .New headwind emerging .
Store of the FutureN/A.Early results positive; ~95% of top 100 doors converted by year‑end .Rollout accelerating .
Marketing cadence/VS Fashion ShowQ3: fashion show returned, drove traffic .Halo lasted 8–10 weeks; plan to smooth marketing in Q1; evaluating major back‑half activation in 2025 .More balanced, full‑funnel focus .
Supply chain and lead timesN/A.New “multiple tracks” product dev; target ~26‑week cycle for PINK apparel; Tiger team reengineering processes .Improving agility and speed .

Management Commentary

  • Strategic posture: “We are playing offense… supercharging our two distinct compelling growth brands, Victoria’s Secret and PINK, complemented by a powerhouse beauty business and a strong digital‑first Adore brand” with four pillars: recommit to PINK, supercharge bras, fuel lifestyle (beauty, sport, swim), and evolve go‑to‑market .
  • On de‑promotion during holiday: “We were able to achieve this growth with fewer promotional days and offerings than last year” .
  • PINK opportunity: “There is a tremendous amount of opportunity in PINK… apparel specifically… there’s a lot to like about the lifestyle piece” .
  • International scaling: “By year‑end, we should have about 95% of our top 100 doors converted [Store of the Future]… third‑party distribution center in the Netherlands… much faster to customer” .

Q&A Highlights

  • Outlook puts improvement through the year; H1 pressured by transport costs, H2 includes 10% China tariff assumption (~$10–$20M); not a “hockey‑stick,” expecting low‑single digit growth in balance of year and OI improvement from Q2–Q4 .
  • Promotions: Company expects fewer promotions in 2025, pulling back bigger “box” events while maintaining traffic drivers; tailwind to gross margin .
  • Early‑year softness diagnosis: weather/consumer confidence; pulled back marketing too far post‑fashion show; under‑bought Valentine’s sleep; plan to balance launch/evergreen bra storytelling .
  • Product development agility: moving apparel to ~26‑week calendar; creating separate tracks for technical categories (swim/sport) .
  • International momentum: double‑digit retail growth, new market entries (e.g., Vietnam/Argentina in 2024; more in 2025), positive comps mid‑single digits, EU DC launch to improve digital speed .

Estimates Context

  • S&P Global consensus (EPS and revenue) could not be retrieved due to access limits; therefore, we cannot present vs‑consensus comparisons for Q4 FY2024 or prior quarters at this time. Values retrieved from S&P Global are unavailable due to access constraints.
  • Company stated Q4 operating income and EPS “exceeded our expectations”; we cannot verify vs Street consensus but note internal outperformance and raised Q4 guidance on Jan 29 .

Key Takeaways for Investors

  • Mix/merchandising and lower promotions drove a quality holiday print (comps +5%, adjusted EPS $2.60); Beauty, sleep and PINK apparel led, with international double‑digit retail strength .
  • FY2025 guide embeds macro/weather and transport in H1 and tariff headwinds in H2; management expects sequential improvement through the year with low‑single digit growth in the balance and OI lift in Q2–Q4 .
  • Tariffs are a real P&L headwind (assumed 10% China; ~$10–$20M in H2); monitor any policy shifts and the company’s mitigation levers (sourcing, pricing, promo discipline) .
  • Structural initiatives (Store of the Future, EU DC, product dev “multiple tracks”) should aid conversion, speed and international growth; by year‑end, ~95% of top 100 stores converted .
  • PINK is a key growth vector; focus on apparel cadence, brand identity and social‑first marketing could expand the customer file and acquisition at lower promo intensity .
  • One‑time items affected comparisons: a $26M gift‑card breakage estimate change lifted Q4 revenue/margins; GAAP results also reflect a $21.6M equity‑method impairment; adjusted figures exclude non‑core impacts .
  • Near‑term trading lens: de‑promo tailwind vs weather/macro and tariff headwinds; catalysts include evidence of sustained comp momentum into spring/summer, PINK apparel reiteration, and international/DC execution .

Appendix: Additional Reference Data

  • Company channels and comps in Q4 2024: Stores NA $1,160.1M (+0.5%), Direct $752.2M (+2.5%), International $193.2M (‑0.6%); total +1.1% with comps +5% .
  • FY2024 results: Net sales $6.230B (+1%), GAAP EPS $2.05, adjusted EPS $2.69; adjusted OI $373M .
  • Customer file/brand scale: ~25M active customers, ~38M loyalty members, ~20% North America market share (intimates), 88M Instagram followers .