The lingerie and beauty company revealed quarterly earnings Wednesday after the market closed, improving on top-line sales and updating its fourth-quarter guidance with a more optimistic future guidance. Company shares shot up nearly 16 percent during Wednesday’s after-hours trading as a result.
“I am very pleased with our solid third-quarter performance, which reflects growth in all core categories,” Martin Waters, chief executive officer of Victoria’s Secret Lingerie, said in a statement. “Our work to transform our brand, deepen our customer connections and improve our operational fundamentals is gaining positive traction. We continue to improve our merchandise assortment and expand our already strong customer file. I’m proud of the commitment and resilience demonstrated by our teams, who delivered these results in challenging circumstances and in doing so are demonstrating the power of a healthy culture. We continue to monitor global supply chain issues and believe our close partnerships with our vendors and our work to get ahead of the curve will help mitigate those challenges. Looking ahead, the leadership team and I believe we have the right strategy and a dedicated team focused on driving long-term growth and creating value for our shareholders.”
That long-term strategy includes rebranding Victoria’s Secret — which includes the Victoria’s Secret Lingerie, Victoria’s Secret Beauty and Pink brands — as “the world’s leading advocate for women,” something the CEO promised shareholders during July’s investor day, when Victoria’s Secret was still part of parent company L Brands.
In recent years, many consumers have been opting for digital bra brands, many of which offer a more inclusive assortment. But Victoria’s Secret has been hard at work trying to regain market share and win back consumers over the last 18 months.
Comeback strategies include adding a string of senior-level hires to the C-suite, including a board made up almost entirely of women (six out of seven); hiring plus-size model Ali Tate Cutler; reintroducing swimwear, and selling off the Victoria’s Secret U.K. business.
Earlier in the day, Victoria’s Secret revealed exclusively to WWD that tennis star Naomi Osaka would join the VS Collective, an initiative that includes women from diverse backgrounds who share their stories by way of partnerships and collaborations. Company sources have also confirmed that the company has planned to expand in India, following expansions in Israel and Milan.
“We were also pleased with our brand transformation, which highlights diversity and inclusion and our advocacy progress,” the company said in its prepared remarks. “Our models are increasingly representing the diversity of our customer population; we continue to roll out size-inclusive mannequins to all stores, and we entered into a new exclusive partnership with Mindd, the first bra company engineered for the D+ woman. We also launched the VS Voices Podcast, our new maternity bra and our first Breast Cancer Awareness Month campaign featuring a partnership with Stella McCartney and our new Body by Victoria Mastectomy Bra. We donated sales of the mastectomy bra for the month of October to the Victoria’s Secret Global Fund for Women’s Cancers to accelerate innovation in cancer research for women, by women.”
So far the plan seems to be working. Total company revenues for the three-month period ending Oct. 30 were $1.4 billion, up from $1.35 billion the same time last year. In North America, in-store sales surged nearly 22 percent during the quarter, year-over-year, to $920 million, up from $755 million, signaling that shoppers are heading back to Victoria’s Secret stores — many of them newly renovated — during the holiday shopping season. Comparable-store sales rose 7 percent, year-over-year, while comparable sales in the direct channel were flat.
Meanwhile, revenues in the direct channel, which includes e-commerce, fell 13.5 percent during the quarter to $406 million, down from $470 million the same time last year. Sales in the international business declined 10.4 percent to $114 million, down from nearly $128 million a year ago.
Victoria’s Secret logged $75 million in net profits during the quarter, down from $143 million the same time last year.
But investors didn’t seem to mind. The company’s updated guidance indicates the retailer is bullish on the upcoming holiday shopping season. Victoria’s Secret is now expecting fourth-quarter revenues to be flat to up 3 percent, compared with 2020’s fourth-quarter revenues of $2.1 billion. The retailer is also anticipating full fiscal-year 2021 revenues to be in the range of $6.7 billion to $6.8 billion, an increase of about 25 percent, compared with 2020’s full-year sales results.
But the company warned that it will likely incur as much as $100 million in supply chain disruptions, including higher freight and production costs, in the fourth quarter.
“While we feel very positive about our brand transformation, our merchandising assortments, and our marketing and store execution plans for the all-important holiday quarter, we are mindful of the uncertainty around COVID-19 related challenges in our base of supply and the impact on our ability to receive merchandise in a timely manner,” the company said in a statement. “Our teams around the world are working diligently to mitigate the potential effect of these challenges by repositioning deliveries, expediting deliveries and in certain situations, canceling deliveries. In addition to higher costs, we know these challenges will minimize our flexibility to chase winners and deliver increased sales versus our forecast, which in turn may inhibit our ability to accelerate sales growth year-over-year beyond what we are forecasting for the quarter.”
Victoria’s Secret ended the quarter with 933 company-owned stores, (846 of them in the U.S.), $977 million in long-term debt and $330 million in cash and cash equivalents.
Shares of Victoria’s Secret, which closed down 2.17 percent Wednesday to $50.51 apiece, are down 13.2 percent, year-over-year.