Q2 2023 Victoria's Secret & Co Earnings Call
Good morning, My name is Brandon.
Operator today.
At this time I'd like to welcome everyone to the Victoria's Secret and company's second quarter 2023 earnings Conference call. Please be advised that today's conference is being recorded.
Parties will remain in a listen only mode until the question and answer session of today's call.
I would like to turn the call over to Mr. Kevin Wink, Vice president of external financial reporting.
Mr Relations at Victoria's Secret and company. Thank you Sir you may begin.
Thank you Fran.
And welcome to Victoria's Secret and company's second quarter earnings Conference call for the period ending July 29, 2023, as a matter of formality I would like to remind you that any forward looking statements. We may make today are subject to our safe Harbor statement found in our SEC filings and in our press release.
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Joining me on the call today is CEO Martin waters, and CFO , Tim Johnson.
We are available today for up to 45 minutes to answer any questions.
Certain results we discussed on the call today are adjusted results and exclude the impact of certain items described in our press release and our SEC filings.
Reconciliations of these and other non-GAAP measures to the most comparable GAAP measures are included in our press release, our SEC filings in the Investor presentation posted on the investors section of our website.
And now I'll turn the call over to Martin.
Thanks, Kevin and good morning, everyone.
As we've shared consistently inside and outside of the business. We are laser focused on the three pillars of our long term strategy number one to strengthen the core number two to ignite growth and number three to transform the foundation of our company.
We have defined and are delivering initiatives in each pillar and we believe these will steadily provide profitable growth into the future.
Now before we dive into the details of the quarter I want to first share my appreciation for the hard work and dedication of our associates and partners all around the world I'm, especially thankful for the team's continued commitment for all they're doing as we push forward with our strategy.
In the second quarter, we delivered sales adjusted operating income and adjusted diluted earnings per share within our guidance range, while the macro environment continues to put pressure on our customer base and our core intimates categories.
As anticipated and what was a continuation of first quarter trends sales performance in the second quarter was particularly challenging and the overall stores and digital intimates market in North America, and this impacted both Victoria's secret and pink businesses.
External market data indicates that overall stores and digital intimates market in North America remain challenged and was down mid single digits in the quarter compared to last year.
We continue to be pleased with our international business, which experienced growth in excess of 25%.
Strong profit flow through in the quarter and our recently acquired a Dolby brand also grew sales during the quarter highlighting the strength of their business model and unique digital strategies.
Additionally, our teams were resilient and focused on what was within our control managing selling margins diligently.
All in costs and delivering inventory levels at Victoria's secret and pink, but were down low double digits compared to last year, allowing us to enter the fall season with a relatively lean inventory levels.
Turning to the numbers in the second quarter, our adjusted operating income was $49 million and adjusted earnings per diluted share was <unk> 24 cents, both near the midpoint of our guidance range.
Overall sales declined 6% in the quarter compared to last year, which was near the low end of our guidance range and down mid single digits.
Sales trends for the first quarter in North America continued throughout the second quarter in both stores and digital channels driven by a decline in traffic and average basket size compared to the second quarter last year.
While conversion rates and average unit retail in both channels were lower than last year. Each of these key metrics continues to trend above pre pandemic levels.
<unk> sales were up year over year against the quarter and represented.
<unk> four percentage points of total sales growth for the ESCO in the quarter.
From a merchandising perspective sales trends for the intimates market in North America remain challenged as I said a decreased in the mid single digits compared to last year.
We remain the leader in market share for the intimates category in North America, including both Bras and panties.
Our rolling 12 month basis, our intimate market share declined slightly with our digital share slightly in stores share down slightly.
From a merchandise category perspective, starting with Victoria's secret.
Beauty business continues to be our best performing category, followed by Bras Sleepwear and pantries.
Within pink intimate sleepwear outperformed apparel, which had another difficult quarter.
We estimate that the previously identified apparel challenges in paying negatively impacted the second quarter sales results by approximately two to three points.
A new re imagined pink merchandising assortment has begun to set and sell both online and in stores and we're encouraged by early positive response from our customers.
Back to our international business, which continued its stellar performance with sales up 26% in the quarter compared to last year and total international system wide sales up in the low teens as well.
The business continues to experience momentum and provide profitable growth across stores and digital.
