Q1 2024 Victoria's Secret & Co Earnings Call
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Ivy: Good morning, My name is Ivy and I'll be your conference operator today at this time I'd like to welcome everyone to the Victoria Secrets <unk> Company first quarter 2024 earnings Conference call. Please be advised that today's conference is being recorded all parties will remain in a listen only mode until the question and answer session of today's call I would now like to turn the call over to Mr. Kevin Lee Vice President of external finance.
Ivy: Good morning. My name is Ivy, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Victoria's Secrets & Company first quarter 2024 earnings conference call. Please be advised that today's conference is being recorded. All parties will remain in a listen-only mode until the question and answer session of today's call. I would now like to turn the call over to Mr. Kevin Wynk, Vice President of External Financial Reporting and Investor Relations at Victoria's Secrets & Company. Kevin, you may begin.
Speaker Change: Our reporting and Investor Relations at Victoria's Secret <unk> Company, Kevin you may begin.
Kevin Wynk: Thank you, Ivy. Good morning, and welcome to Victoria's Secret & Company's first quarter earnings conference call for the period ending May 4, 2024. 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 statements found in our SEC filings and in our press release. Joining me on the call today are CEO Martin Waters and CFO Tim Johnson. We are available today for up to 45 minutes to answer any questions.
Kevin Lee: Thank you Ivy good morning, and welcome to Victoria's Secret and company's first quarter earnings conference call for the period ending May four 2024, 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 statements found in our SEC filings and in our press releases.
Kevin Lee: Joining me on the call today is CEO, Mark waters, and CFO, Tim jobs, where we are available today for up to 45 minutes to answer any questions. Certain results. We discuss on the call today are adjusted results and exclude the impact of certain items described in our press release in our SEC filings.
Kevin Wynk: 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 file. Reconciliations of these and other non-GAAP measures to the most comparable GAAP measures are included in our press release, our SEC filings, and the investor presentation posted on the investors section of our website. Thanks, and now I'll turn the call over to Martin.
Kevin Lee: Reconciliation of these and other non-GAAP measures to the most comparable GAAP measures are included in our press release, our SEC filings and the Investor presentation posted on the investors section of our website.
Speaker Change: Thanks, and now I'll turn the call over to Martin.
Martin P. Waters: Thanks, Kevin, and good morning, everyone. I'm pleased to report that our first quarter results exceeded or met our expectations for the quarter on all key financial metrics. We experienced sequential improvement in quarterly sales trends for the third consecutive quarter in North America, in both our stores and digital business for both Victoria's Secret and Pink Brands. We delivered meaningful newness in merchandise and brand projection during the quarter, and our customers responded, particularly in April, which was our strongest month of the quarter.
Martin: Thanks, Kevin and good morning, everyone. I am pleased to report that first quarter results exceeded or met our expectations for the quarter on all key financial metrics.
Martin: We experienced sequential improvement in quarterly sales trends for the third consecutive quarter in North America in both our stores and digital business, but both Victoria's secret and Pink brands.
Martin: We delivered meaningful newness in merchandise and brand projections during the quarter and our customers responded, particularly in April which was our strongest month of the quarter.
Martin P. Waters: In North America, the improvement in trend was evident in both our store and digital businesses. From a store's perspective, we experienced significant improvement in traffic in April, meaningfully outperforming the balance of the month. In terms of our digital business, the investments we've made to improve the customer experience resulted in digital sales performance outperforming stores. Traffic levels and our digital channels improved, with April being the strongest month.
Martin: In North America, the improvements in trend was evident in both our store and digital businesses from a stores perspective, we experienced significant improvement in traffic in April meaningfully outperforming the balance of the mall.
Martin: In terms of our digital business the investments we've made to improve the customer experience resulted in digital sales performance outperforming stores.
Martin: Traffic levels in our digital channels improved with April as the strongest month.
Martin P. Waters: And our conversion continues to grow, driven by improving customer experience and positive customer receptivity to our improving merchandise assortment. From a market perspective, we are encouraged to see that sales trends in the Intimates market in North America improved from quarter to quarter, and we recognize a similar improvement in our Intimates business performance, in particular, in the March and April time frame. Our combined Victoria's Secret and Pink market share in the Intimates category remained at about 20%.
Martin: Conversion continues to grow driven by improving customer experience and positive customer receptivity to our improving merchandise assortments.
Martin: A market perspective, we were encouraged to see that sales trends in the intimates market in North America improved quarter to quarter and we recognize a similar improvement in our intimates business performance in particular in March and April time frame.
All combined Victorias secret and pink market share in the intimates category remained at about 20%.
Martin P. Waters: We will also be encouraged to see our digital market share in both bras and panties along with an increase in our sports bra market share. From a merchandise category perspective, Victoria's Secret Beauty Business continues to be our best performing category, with year-over-year growth for the third consecutive quarter, and was followed by improving performance in panties and bras. The combined intimates and beauty business for Victoria's Secret was about flat in the quarter compared to last year.
Martin: We were also encouraged to see our digital market share in both bras and panties.
