Victoria's Secret & Co. Q4 FY2024 earnings call

• Q4 results were strong with sales growth in VS, PINK, and Beauty, and healthy margins, controlled costs, and good inventory management.
• Strategies for growth include recommitting to PINK to win the next generation of consumers, supercharging bras and reasserting authority, fueling growth in lifestyle categories (beauty, sport, swim), and evolving brand projection and go-to-market strategy.
• Enablers include a customer-centric performance culture, an evolved product development process, and an efficient operating model.

In Q4, sales were strong with growth across VS, PINK, and Beauty. North America saw positive year-over-year sales growth in stores and digital for VS and PINK. The Beauty business was a standout with higher AUR items. Internationally, retail sales were up double-digits. Sales growth was broad-based across the business, with all three brands showing growth in all channels and markets. For example, in North America, VS and PINK had positive sales growth in stores and digital, and the Beauty business had strong basket sizes, traffic, and product acceptance.

• Guidance for 2025 is sales of $6.2 billion to $6.3 billion, with Q1 expected to be down 2 to 4%. The balance of the year is expected to show improvement, with low-single-digit growth. Operating income is guided to be flat to down close to $50 million year-over-year, with the bulk of the decrease in Q1.
• Store of the future formats are ramping up, with more full and partial store of the futures planned this year, and early results are positive.

• Macro-environment challenges including shifting consumer confidence, volatile economy, and unseasonal weather impacting mall traffic.
• Production lead times affecting inventory productivity.
• Tariffs, with a 10% assumed on China for the balance of the year, impacting the guide.

Q: Elaborate on drivers of gradual improvement and product pipeline for back half of year?

A: Drivers include getting teams and leaders in place, incremental improvement in PINK and VS brands, and tentpole moments starting in August. Product pipeline is iterative with incremental improvement each month, and buying for fall is ongoing.

Q: Over what horizon full imprint on product? Inventory efforts?

A: Full imprint is iterative, with incremental improvement each month. For inventory, there are areas with agility, like underwear and some PINK apparel, and a new leadership structure is designed to enable better product development processes.

Q: Quantify top line opportunity, divergence in regions/customer demographics?

A: LRP work is in early stages, with significant opportunity in PINK. In regions, warmer weather regions had higher performance than colder ones. Customer demographic profiles showed differences based on weather impacts.

Q: Opportunity in product lines, Valentine's Day performance?

A: Multiple product tracks are essential, with potential to reduce lead times. Valentine's Day saw some areas where improvements could be made, like marketing spend and product launch strategies.

Q: Upside/downside to guide, store of the future lift?

A: Guide has sales flat to up low-single-digits. Store of the future early results are positive, with more planned and 95% of top 100 doors expected to be converted by year-end.

Q: Focus on PINK vs VS, categories, Valentine's Day?

A: PINK has significant opportunity with reimagining, while VS has opportunity in lifestyle. Lifestyle categories are driving growth. Valentine's Day had areas for improvement in marketing and product launches.

Q: Savings goal, marketing for brands, product launches?

A: Cost savings goal largely achieved, with opportunities to continue efficiency. Marketing for VS focuses on consideration, for PINK on awareness. Product launches in Q4 are limited, with sport being a recent area of success.

Q: International growth, sport/swim size/growth?

A: International retail sales up double-digits, with new countries and digital opportunities. Sport and swim are small but growing, with early reads in spring positive.

Q: Sport/swim size/growth, SG&A expectations?

A: Sport and swim are small but growing. SG&A for marketing is largely flat, with total SG&A having slight deleverage in the guide but potential to leverage with growth.

Q: PINK marketing words, Fashion Show in 2025?

A: PINK marketing words are being studied, with research planned. Fashion Show had success but will be more leveled out, with activation in the back half of the year planned.