Second quarter results were driven by significant year over year growth in China.
Our joint venture with Virgin America, and globally with partners in our franchise and travel retail networks.
In the past 12 months, we have entered four new countries and opened nine new digital sites to increase our global footprint and we have 25 to 35 net new stores planned to open in the fall season.
We continue to be optimistic about sales and profit and store growth opportunities for all of our partners around the world.
Aside from the financials over the last 90 days, we've executed several key actions in support of our strategy and brand positioning for the long term, which include we announced the premiere of the Victoria's secret well toward streaming on the 26th of September on Amazon Prime video.
Spectacular fashion events part documentary this one of a kind show promises and unrivaled viewing experience that celebrates the mission at Victoria's secret to uplift and champion women on a global scale.
The total will be headlined by Grammy Award, winning artist Otsuka with relentless focus on the broader strategy and delivering newness innovation and fashion to our customers. We debuted the icon by Victoria's secret a new collection of bras panties and luxury centered around the new icon by Victoria's Secret Pushups, Demi bra and featured in <unk>.
All star cast of talent, including the return of Giselle Luncheon, Naomi Campbell, Adriana Lima, and Kevin just wanted to go to the <unk> family.
We also introduced a featherweight Max sports bra, featuring a liver revolutionary Super light shaped design for both Jim and everyday work.
We expanded we expanded our channels of distribution with the launch of Victoria's secret lingerie and apparel and the official Victoria Secret Amazon fashion storefront and.
In June we enhanced Victoria's secret and pink customer experience and rolled out our new multi tender loyalty program to all customers in just three months, we already have over 16 million members, who are currently accounting for over 70% of our weekly sales and Thats trending higher.
We launched the Dolby merchandise available for sale on Www, Victoria's secret Dot com during the quarter and we continue to leverage <unk> expertise and technology to improve the customer experience by further developing our launch plans for try on at home and VIP membership services for the Victoria's secret and pink customer.
And we evolved our leadership structure to advance our strategic priorities with the appointment of Greg units as brand President.
Along with welcoming back to the brand and Stephen incentives, our new Chief merchandising officer.
Looking forward, we're focused on changing the trajectory of our sales trends and our teams have been working tirelessly on multiple growth initiatives designed to impact the third quarter and the all important holiday season.
We're encouraged by August sales trends, which were better than July the second quarter and the entirety of the spring season.
I believe there are early signs that our growth initiatives are beginning to be noticed by customers.
For the third quarter, we expect sales to decrease in the low to mid single digit range compared to last year and we are forecasting an adjusted operating loss in the range of 45% to $75 million.
We expect inventory levels in our core Victoria's secret Pink business at the end of the third quarter to be down mid to high single digits compared to last year.
Our guidance for the third quarter reflects an improvement in our sales trend in North America based on August results as I just mentioned the phased rollout of the new digital technology capabilities, Victoria's secret will Tau and a re imagined pink merchandise, which as I said is beginning to deliver at the end of August .
For the full year 2023, we're forecasting sales to decrease in the low single digit range compared to last year and we expect the adjusted operating income rate to be in the range of 5% to 6% compared to current analyst consensus estimate, which reflect sales down approximately 2% compared to last year and adjusted operating income.
Rate of approximately five 5%.
We remained focused and continued to take important steps to evolve and innovate our business focused on our three core pillars strengthening the call ignite growth transform the foundation.
We continue to believe executing against our strategies in each of the pillars will improve business trends beginning in the third quarter and accelerating into the holiday season.
Strengthening the core we have growth strategies and new customer experiences that we believe are opportunities, including new bra launches and innovation re imagining merchandise positioning for pink.
Multi multi tender loyalty program, new customer experience initiatives in digital and further expansion of our successful store of the future format as well as the Victoria's secret well tool, which will be our largest marketing investment in over five years.
Ignite growth our international business has momentum with partner expansion plans for more than 100, new stores in several new markets planned.
The next two years, we also plan to leverage <unk> technology on a scaled platforms for the fall season, and we're continuing to expand our channels of distribution to meet the customer where she is.
Form the foundation, we continue to take steps to drive operating margin expansion by modernizing the operating model. These initiatives are well underway and we remain committed to the total of $250 million opportunity identified at our October Investor Day, we have begun to realize those benefits related to initiatives in 2020.