Martin: Along with an increase increase along with a sports bra and market share.
Martin: From a merchandise category perspective, Victoria's secret beauty business continues to be our best performing category with year over year growth for the third consecutive quarter.
Martin: And was followed by improving performance in panties and bras.
Martin: The combined intimates and beauty business for Victoria's secret was about flat in the quarter compared to last year.
Martin: Pink experienced improving sales trends throughout the quarter and April was the strongest month for the brand in the last several quarters with bras sleep and apparel as the best performing categories, helping to offset the slow start to the quarter.
Martin P. Waters: Pink experienced improving sales trends throughout the quarter, and April was the strongest month for the brand in the last several quarters, with bras, sleep, and apparel as the best performing categories, helping to offset a slow start to the quarter. However, the retail environment in North America was challenging, and the promotional environment was very competitive.
Martin: The retail environment in North America was challenging and the promotional environment was very competitive, but importantly, our gross margin rate in the quarter was above last year. When we were disciplined with traffic driving offerings for our customers and managed our inventories well, which were down 5% compared to last year.
Martin P. Waters: But importantly, our gross margin rate in the quarter was above last year, and we were disciplined with traffic-driving offerings for our customers and managed our inventories well, which were down 5% compared to last year. In addition to improving North American trends, our international business continues to have real momentum, with net sales up 16% in the first quarter compared to last year. International Systemwide Retail Sales increased by low double digits in the first quarter, and we continue to deliver profitable growth across stores and digital as compared to last year. International sales in the first quarter were driven by significant year-over-year growth in China and globally with our franchise and travel retail partners.
Martin: In addition to improving North American trends, our international business continues to have real momentum with net sales up 16% in the first quarter compared to last year.
Martin: International system wide retail sales increased low double digits in the first quarter and we continue to deliver profitable growth across stores and digital as compared to last year.
Martin: International sales in the first quarter were driven by significant year over year growth in China and globally with our franchise and travel retail partners.
Martin P. Waters: We're optimistic about sales, profit, and growth opportunities for all of our partners around the world and remain on track with the growth plans we discussed at our Investor Day in October 2023. Our adjusted SG&A rate in the quarter was better than our guidance, primarily due to disciplined and proactive expense management initiatives to drive incremental efficiency within our operating model. The combination of SG&A and buying and occupancy dollars was down slightly from last year.
Martin: We are optimistic about sales profit and growth opportunities for all of our partners around the world and remain on track with the growth plans, we discussed at our Investor Day in October 2023.
Martin: Our adjusted SG&A rate in the quarter was better than our guidance, primarily due to disciplined and proactive expense management initiatives to drive incremental efficiency within our operating model.
Martin: The combination of SG&A and buying and occupancy dollars were down slightly to last year.
Martin P. Waters: At our Investor Day in 2022, we committed to transforming the foundation of our company and established a $250 million three-year goal, and we're on track to meet that goal, and we believe we've demonstrated our commitment to continually focusing on efficiencies within our operating model and improving the cost structure of our business. 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.
Martin: At our Investor day in 2022.
Martin: <unk> transforming the foundation of our company and established a $250 million three year goal and we're on track to meet that goal and we believe we have demonstrated our commitment to continually focusing on efficiencies within our operating model and improving the cost structure of our business.
Martin: 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 for example.
Martin P. Waters: For example... We continue to develop our understanding of the Victoria and Victoria's Secret and Pink customer through our multi-tender loyalty program, which has now been active for one year. We have 30 million members who drive about 80% of our sales on a weekly basis.
Martin: We continue to develop our understanding of the Victoria.
Martin: Turing to secret and pink customer through our multi tender loyalty program, which is now being active for one year. We have 30 million members, who drive about 80% of our sales on a weekly basis.
Martin P. Waters: Through insights and data, we're focused on turning our understanding of our customers into a world-class, seamless customer experience. We continue to introduce newness in bras with the relaunch of our number one bra collection, Body by Victoria, with all new styles and our latest innovation offering a lightweight design that smooths shapes and supports without an ounce of padding. In March, we launched a campaign focused on our top-rating sports bra, Featherweight Max, available in a variety of new colorways and also featuring our Flex sports bra and Flex leggings with invisible lift technology, as well as our Elevate compression leggings.
Martin: Through insights and data we are focused on turning our understanding of our customer into world class seamless customer experiences.
Speaker Change: We continue to introduce newness in bras with the relaunch of our number one bra collection body by Victoria with all new styles in our latest innovation offering lightweight design that smooth shapes and supports without announce a pattern.
Speaker Change: In March we launched a campaign focused on our top rating sports bra.
Speaker Change: Max available in a variety of new color ways and also featured our flex sports bra and flex leggings with invisible lift technology as well as our elevate compression leggings.
Speaker Change: In April we launched our escape to summer collection, featuring all new swim intimates and Sun ready pieces to wear day or night as well as our iconic archived sweat and styles that are beloved by our customers.
