Victoria’s Secret Prepares for Challenging Holiday Season as Shoppers Remain Cautious


Sales at Victoria’s Secret fell short among cautious consumers and an increasingly promotional retail environment.

The lingerie and beauty company — which includes Victoria’s Secret Lingerie , Victoria’s Secret Beauty and the Pink brands — revealed quarterly earnings Wednesday after the market closed, falling short on top and bottom lines as inflation persists and shoppers reconsider discretionary purchases.

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The company slashed its fourth-quarter holiday shopping season outlook as a result, causing shares of Victoria’s Secret to fall more than 7 percent during after-hours trading.
Looks from Victoria’s Secret’s 2022 holiday campaign.

But the company remained optimistic about the future.

Martin Waters, chief executive officer of Victoria’s Secret & Co., said in a statement: “After nearly a year and a half as an independent, publicly traded company, we continue to make significant progress in our transformation and mission to celebrate and champion all women. We have created a solid financial platform with our new, more agile operating structure and even in a very challenging macroeconomic environment, we were able to deliver third-quarter operating income and earnings per diluted share results above our previous guidance. With our aligned focus on our customer and our strategic priorities, we are well positioned to continue to navigate and execute in a shifting consumer landscape.

At our Investor Day in October, we discussed our strategic growth plan, which outlines significant runway ahead guided by our three key principles: strengthen our core, ignite growth and transform the foundation,” Waters continued. “Led by our two category-defining brands and merchandise leadership positions in intimates and beauty, we remain confident in our ability to deliver our long-term financial targets, reinvest in our business and return value to our shareholders. Further evidence of our commitment to drive long-term value, we recently announced our agreement to acquire Adore Me, a technology-led, digitally native intimates brand — a move that strategically positions us for accelerated growth. We are excited for the opportunity to leverage Adore Me’s expertise and technology to improve our customer shopping experience and accelerate the modernization of our digital platform. This is just one example of how we are committed to executing on our strategic growth plan.”

Victoria’s Secret acquired lingerie start-up Adore Me earlier in November for $400 million in an effort to offer a greater assortment of inclusive sizing. The deal is expected to close in January.

But the international business remained Victoria Secret’s bright spot during the quarter, with sales surging 42.8 percent, year-over-year, to $163 million, up from $114 million last year.

Other tailwinds included the beauty business and bras in the core lingerie business. For the third quarter in a row, the company said there’s been growth in its North American intimates business. Sales of panties and apparel were down for the quarter. The company added that in-store traffic was up during the quarter, year-over-year.
Beauty remained a bright spot during the quarter.

Even so, revenues for the three-month period ending Oct. 29 fell 9 percent to roughly $1.32 billion, down from $1.44 billion a year ago. Total comp sales for the quarter, which includes physical retail and e-commerce, were down 11 percent, compared with a year ago. Comp sales in stores fell 10 percent.

By channel, sales at Victoria’s Secret’s North American stores declined 11.7 percent year-over-year to nearly $813 million, down from roughly $920 million, while sales in the direct business fell 15.9 percent to nearly $342 million, compared with about $406 million last year.

Inventory was up 22 percent for the quarter, compared with last year, at $1.24 billion. But the company said this was in line with expectations. In addition, the firm said supply chain headwinds — such as modal mix changes, price hikes and other delivery bottlenecks — represent about 65 percent of the dollar increase, year-over-year. Meanwhile, international growth, size expansions and the partnership with Amazon represents about 25 percent of the firm’s added costs for the quarter.

The company added that it had an extremely promotional quarter and that average basket size and conversion rates for the quarter were down, year-over-year.

Victoria’s Secret logged $22.2 million in profits, down from $75.2 million last year, as a result.

The retailer is now expecting fourth-quarter net sales to be down in the high-single digit range, compared with 2021’s fourth-quarter net sales of $2.1 billion. The company anticipates net income for the fourth quarter to be in the range of $2 to $2.45 per diluted share.

For the full year, Victoria’s Secret expects net sales will decline 6 percent to 7 percent, compared with 2021’s full-year net sales of $6.78 billion. Adjusted net income for the year will be in the range of $4.50 to $4.95 per diluted share.

The firm added that current quarter sales up until Black Friday were consistent with third-quarter sales, but said sales increased on Black Friday through Cyber Monday.

“These were very important, high-volume days for our business and quarter-to-date through Cyber Monday, we estimate we have registered approximately 30 percent of our fourth-quarter sales,” the company said in its prepared remarks. “We anticipate the balance of the quarter, or the remaining 70 percent, will continue to be highly competitive and promotional, and we are prepared to be aggressive in getting our fair share of consumer spending.”

The retailer ended the quarter with 838 company-operated stores. In addition, the company expanded its Store of the Future fleet to 23 — 12 in the U.S. and 11 internationally. The firm also ended the quarter with $126 million in cash.

Shares of Victoria’s Secret, which closed up 1.03 percent to $45.95 Wednesday, are down 11.49 percent, year-over-year.

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