And more than two thirds of the total savings are expected to be realized in 'twenty four and 'twenty five.
Of course, we recognize that neither our brand revolution, nor our strategy, we'll return that full potential overnight.
We're on a journey, we also believe that.
There is a clear path to growth due to the current turbulent environment and into the future.
Our focus as leaders and as a company is on ensuring we continue to be a future facing business that becomes more and more culturally relevant and the shifting consumer environment. We remain confident in our repositioning efforts and our strategic plans for growth we understand there could be volatility in our results. This year. However, we remain committed to delivering our long term.
Financial targets and returning value to shareholders.
And lastly, we're looking forward to our Investor day in our office in New York City.
October the 12th and we plan to reflect on the previous year and provide update on our longer term strategy.
Thank you that concludes our prepared remarks I'm more than happy to take your questions at this time.
Thank you so very much now if you would like to ask a question. Please press star one you will be announced by name and company. So you know when your line is open.
Mr. AHL you request that would be star two.
So again to ask a question at this time, Please press star one and our <unk>.
First request is from Matthew boss with Jpmorgan. Thank you Sir your line is open.
Great. Thanks, So Martin two part question could you speak to the Victoria's Secret brand image today, and the rationale behind the strategic shift in marketing with the World Tour and then secondly could you just elaborate on the three pillars and more specifically the initiatives to strengthen the core.
Sure as you outlined at the Analyst day last just given the market share that you cited in intimates this quarter.
Yeah. Thank you for the question, Matt I'm happy to take that we are feeling good about where we are on the repositioning journey of the brand as you know when this management team took over we defined the challenge as being a complete repositioning of the brand.
And we've been dedicated to that and dedicated to the cause of championing and uplifting women on their journey through life I don't see this next evolution of our marketing strategy is a change I see it as the reinvention and re imagination of what was probably the most important retail marketing.
Bye.
The last decade in the Victoria's secret fashion show.
The World Tour and the announcement that we made around that is really a celebratory moment, representing the ultimate expression of our brand transformation. It kind of brings to life our commitment that I just talked about.
And it's already had a massive media impacts so we feel really good about where that is.
I think it gives us an opportunity to talk about cultural relevance and to kind of reclaim our position at the center of cultural relevance, whether thats fashion art music or popular culture, and we're super excited about partnering with Amazon in that endeavor. So I see it as a natural extension of the work that we've been doing.
And the early signs certainly that the customer is noticing.
On the media around the world is noticing.
In terms of the three pillars of our strategy.
Kind of take them in reverse order and transforming the foundation of the company I feel really really good about where we are.
Progress that TJ and Dean and the team have made on our cost base and on a supply basis is really extraordinary and we will give further details of that at our October meeting, but suffice to say I'm very very pleased with the progress that we've made there and the ignite growth column. The same is true international sales up 2000.
6% in the quarter.
Our partnership with Amazon going from strength to strength the success that we're seeing in global curated marketplace.
Exceptional growth year over year, so feeling really good about all of those initiatives as you rightly indicate the area, where we need to focus more is on the core of our company we have seen some slight decline.
Our market share. The good news is that we've seen an increase in share in digital and the world.
Chris Rep and her team are doing in digital seems to be paying off we're definitely delivering a better customer experience there and I think that's helping us.
So when we get to the October meeting, we'll talk more about what we intend to do differently in the year ahead, but without giving the game away I can tell you that it will be a relentless focus on the core of our company, which is innovation in bras and panties.
And marketing in a way that's culturally relevant and getting stronger in some of the categories that we walked away from particularly around sports bras.
And sports apparel.
I hope that helps.
A long answer to a short question I hope that gave you some more color.
Great color best of luck.
Thank you. Our next question is from Lorraine Hutchinson with Bank of America. Your line is open.
Good morning.
Martin can you talk about the factors that caused the accelerating August trend and if you expect them to hold for.
<unk> continued to improve as the year coupon.
Sure Ken Thanks, Ryan for the question yes.
This was definitely better than July and it was better than Q2 embedded in the entirety of the spring season. So we feel good about that.
Whats driving the change well we've had some really good green shoots of recovery the icon bra was.
It was good news for us.