Martin P. Waters: In April, we launched our Escape to Summer collection, featuring all new swim intimates and sun-ready pieces to wear day or night, as well as our iconic archive swim styles that are beloved by our customers. The new swim collection has been designed to celebrate our heritage in a fresh and modern way. As part of our commitment to expanding our categories, we continue to introduce new swim products under the collaborative label Pink x Frankie's Bikinis that celebrates the iconic pink brand reimagined through the lens of founder and creative director of Frankie's, Francesca Aiello.
Speaker Change: The new swim collection is being designed to celebrate our heritage and a fresh and modern way.
Speaker Change: Part of our commitment to expand our categories. We continued to introduce new schwinn products under the collaboration of collaborative label Pink Times frankly is makena is that celebrates the iconic pink brand re imagine through the lens of founder and creative director and Frank Hughes Francesca Hello.
Speaker Change: In May we announced the Victoria's secret fashion show is coming back in 2020 for the show will deliver precisely what our customers have been asking for the glamour runway fashion fun wings entertainments ultra powerful modern license, reflecting who we are today, we're thrilled to share. This iconic property later this year.
Martin P. Waters: In May, we announced the Victoria's Secret Fashion Show is coming back in 2024. The show will deliver precisely what our customers have been asking for. The glamour, runway, fashion, fun, wings, entertainment, all through a powerful modern lens reflecting who we are today.
Martin P. Waters: We're thrilled to share this iconic property later this year. As we look forward, albeit with some caution, to the broader retail environment in North America, we're planning the business in an appropriately conservative way in the near term but are encouraged by April, and the month of May was a solid start to the second quarter. We're optimistic about the positive signs we're seeing and remain focused on accelerating our core by leveraging our market leadership position and delivering on multiple initiatives to drive growth in our business, including product innovations to enhance Victoria's Secret's brand, the reimagined merchandise strategy for Pink, new customer experience enhancements in our digital business, and, of course, a multi-tender loyalty program.
Speaker Change: As we look forward, albeit with some caution around the broader and broader retail environment in North America, We're planning the business in an appropriately conservative way in the near term, but are encouraged by April and the month of May was a solid start to the second quarter.
Speaker Change: We are optimistic about the positive signs we are seeing and remain focused on accelerating our core by leveraging our market leadership position and delivering on multiple initiatives to drive growth in our business, including product innovations to enhance Victoria's secret brand the re imagined merchandise strategy for paint new customer experience enhance.
Speaker Change: And our digital business and of course, our multi tender loyalty program.
Speaker Change: For the second quarter of 2024 were forecasting sales to decrease in the low single digit range compared to the second quarter 2023.
Martin P. Waters: For the second quarter of 2024, we're forecasting sales to decrease in the low single-digit range compared to the second quarter of 2023. This forecast reflects performance to start the quarter and tracks in line with the trajectory we've discussed for 2024, which assumes the broader intimates market in North America will remain promotional and could remain pressured throughout the first half. At this level of sales, we're forecasting second quarter adjusted operating income to be in the range of $30 to $45 million.
Speaker Change: This forecast reflects performance to start the quarter and tracks in line with the trajectory. We've discussed for 2024, which assumes the broader intimates market in North America will remain promotional could remain pressured throughout the first half.
Speaker Change: This level of sales we are forecasting second quarter adjusted operating income to be in the range of $30 million to $45 million.
Speaker Change: For fiscal year 2024, we are reaffirming our forecast and expect sales to be about $6 billion or down low single digits, two compared to 52 weeks from fiscal 2023.
Martin P. Waters: For fiscal year 2024, we're reaffirming our forecast and expecting sales to be about $6 billion, or down low single digits to a comparative 52 weeks from fiscal 2023. Our forecast assumes that trends improve throughout the back half of 2024. At this forecasted level of sales, we expect our adjusted operating income in 2024 to be about $250 to $275 million.
Speaker Change: Our forecast assumes that trends improved throughout the back half of 2024 at this forecasted level of sales. We expect our adjusted operating income in 2024 to be about $2 $50 million to $275 million.
Speaker Change: Lastly, as we have shared consistently inside and outside the business with the long term health of the business in mind, we remain committed to our strategic priorities firstly to accelerate our core second to ignite growth and thirdly to transform the foundation of our company.
Martin P. Waters: Lastly, as we've shared consistently inside and outside the business with the long-term health of the business in mind, we remain committed to our strategic priorities, firstly, to accelerate our core, second, to ignite growth, and thirdly, to transform the foundation of our company. As we look into the balance of the year, we're committed to initiatives designed to leverage our market leadership position and unlock our opportunity to convert our significant cultural influence into long-term financial growth.
Speaker Change: As we look into the balance of the year, we're committed to the initiatives designed to leverage our market leadership position and unlock our opportunity to convert a significant cultural influence into long term financial growth.
Martin P. Waters: Thank you. And that concludes our prepared comments. At this time, we'd be more than happy to take any questions you might have. Over to you, Ivy. Ladies and gentlemen, if you wish to ask a question, please press star 1 and record your name clearly when prompted. To withdraw your question at any time, you may press star then 2. As a reminder, we ask that each participant limit themselves to one question and one follow-up.
