Victoria's Secret's (NYSE:VSCO) Q1 Earnings Results: Revenue In Line With Expectations

Petr Huřťák /
2024/06/05 4:22 pm EDT

Intimatewear and beauty retailer Victoria’s Secret (NYSE:VSCO) reported results in line with analysts' expectations in Q1 CY2024, with revenue down 3.4% year on year to $1.36 billion. The company's outlook for the full year was also close to analysts' estimates with revenue guided to $6 billion at the midpoint. It made a non-GAAP profit of $0.12 per share, down from its profit of $0.28 per share in the same quarter last year.

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Victoria's Secret (VSCO) Q1 CY2024 Highlights:

  • Revenue: $1.36 billion vs analyst estimates of $1.36 billion (small beat)
  • EPS (non-GAAP): $0.12 vs analyst expectations of $0.12 (in line)
  • The company reconfirmed its revenue guidance for the full year of $6 billion at the midpoint (operating profit guidance was also maintained)
  • Gross Margin (GAAP): 36.9%, in line with the same quarter last year
  • Locations: 1,378 at quarter end, up from 1,347 in the same quarter last year
  • Same-Store Sales fell 5% year on year (beat vs. expectations of down 6% year on year)
  • (-11% in the same quarter last year)
  • Market Capitalization: $1.75 billion

Chief Executive Officer Martin Waters commented on the first quarter, “I am encouraged by our results in the quarter which were at the high-end of our previously announced preliminary results calling for adjusted operating income up to $40 million. We experienced sequential improvement in quarterly sales trends in North America in both our stores and digital business for both the Victoria’s Secret and PINK brands. We delivered meaningful newness in merchandise and brand projection during the quarter and our customers responded, particularly in April, which was our strongest month of the quarter. The retail environment in North America was challenging and the promotional environment was very competitive, but importantly our gross margin rate in the quarter was above last year as we managed our inventory and were disciplined with traffic-driving offerings for our customers. In stores, our customer traffic improved noticeably throughout the quarter. In our digital business, the investments we’ve made to improve the customer experience resulted in digital sales performance outpacing stores. Our SG&A rate was favorable to our expectations as we delivered incremental efficiency within our operating model. In addition to improving North America trends, our international business growth continued with net sales increasing in the mid-teens again in the first quarter.”

Spun off from L Brands in 2020, Victoria’s Secret (NYSE:VSCO) is an intimate clothing and beauty retailer that sells its own brands of lingerie, undergarments, and personal fragrances.

Apparel Retailer

Apparel sales are not driven so much by personal needs but by seasons, trends, and innovation, and over the last few decades, the category has shifted meaningfully online. Retailers that once only had brick-and-mortar stores are responding with omnichannel presences. The online shopping experience continues to improve and retail foot traffic in places like shopping malls continues to stall, so the evolution of clothing sellers marches on.

Sales Growth

Victoria's Secret is larger than most consumer retail companies and benefits from economies of scale, giving it an edge over its competitors.

As you can see below, the company's revenue has declined over the last four years, dropping 2.3% annually as its store count and sales at existing, established stores have both shrunk.

Victoria's Secret Total Revenue

This quarter, Victoria's Secret reported a rather uninspiring 3.4% year-on-year revenue decline to $1.36 billion in revenue, in line with Wall Street's estimates. Looking ahead, Wall Street expects revenue to decline 1.4% over the next 12 months.

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Same-Store Sales

Victoria's Secret's demand has been shrinking over the last eight quarters, and on average, its same-store sales have declined by 8.1% year on year. The company has been reducing its store count as fewer locations sometimes lead to higher same-store sales, but that hasn't been the case here.

Victoria's Secret Year On Year Same Store Sales Growth

In the latest quarter, Victoria's Secret's same-store sales fell 5% year on year. This decrease was an improvement from the 11% year-on-year decline it posted 12 months ago. It's always great to see a business improve its prospects.

Key Takeaways from Victoria's Secret's Q1 Results

This was a quarter without many surprises. Same-store sales beat slightly, leading to a slight revenue beat. Full year guidance was maintained for revenue and operating profit, showing that the company is on track. The company is down 1.1% on the results and currently trades at $22.37 per share.

Victoria's Secret may have had a tough quarter, but does that actually create an opportunity to invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.