A two for one deal one that went to our number one digital brown had a $4 four rating and a very high <unk> ratios. So that was terrific, but also it goes back into the conversation with very high media ratings, so that helped.
We also had strength in further weight Maxx sports bra, where we've we've chased into that or to another 160000 units in the last couple of weeks.
The pink.
Early arrival of merchandise.
Seamless sports Bra is good but also some of the new merchandise that set at the very very end of the month is starting to look good.
Within beauty, we had some some strong performance edp's were up 5% driven by the Heavenly Restage and bio rose launch so kind of all of our all across the business. There were just some nice green shoots that.
Encouraging for us and we've got a lot less carryover as we go into this season than we had in the previous year. So I don't I don't know the trends from August we will definitely continue but we're optimistic that they will.
And thanks for asking the right.
Our next question is from Adrienne <unk> with Barclays Ma'am Your line is open.
Great. Thank you very much.
Martin can you talk about the promotion analogy the environment, what the expectations are for the fall season as you launch these new kind of full price initiatives and then T. J can you remind us lastly, I know you did a kind of aired ocean modal mix was more weighted towards Eric can you remind us sort of what was the percent John .
Air relative to normal and then in the guidance what do you have in there in terms of basis points a recapture thank you very much.
Yes, thanks for the question Adrian.
In the second quarter the levels of promotional let's see in our business.
Slightly up year over year slightly up year over year.
I think that is about Ah reflect a reflection of the market as a whole so as we look around our competitive base we still.
Promotions were slightly up year over year. So I think we were in line with the market in terms of the guidance that we're planning for Q3 and Q4, we expect promotions to be about the same year over year as always we are optimistic that if our full price initiatives really cut through and they work that we can pull back on.
On that promotional letting that could provide some upside but the guidance, we're giving is about flat on promotion Odyssey.
In terms of I'll just answer for T J.
The AD mix so it was about 35%.
During the second quarter, and we're expecting that to be in the order of 25% for the back half of the full season, so substantially normalized from Larry has been historically, our I T J absolutely and in addition to that Adrian as you might imagine the both air and Ocean rates have certainly moderated as the year's gone.
On and we're hopeful during the holiday season, we will see continued moderation level levels relative to last year. So it's a good environment for US right now both from a rate perspective, and a capacity perspective.
Fantastic. Thank you very much best of luck.
Our next question from Alex <unk> with Morgan Stanley . Your line is open.
Perfect Hi, Martin Thanks for taking the question maybe two for me.
First just on the second quarter International was clearly a bright spot. So maybe how do you think about the divergence in sales performance there versus North America is there something different about your positioning there or is it just a function of a small base internationally and then secondly, just thinking through the guidance and I look forward. It seems to include a bit of a step.
Up in profitability in the fourth quarter, perhaps bigger than usual so maybe what gives you conviction there. Thanks a lot.
Yes, Thanks, Alex.
Ed Thanks for highlighting the international business, we are really pleased with the progress that we've been making in that business really over the last two years the quarter was strong for sure, but it's a consistent.
Picture over the last eight quarters of really solid progress.
There are a couple of maybe three important changes that we made to the international strategy that are paying off one is.
Working with our partners to open smaller stores than we had previously imagined secondly, having a store of the future format. That's more modern.
Our most shop, a little more accessible at a significantly lower capital expense enables partners to open more stores and better stores and thirdly, we have embraced the digital.
The area of international with supporting our partners with digital sales and progressing with digital sales ourselves. So those three changes over the course of the last two years really really paying off in a very positive way for us.
That's really what's driving the change.
It's true to say that store fleet.
And then internationally is much younger than it is here.
It's also true to say that we are executing extremely well, but the fundamental strategy and positioning us as the same as it is here in North America I'm optimistic that the <unk>.
Great results, we're seeing in international will be.
Encouraging for our domestic business.
The thing I should mention on international is China.
We had a very difficult business going back pre pandemic.
And the ship with Virgin America has been a real win for US Virginia isn't fantastic partner.
For the second consecutive quarter, we're actually making money in China or in China is a difficult environment right now so for our business to be strong in what I say strong we've doubled our digital sales in China in the quarter.
We're really seeing some terrific momentum.
All in all pleased with the with how things are going as it relates to the fourth quarter and the domestic business.