Speaker Change: Thank you and that concludes our prepared comments at this time, we'd be more than happy to take any questions you might have over to IV.
Ivy: Ladies and gentlemen, if you wish to ask a question, please press star 1 and record your name clearly when prompted. To withdraw your question at any time, you may press star then 2. As a reminder, we ask that each participant limit themselves to one question and one follow-up to allow ample time to respond to each participant that may wish to participate in this portion of the call. For our first question, we'll go to the line of Simeon Siegel from BMO Capital Markets.
Speaker Change: Ladies and gentlemen, if you wish to ask a question. Please press star one and record your name clearly when prompted to withdraw your question at any time you May Press Star then two as a reminder, we ask that each participant limit themselves to one question and one follow up to allow ample time to respond to each participant that may wish to participate in this portion of the call for our first question will go to the line of Serbia.
Speaker Change: John Segal from BMO capital markets. Please go ahead.
John Segal: Thanks, Deborah and good morning, hope, you're all doing well.
Simeon Avram Siegel: Thanks, everyone. Good morning. I hope you're all doing well.
Martin you mentioned in the fashion show returning how are you thinking about marketing this year, maybe speak to the work you did to come to this decision any any change that signaling a shift in the marketing imagery and messaging just anything you could speak to that and then just a more nuanced to the April strength comment include pink as well any thoughts how you're thinking about the progress of the stable Asia stabilization.
Speaker Change: And turnaround of bank. Thanks.
Timothy A. Johnson: Yes, Thanks, Tim I appreciate the question I'll take the second one so yes pink performance definitely improved in April April was the strongest month for Ping that we've seen.
Martin P. Waters: Yeah, thanks, Simeon. I appreciate the question. I'll take the second one first.
Martin P. Waters: So yes, pink performance definitely improved in April. April was the strongest month for pink that we've seen in a long time, frankly, and it was driven by strength in new merchandise, particularly wink bras and cinch corsets. We had some success with flared bottoms.
Speaker Change: Long time frankly.
Speaker Change: And it was driven by strength in new merchandise, particularly wink.
Speaker Change: <unk> since costs that we had some success with flat both centers.
Speaker Change: As I mentioned in the prepared remarks, the pink times <unk>.
Martin P. Waters: As I mentioned in the prepared remarks, the pink times Frankie's was big, and sports bras were good. So across the board, pink had a much improved April. And so we're encouraged by that. Still a way to go in pink. It is underperforming Victoria's.
Speaker Change: Big Sports brands had been good so across the board Pink had a much improved April and so where we're encouraged by that still a way to go and tank. It is underperforming victorious.
Speaker Change: But we feel like we're getting there we're making some progress.
Speaker Change: Thank you for asking about the fashion show one of my favorite subjects.
Martin P. Waters: But we feel like we're getting there and making some progress. We were delighted to announce in May that the show was coming back. We had a pretty incredible response, to be honest, 1.8 billion media impressions in about two weeks. And I'm really encouraged to say that it was 98% positive.
Speaker Change: We were delighted to announce in May that the show is coming back we had a pretty incredible response to be honest $1 8 billion media impressions in about two weeks.
Speaker Change: And.
Speaker Change: I am really encouraged to say that it was 98% positive we don't always get positive responses to our post but 98% positive. It was our number one video all kicked off this year and we picked up a 130000 new followers all ticked up following that.
Martin P. Waters: We don't always get positive responses to our posts, but 98% of the time, it was our number one video on TikTok this year, and we picked up 130,000 new followers on TikTok following that. It was also very strong on Instagram.
Speaker Change: It was also very strong on Instagram in terms of the marketing of the show and the positioning of the show it's going to be as I said earlier, it's going to be all about glioma gotta be feature our runway is going to be fashion is going to be found wings entertainment, but through the modern lens of who we are today, so not exactly a repeat of who we used to be picking up on the.
Martin P. Waters: In terms of the marketing of the show and the positioning of the show, it's going to be, as I said earlier, it's going to be all about glamour. It's going to feature a runway. It's going to be fashion. It's going to be fun, wings, and entertainment. But through the modern lens of who we are today, so not exactly a repeat of who we used to be, but picking up on the moments that people enjoyed most about our fashion show historically, it will also be the kickoff to our holiday campaign. And that's important. It's not just a top of the funnel halo investment.
Speaker Change: Moments that people enjoyed most about a fashion show historically.
Speaker Change: It will also be the kickoff to our holiday campaign and that's important it's not just top of funnel Halo investment it's directly linked to our sales performance going into the all important holiday campaign and perhaps the biggest single <unk>.
Martin P. Waters: It's directly linked to our sales performance going into the all-important holiday campaign and perhaps the biggest single. The key element of difference will be that it will be merchandise-driven. That's kind of the headline for the fashion show throughout the business. It's merchandise-driven. It needs to focus on our merchandise, not other people's. It needs to be fun. It needs to be less ethereal than we've been before. It needs to be commercial, mainstream, and a great celebratory kickoff to the holiday season filled with joy.
