Victoria's Secret & Co. Reports Mixed Q2 Results, Sees Decline in Sales but Improvement in Profitability

Victoria's Secret & Co. reported its financial results for the second quarter of fiscal year 2024, which ended on August 3, 2024. The company experienced a slight decline in net sales, reporting $1,417 million, down from $1,427 million in the same quarter of the previous year. Year-to-date net sales also decreased by 2%, totaling $2,777 million compared to $2,834 million in the prior year. The decline in sales was attributed to a 3% decrease in comparable sales, with North American store sales falling by 2% to $800 million and direct channel sales decreasing by 1% to $430 million. However, international sales showed resilience, increasing by 6% to $187 million in the second quarter.

Despite the drop in sales, the company reported a significant improvement in profitability. Gross profit for the second quarter rose to $501 million, up from $487 million in the prior year, driven by reduced costs of goods sold and gains from the sale of non-store corporate-related assets. Operating income surged to $62 million, a $36 million increase from $26 million in the second quarter of 2023, resulting in an operating income rate of 4.4%, up from 1.8% a year earlier. Net income for the quarter was $32 million, compared to a loss of $1 million in the same period last year.

The company’s total assets increased to $4,635 million as of August 3, 2024, compared to $4,525 million a year earlier. Shareholders' equity also improved significantly, rising to $472 million from $279 million in the previous year. Long-term debt decreased to $1,119 million from $1,270 million, reflecting a reduction in financial obligations.

Strategically, Victoria's Secret completed the acquisition of Adore Me, Inc. in December 2022, which continues to impact its financials. The company recognized pre-tax income related to purchase accounting items in the second quarter of 2024, contrasting with a pre-tax expense in the same quarter of 2023. Additionally, the company announced a restructuring initiative in early 2023, which included the elimination of certain executive roles and the appointment of a new CEO, Hillary Super, effective September 9, 2024.

The company also initiated a share repurchase program in March 2024, authorizing the repurchase of up to $250 million of common stock, although no shares have been repurchased under this program as of the reporting date. Overall, Victoria's Secret is focusing on strategic priorities to accelerate core growth, ignite new opportunities, and transform its operational foundation.