OLED stuff, we've been talking about earlier in the year. So it really matures during the fall season. So it's the reason.
The reason to be confident and cheerful.
It relates to the fact that we've been working tirelessly over here on a whole series of initiatives and I've listed some of them already.
Launch of new bra collections the world tool.
Coming in there is fashion merchandise associated with the well until that will impact the full season.
The loyalty program, which starts to give us confidence for the back half.
All across the business the things that we've been working on will be delivering in the back half and so we're just optimistic that we will get our fair share of the upside TJ anything to add to that no. I think you hit on the major marking initiatives, Alex as Martin mentioned major customer initiatives major brand initiatives.
Good early receptivity to some of the fall merchandise, particularly on the <unk> side.
And a growing assortment of new pink merchandise that we're excited about so all of those factors contribute to what we think will be an improving sales trend as we move through month to month through the fall season, I think Additionally, just understanding that two of our largest marketing of investments.
Our short period as a public company are all coming together here in the third quarter that does put some expense pressure on the third quarter, but as we look to fourth quarter and the halo of those marketing events and a more normal expense structure growing sales.
Shows the margin opportunity early in the holiday season going into <unk>.
Next year, so we feel good about the way that the back half of the year as laid out from from an initiative perspective.
Cost structure perspective, and our ability to chase winners and losers in the inventory assortment.
Thanks, a lot good luck.
Our next question is from Ike <unk>.
With Wells Fargo and your line is open.
Okay.
Hey, good morning, everyone two.
Two questions from me.
Was going to ask about gross margin.
Is there a way to kind of talk about expectations for <unk> or what's embedded in the full year and the 5% to 6% margin and then just a follow up is kind of on the direct business. So if you ex out of door me directors.
Trending down.
Cingal is low double or something in that range in your back half improvement that you guys are hoping for do you expect to see more improvement on the E comm side more improvement on the store side similar as a rationale just kind of curious how to think about both channels.
TJ do you want to take the gross margin and then I'll pick up the digital question, yes, absolutely. So from a margin perspective, as we move through the year here.
Here in second quarter, our selling margin was relatively flat.
And the gross margin decline of 150 basis points was about the <unk> deleverage on the lower sales as we look forward to Q3, and Q4, we actually see selling margin or merchandise margins up year over year.
For two reasons first off as Youll recall, we have transformed the foundation initiative in place.
And we've mentioned.
For a number of months now that we will start to see some of the cost of goods sold benefit.
Lower costs hitting the fourth quarter. So that's one item positively impacting merchandize margins and then the second item was.
Was the question that was asked earlier around air and Ocean. We continue to see positive news there from a rate perspective, and I think I'll throw in a third thing in that the raw material cost that the teams are working on are starting to those price increases are starting to abate also so from a merchandise margin perspective, we feel good.
Good about how things are trending and we feel good about the inventory levels, we came into the.
The quarter in the fall season with I think also as we move through the fall season.
And start to see some of our strategic initiatives take hold and improve the North America business, we would expect to be in Eau de leverage to start to abate as we move through third and into fourth quarter as well. So that's what gets us to our guidance for third quarter.
Our gross margin rate that approximates last year and embedded in our guidance is in improving gross margin rate in.
In the fourth quarter.
Yes.
On the difference between the digital and store channels as we look at the back half of the year, we're expecting.
Performance improvement from both of those channels. However, if I sort of step back from the immediate state and say.
What do we think is happening right now our share of digital.
<unk> of our total system the industry expectation is that that will grow over time and likely we will get to say 40 over the next three years. So we are prepared for that and we would expect that our share of digital.
From our total system will increase so it's important that we get to world class icon digital so Chris referenced that team have been working on is building ton just loads and loads of capability like fewer clicks to product removal of category landing pages.
<unk> search being added shop videos embedded within the barcode scanning.
Moving from non callable text to fully callable text enhancing our link linking capabilities.
Kind of stuff as well as personalized E mail through da Vinci. So there's a lot of activity that we've been investing in that should mature in the back half of the year and so the likelihood is that digital will increase and its participation for us.
Luckily the profitability of the channels is pretty much the same for us. So we don't really mind, where the customer shops with us we're prepared for her in both arenas.
I think the other thing to note about digital as we talked about the synergies from Adobe.
A very important one is the launch of try on at home.