Speaker Change: Elements of difference will be that it will be merchandise driven that's kind of the headline for the fashion show throughout the business its merchandise driven it needs to focus our merchandise not other people's it needs to be followed and it needs to be less ethereal than we've been before needs to be commercial mainstream.
Speaker Change: Great celebrates III kickoff to the holiday season filled with joy. So I hope that helps to give you some sense of what it is that we're trying to do something.
Martin P. Waters: So I hope that helps to give you some sense of what we're trying to do. Thanks guys, best of luck for the rest of the year. Next, we'll go to the line of Dana Telsey from Telsey Group. Please go ahead. Hi, good morning, everyone.
That's great. Thanks, guys best of luck for the rest of year.
Speaker Change: Thank you.
Speaker Change: Next we will go to the line of Dana Telsey from Telsey Group. Please go ahead.
Martin P. Waters: Thank you, Dana. I think I have got at least four questions there. Let me see if I can cover them all.
Dana Lauren Telsey: Next, we'll go to the line of Dana Telsey from the Telsey Group. Please go ahead.
Speaker Change: Hi, good morning, everyone.
Dana Lauren Telsey: Do you think about the swim category, how did the swim category before them where are you on that trajectory and obviously you've had some new product launches to like this.
Speaker Change: The reintegration of body by Victoria, What did you see in intimates in panties, and then store the future how did that perform versus the day. Thank you.
Speaker Change: Thank you Dana I think I got at least four questions. There, let me see if I can catch them all swimming. So swim right now if we take year to date, we're about flat to last year. However, we started late we deliberately slowed swim later, so we were playing catch up I will tell you that April was terrific.
Martin P. Waters: So swimming, right now, if we take year to date, we're about flat to last year. However, we started late. We deliberately flowed in the water later. So we were playing catch up. I will tell you that April was terrific for swimming. Swimming has been difficult in the last couple of years across the board, which is hard to explain in the post-COVID era with people traveling more and going on vacation more.
Speaker Change: For sweat swim has been difficult in the last couple of years across the board, which is hard to explain in the post COVID-19 area would be era with people traveling more on going on vacation more but it's been a tough couple of years, but I'm delighted that our recent performance on sweaters, both in Victoria and paint driven by the frankly as merchandise has been great.
Martin P. Waters: But it's been a tough couple of years. But I'm delighted that our recent performance on swim, both in Victoria's Secret and Pink, driven by Frankie's merchandise, has been really strong. So that's good. Body by Victoria, very strong.
Speaker Change: Strong so that's good.
Speaker Change: Body by Victoria, very strong I mean, perhaps the most important bra launch we've had in the last three years and that it is our number one collection.
Martin P. Waters: I mean, perhaps the most important bra launch we've had in the last three years, in that it is our number one collection. And so relaunching the entire collection across the board with some really stunning new features focused on comfort and everyday wear was a really big moment for the brand. And it performed in line or ahead of our expectations. So that was good.
Speaker Change: And so relaunching the entire collection across the board with some really <unk>.
<unk> new features focused on comfort.
And every day.
Speaker Change: It was a really big moment for the branded.
Speaker Change: <unk> performed in line or ahead of our expectations. So that was good.
Martin P. Waters: You asked about panties. Our panty business was very strong in April, with about the strongest month we've seen in a while. It is a promotional category, as you know. We're not embarrassed to be promotional in panties. Far from it.
Speaker Change: Asked about panties.
Our turnkey business was very strong in April with about the strongest month, we've seen in a while it is a promotional category as you know, we're not embarrassed to be promotional and pantries far from it. It's a traffic driver for the business. We worked very hard on the quality of our panties.
Martin P. Waters: It's a traffic driver for the business. We've worked very hard on the quality of our panties, and there have been significant structural improvements to that business over the last six months or so. It was one of the key priorities for Greg Eunice and his team when they took their leadership together about a year ago. One of the key focuses was to make the panty business as strong as it could be.
Speaker Change: And there being significant structural improvements to that business over the last six months or so it was one of the key priorities for Greg units and his team when they.
Speaker Change: When they took.
TJ: Took on when they took their leadership together about a year ago. One of the key focuses was to make the P&C business as strong as it could be so that's been a really big area of focus and I might go to rest my voice I might go to a store of the future with you TJ. If that's okay. Absolutely. Thanks for the question Dana we continue to be encouraged by store of the future.
Martin P. Waters: So that's been a really big area of focus, and I might go rest my voice. I might go to the store of the future with you, TJ, if that's okay. Absolutely. Thanks for the question, Dana.
Timothy A. Johnson: We continue to be encouraged by Store the Future's performance in stores that have been recently remodeled and in many of the stores that have been opened as new. We have not opened as many new stores yet in 2024, so we're really monitoring those stores that we touched, remodeled, or opened in 2023. We are confident that those stores are outperforming the fleet. We're confident that we're getting the work done and getting our messaging across and creating a better shopping experience for the customer and doing it at a lower cost, so our cost on Store the Future continues to improve.
Timothy A. Johnson: Absolutely. Thanks for the question, Dana.
Speaker Change: Performance in stores that have been recently remodeled.
Speaker Change: And in many of the stores that have been opened as as new.
Speaker Change: We have not opened as many new stores yet in 2024. So we are really monitoring those stores that we touched remodeled or opened in 2023.
Speaker Change: We are confident that those stores that are outperforming the fleet. We're confident that we're getting the work done and getting our message across and creating a better.
Speaker Change: <unk> experience for the customer and doing it at a lower cost so our cost on store of the future continues to improve and in fact, we will do as many.
Timothy A. Johnson: In fact, we'll have as many activities this year or as many stores touched this year as last year, but we'll do it for several million dollars less, so I feel very good about the progress that we're making with Store the Future. As we exit this year, we'll have about 17 or 18 percent of our fleet in North America in the new Store the Future format, and equally impressive, as we exit this year in our international business, we'll have about 30 percent of our stores in the new Store the Future format, so a significant amount of work has been done well in a very short period of time. Thanks for the question.
Speaker Change: We'll have as many activities this year or as many stores touched this year.
Speaker Change: As last year, but too for several million dollars less so feel very good about the progress that we're making with store of the future as we exit this year, we'll have about 17 or 18% of our fleet in North America, and the new store of the future format and equally as impressive as we exit the year in our international.
Speaker Change: Business will have about 30% of our stores in the new store of the future format. So a significant amount of work has been done done well in a very short period of time. Thanks for the question.
Speaker Change: Thank you.
Speaker Change: Next we'll go to the line of Lorraine Hutchinson from Bank of America. Please go ahead.
Lorraine Corrine Maikis Hutchinson: Next, we'll go to the line of Lorraine Hutchinson from Bank of America. Please go ahead.
Timothy A. Johnson: Thanks. Good morning, T.J. I wanted to ask about the SG&A outperformance in the first quarter and if these cost savings are something that we can count on as we start to model growth for the rest of the year.
Speaker Change: Thanks, Good morning TJ.
TJ: TJ I wanted to ask about the SG&A outperformance in the first quarter and if these cost savings are something that we can count on as we start to model growth for the rest of the year.
TJ: Yes, thanks for the question Lorraine I think.
Timothy A. Johnson: Yeah, thanks for the question, Lorraine. I think you're taking a big step back. Really, we started on the cost journey probably 18 months or more ago, you may recall. So in 2022, really all four quarters of the year were down from a cost perspective. Front half of 2023, same story, NRVS and pink businesses.
Speaker Change: He has taken a big step back really we started on the cost journey, probably 18 months or more ago, you may recall.
Speaker Change: In 2022 really all four quarters of the year were down from a cost perspective front half of 2023 same story in rvs and pink businesses. It really wasn't until the third quarter. When we re imagined the fashion show with the World Tour and brought that back that costs were up slightly year over year. So we've been on that journey for an extended period.
Timothy A. Johnson: It really wasn't until the third quarter when we reimagined the fashion show with the world tour and brought that back that costs were up slightly year over year. So we've been on the journey for an extended period of time. And the importance of mentioning that is we, in our preferred comments, mentioned that when we think about buying occupancy along with SG&A dollars, they were down from last year. So really, that's the first quarter that's down on 23, which is down on 22.
Speaker Change: At a time and the importance in mentioning that is.
Speaker Change: In our prepared comments mentioned that when we think about buying and occupancy along with SG&A dollars. They were down to last year. So really thats a first quarter that's down on 23, which is down on 22. So it's been a long runway of good work and really keeping costs in check has been somewhat cultural.
Timothy A. Johnson: So it's been a long runway of good work, and really keeping costs in check has become somewhat of a culture across the organization now. So I feel very comfortable that we'll continue to be very diligent on costs as we move through the balance of the year on both the SG&A line and on the buying an occupancy line. And this is separate or in addition to the great work that's been done by the merchant and product sourcing teams and in terms of the cost of goods sold initiatives and lowering average unit costs in partnership with our vendors.
Speaker Change: Across the organization now so I feel very comfortable that we will continue to be very diligent on costs as we move through the balance of the year on both the SG&A line and on the buying and occupancy line and this is separate or in addition to the great work Thats been done by the <unk>.
Speaker Change: Merchant and product sourcing teams and.
Speaker Change: In terms of the cost of goods sold initiatives and lowering average unit cost in partnership with our vendors so feel very comfortable about the trajectory of keeping costs in check.
Timothy A. Johnson: So I feel very comfortable about the trajectory of keeping costs in check and really setting the business up nicely for the improving trends that we expect in North America as the year goes on. Setting the business up nicely for a very strong flow through.
Speaker Change: And really setting the business up nicely for the.
Speaker Change: The improving trends that we expect in North America as the year goes on setting the business up nicely for a very strong flow through.
Timothy A. Johnson: And then, TJ, thank you. And then, if I could just follow up on the fashion show, as you think about the cost of that versus the cost of the world tour last year, is it similar in magnitude, or would we see an increase or decrease in that third quarter marketing expense? Yeah, I think so.