Which will be launched on a test basis in the fall season that of course points at the digital business rather than the stores business. So that's.
Another benefit to that side of to that channel.
I hope that helps out.
Thank you.
Our next question from Marni Shapiro with retail tracker. Your line is open.
Good morning, everyone.
I was hoping you could dig in a little bit to your loyalty program I think impressive 16 million people sign up in a matter of three months.
Can you or do you have any insight into these new or existing shoppers already lapsed shoppers are you seeing activity change once they sign up and I guess what is the look forward to that as we get into the holiday season, how do you expect to use the loyalty program.
Yeah. Thanks, Bonnie good morning.
We're pleased with over 16 million members in three months I think that's a very strong adoption rate.
I think as I look back over the last couple of weeks and the sort of low 70, 70, 273% of sales coming through that device.
That gives us great data.
And data is our friend when it comes to marketing and personalization. So.
How much of this file these new about 50% is new so of those $16 million about 15 about 550% would be new a new we define as we've not seen this customer in the last I think 24 months.
So that's pretty strong.
Adoption rate I would say in terms of the.
What we know about that customer broadly consistent with the customers that we've seen previously in terms of demographics in terms of age in terms of the segmentation the real win for US as I said this is enabling us to move from a one size fits so marketing campaign to campaigns that reflect the needs and preferences of the individual.
And we're kind of a page one of that we just started it but we will gain capability as the system loans more from the data and as we get more comfortable with personalization. So.
That's the big win now of course.
From an external point of view when you're looking in you will be receiving marketing that we had.
Our systems and our capabilities.
Especially on intelligence think are most suited to you as well.
We will no longer be able to see all of the marketing that's booking at all of the people. So you just to kind of have to trust us that there are multiple campaigns in place pointing at different people at different times.
Great. Thank you so much you are welcome.
Thank you and our next question is from Jonna, Kim with TD Cowen Ma'am. Your line is open.
Thank you for taking my question just curious on the beauty side. It seems like it's really growing nicely what is sort of the driver behind the beauty and how do you think this segment could grow over time. Thank you.
Yeah. Thanks for the question beauty has always been a really important part of our business. It's a natural adjacency to loans Ray.
It's a really really beautiful partner, both in store and digital to our lingerie business whats been driving the strength and performance recently, let's say this year is a couple of things one the ADP strength of performance, particularly the Headingley restraint restage was very good the bat rose launch was terrific for us.
But also body fragrance mist I think it was up in the mid to high single digits in the second quarter.
And that's at a very accessible price point into good entry into the brand.
We do on occasion see a different customer coming into the brand through beauty and that gives us an opportunity to talk to her about other things that we sell so beauty is a terrific business for us we're excited about what's coming in the back half of the year.
A very important strategic business for us thanks for asking.
Thank you.
And now our next question from Cory <unk> with Jefferies. Your line is open.
Great. Thanks, I was wondering if you could talk a little bit about some of the newer initiatives that pink how that business is trending and then maybe just an update on how <unk> is doing into back to school.
Yes, thanks for asking.
<unk>.
I'd say early days I literally mean early days, we launched the first of the new pink merchandise on August the 29th so but kind of two days in so it is very very early days I do know, though from some tests of early merchandise that we put out to a certain number of stores in some.
Customers online. The response has been favorable we're seeing good pick up on the new merchandise what I will tell you as though we have not built a big impact.
The turnaround of pink into half two our goal is to watch and learn and chase like crazy into the Windows. We've already started to see some chase opportunities, particularly in the seamless.
We expect that there will be others that will emerge in the coming days and we will chase hot into them.
For us it's about redefining the pink brand to be more declarative.
With the brand narrative and appeal to Gen Z, specifically and that won't happen overnight.
So early early signs very very early signs are positive we have not baked in a big U turn for the back half we will keep you posted as we as we go I think by the time, we get to our Investor meeting October 12, we will have some reasonable indications and we'll certainly show you and anybody else that comes to that meeting or watches that meeting.
The merchandise that's trying to.
Yes, I think on the second part of the question Cory around back to school.
Given the transition we're in in Pink.
More difficult to kind of isolate into pink only back to school. So I'll pivot back to Martin's earlier commentary around the month of August and Thats really about merchandize green shoots, particularly on the <unk> side strong beauty significant marketing launch with icon.