Speaker Change: Thanks T. J. Thank you and then if I could just follow up.
Speaker Change: On the fashion show as you think about the cost of that versus the cost of the World Tour last year.
Speaker Change: Is it similar in magnitude or would we see an increase or decrease in that third quarter marketing expense.
Speaker Change: Yes, I think it's fair to assume that the fashion show costs. This year will be lower than the world through our cost last year again, keeping in mind the world tour spanned many countries many different cultures.
Timothy A. Johnson: Yeah, I think it's fair to assume that the fashion show cost this year will be lower than the world tour cost last year. Again, keeping in mind the world tour spanned many countries, many different cultures, and a significant amount of work that took probably, in round numbers, 15 to 18 months to all come together.
Speaker Change: And a significant amount of work that took probably in round numbers 15 to 18 months to two all come together, so it's fair to assume that.
Timothy A. Johnson: So it's fair to assume that if you just look at fashion show versus world tour, the fashion show should come in at a lower cost. But having said that... It will. It will. It will come in at a lower cost. Having said that, we also make trade-offs in our business. So I wouldn't want you to expect that all of those dollars, Lorraine, should flow through to the bottom line. We'll want to make sure that, to Martin's point, we're supporting the fashion show with both top of funnel and lower funnel as support for kicking off the holiday season and really launching holiday performance probably earlier than in the third quarter.
Speaker Change: If you just look at fashion show versus World Tour, the fashion show should come in at a lower cost having said that it will it will be it will come in at a lower cost.
Speaker Change: Having said that we also make trade offs in our business. So.
Speaker Change: Wouldn't want you to expect that all of those dollars foot range does flow through to the bottom line will want to make sure that to Martin's point, we're supporting the fashion show.
Speaker Change: With both top of funnel and lower funnel as the support for kicking off holiday and really launching holiday performance.
Speaker Change: Probably earlier than in the prior year in the third quarter. So it's not a dollar for dollar trade off for $1 dollar for dollar flows through.
Timothy A. Johnson: So it's not a dollar-for-dollar tradeoff or dollar-for-dollar flow through just because one's lower than the other. We'll be looking at the marketing spend in total, which we think will still be down a little bit from last year, but we want to make sure we're doing everything we can to get the word out on some of the merchandise assortment changes, expansions, and newness that we have coming. So it's a holistic picture from a marketing perspective.
Speaker Change: Just because one slower than the other will be looking at the marketing spend in total which.
Speaker Change: We think still across the year will be down a little bit to last year, but we want to make sure. We're.
Speaker Change: I'm doing everything we can to get the word out some of the merchandise assortment changes expansions and newness that we have coming so.
Speaker Change: It's a holistic picture from a marketing perspective.
Speaker Change: Thank you.
Speaker Change: Next we'll go to the line of Brook Roche from Goldman Sachs. Please go ahead.
Brooke Roach: Next, we'll go to the line of Brooke Roach from Goldman Sachs. Please go ahead.
Brook Roche: Good morning, and thank you for taking my question can you speak to the level of customer engagement you are seeing in response to promotions relative to the full price assortment and as you do get these customer driving traffic initiatives are they beginning to cross shop, the rest of the store.
Martin P. Waters: Good morning, and thank you for taking our question. Can you speak to the level of customer engagement you're seeing in response to promotions relative to the full price assortment? And as you do get these customer driving traffic initiatives, are they beginning to cross shop the rest of the store?
Brook Roche: Hmm.
Speaker Change: Hi, Thank you for that question.
Martin P. Waters: I thank you for that question. Our level of promotionality is up a nudge year over year, keeping pace with how we see the market in total. What we have experienced with promotions is that they're a good way to bring people into the business as a whole. And yes, they do cross shop. It's, I won't say it doesn't happen.
Speaker Change: Our level of promotion allergy is up in <unk> year over year, keeping pace with how we see the market in total.
Speaker Change: We experienced with promotions is that it's a good way to bring people into the business as a whole and yes, they do cross shop.
Speaker Change: I won't say it doesn't happen, but it's rare for us to have customers who've just come in and take advantage of the promotion and nothing else generally that promotion drivers impacted the box as a whole.
Martin P. Waters: But it's rare for us to have customers who've just come in, take advantage of the promotion, and nothing else. Generally, the promotion drivers impact the box as a whole. They're a great way of bringing new customers into the file. At any given time, about 40 to 50% of the customers that are coming into the business are new or reconverted, meaning we haven't seen them in the last 18 months to two years. So promotions are an important part of the overall mix. I think that's probably about as much as I can say in response to that question.
Speaker Change: They're a great way of bringing new customers into the file at any given time about 40% to 50% of the customers that are coming into the business or new or re converted meaning we haven't seen them in the last 18 months to two years. So promotions are an important part of the overall mix I think thats probably about as much.
Speaker Change: As I can say in response to that question.