Significantly more.
Getting dollars.
Visual online all in relative to the launch last year. So obsessed and then also youre seeing good early signs of us utilizing the strength of our new loyalty program with a successful beat the clock event in August so.
If August is a proxy for back to school was our best month of the year really driven by some of the merchandising green shoots.
And marketing efforts on the part of the team yes, one other thing on <unk> that I forgot to mention.
We're really pleased about is the collaboration with <unk> and Haile, which.
Just had a fabulous media pickup, particularly in social media the product looks amazing and early indications on that are that it's going to sell out and sell out quickly. So that's a good indication of a green shoot on paint that I should have mentioned earlier.
Our next.
Great. Thank you.
Well.
Now our next question from Carla Casella with Jpmorgan. Your line is open.
Hi, My question's around the heavy marketing spend you talked about for third quarter and the tour.
Is that completely out of Denver some of that pull forward from the spin you would normally spend in <unk>.
Yes. Good question. Thanks, Carla I think we took the approach of really leaning into the investment here from a marketing perspective.
With two of our largest marketing spend since we.
Become a public company with the World Tour and the launch of the icon bra all happening in the same quarter and our lowest volume quarter of the year. So we really are taking the longer term view here and.
And expect that the Halo of both icon in World Tour.
Carry on with customers through the holiday season, and we will also present for US a lot of marketing collateral to utilize in our stores and on our digital sites for a number of weeks to come so while the expense Carla it's largely in the third quarter, we do see benefits of that the.
Marketing spend for.
Our stores and digital all the way through the fourth quarter season, but to answer your question specifically, we did not.
Go out to fourth quarter and make significant reductions.
To fund the third quarter. This is really additive to the fall season and was in our original plans and guidance for the year. So.
Helping new calendar is the season better.
But the marketing spend here in third quarter is not a surprise to us thats been planned all year. The teams have been working on it for months to months and months and we're excited about the reception that we're seeing from from customers and the media.
Fran I could point out.
I think we have time for one more question.
So much so our last question of the day is from William Reuter with Bank of America. Sir Your line is now open.
Hi, I have two questions. The first is with the loss in market share do you think this is the lower priced options as.
As consumers are just having constrained.
Budgets are do you think that there.
Have been.
Competition, that's been introduced your price points, and then secondarily any comments from a dollar or margin basis point standpoint in terms of what the tailwind of lower rate is in the.
Second half of the year. Thank you.
Yes, I'll take the first part and then we'll go to TJ on the on the second part so just to be clear on the market share very it's a small.
Change in market share position and that reflects a few moving parts that I'll just unpack for everybody. One is digital share is up. So if you think about new competitors that have come into the market in recent years. They tend to be digitally native players. We're doing okay. In digital our share is up down slightly and stores.
Up slightly in constructed bras non sports brought us down.
More meaningfully and panties, which is a harder category to defend a lower price point category a category with lower barriers to entry specifically where are we who is gaining share.
Walmart Amazon and off price of the places that are picking up the share is that a surprise in this difficult economic environment probably not.
That isn't an excuse we need to find ways to extract more cash from our consumers, we need to develop better merchandise thats more innovative and commands higher price points. So that she is prepared to invest in this category rather than just default to generics and low price generic so it's on us to be able to respond to it but the specific answer to your.
Question is that it is lower price and off price.
Picking up on T J and I think Williams to the second part of your question around supply chain.
In big round numbers in both the third and the fourth quarter, we're probably seeing a tailwind in.
In our forecasting of about $15 million to $20 million.
But I think more importantly than the tailwind.
Accentuating the good work the teams are doing around the cost of goods sold initiatives as part of the transform the foundation.
Will be equally important if not more important in the fourth quarter in particular so.
Yes, there are some favorable trends in the marketplace, we're benefiting from like many others, but there's also a number of good initiatives underway on cost of goods starting in the fourth quarter that we will have a benefit going on into 2024.
That's the work our teams are doing specifically on our product and in our business.
Okay. Thank you everyone that concludes our call. This morning, we appreciate your continuing interest in Victoria's Secret and company.
Thank you thanks, everybody.
As we are concluded. Please go ahead and disconnect and have a wonderful day. Thank you.