Timothy A. Johnson: Yeah, I think in addition to that, Brooke, I think it's important to understand that we have a pretty rigorous test and control environment in the business. So we are testing, you know, stores that have promotions, stores that don't have promotions to make sure that it's a good idea and drives both sales and gross margin dollars. I think that's one point.
Speaker Change: Yes, I think in addition to that book.
Speaker Change: I think it's important to understand we have a pretty rigorous test and control environment in the business. So we are testing.
Stores that have promotion stores that don't have promotion to make sure that it is a good do and drives both sales and gross margin dollars I think that's one point and I think the second point is you are kind of following along in traveling stores.
Timothy A. Johnson: And I think the second point is you're kind of following along and traveling stores. You probably noticed that we did use our beauty business and some promotions from a beauty perspective to help get people across the lease line. And as Martin mentioned, you know, particularly in the month of April, where we did see more promotions year over year, you saw the whole box get better. You saw all three lines of business, you know, both brands get better and perform, as evidenced by, you know, Pink having its best month in several quarters. So it wasn't necessarily always the promotion in Pink as an example, but just the way that we're using, you know, the traffic driver mentality across the business to make the whole box rise.
Speaker Change: You probably noticed that we did use our beauty business and some promotions through our beauty perspective to help get people across the lease line and as Martin mentioned, particularly.
Speaker Change: Particularly in the month of April where we did see more promotions year over year.
Speaker Change: The whole box get better you saw all three lines of business both brands.
Speaker Change: Get better and perform as evidenced by bank covenants first month in several quarters, so wasn't necessarily always the promotion and pink as an example, but just the way that we're using.
Speaker Change: The traffic driver.
Speaker Change: Mentality across the business to make the whole box rise.
Speaker Change: Great. Thank you and then one other question for you can you talk to the customer reaction to the marketing campaigns behind the sport business that you executed this quarter, how does that inform your plans for support in the back half of the year.
Martin P. Waters: Great, thank you. And then one other question for you. Can you talk about the customer reaction to the marketing campaigns behind the sport business that you executed this quarter? How does that inform your plans for sport in the back half of the year?
Speaker Change: Yeah. Thank you for that question about sport.
Martin P. Waters: Yeah, thank you for that question about sport. The response to us being in the sport business has been overwhelmingly positive. We see that in two ways, maybe three ways.
Speaker Change: Their response to us being in the sport business has been overwhelmingly positive we see that in two ways, maybe three ways first.
Martin P. Waters: First, our sales compared to the prior year are up significantly, very significantly, particularly driven by sports bras. Secondly, the response to social media and to our marketing is very positive, amongst the most positive that we have across the system. And the third is a bit, like I said, with promotions, the halo that it has on the business as a whole, that part of our strategic intent is to be in broader categories that give more reasons for the customer to come to us.
Speaker Change: Sales compares to prior year are up significantly very significantly, particularly driven by sports bras.
Speaker Change: Secondly, the response to social media and to our marketing is very positive amongst the most positive that we have across the system.
Speaker Change: And the third is.
Speaker Change: A bit like I said with promotions the halo that it has to the business as a whole.
Out of our strategic intent is to be in broader categories that give more reasons for the customer to come to us and as we know sport is.
Martin P. Waters: And as we know, sport is a well-shopped category, but we were wrong to have exited, wrong to have got out of that business. It's taken us, frankly, longer to get back into the sports business than we would have liked, but we're now doing so with real conviction. And what we're doing right now informs what we will do during July and August, as we put even more conviction behind the sports part of our business.
Speaker Change: As a well shops category, but we were wrong to have exited wrong to have got out of that business. It's taken us frankly longer to get back into the sport business than we would have liked but we're now doing so with real conviction.
Speaker Change: And what we're doing right now informs what we will do during July and August as we put even more conviction behind this part of our business I will say that.
Speaker Change: That we've seen our market share uptake already and.
Martin P. Waters: I will say that we've seen a market share uptick already in sports bras, which to see an instant reaction like that is particularly encouraging. So, more of the same for the balance of the year, I think would be the answer.
Speaker Change: Sports Bras, which to see an instant reaction like that.
Speaker Change: It's particularly encouraging so so more of the same for the balance of the year I think would be the answer.
Speaker Change: Great. Thanks, so much I'll pass it on.
Irwin Bernard Boruchow: Great, thanks so much. I'll pass it on. Next we'll go to the line of Ike Boruchow from Wells Fargo. Please go ahead. Hey morning, everyone. I guess just wanted to understand a little bit more the promotional environment.
Speaker Change: Next we'll go to the line of Ike <unk> from Wells Fargo. Please go ahead.
Irwin Bernard Boruchow: Next, we'll go to the line of Ike Boruchow from Wells Fargo. Please go ahead, morning.
Ike <unk>: Hey, good morning, everyone. I guess, just wanted to understand a little bit more the promotional environment T. J can you just talk about the the intensity that you're seeing and then I'm really most interested and what's embedded in your form both for the second quarter and remainder of the year are you planning to pull back on promo at any time is that baked into your guide or.
Ike <unk>: Again, just trying to understand how you are kind of level setting right.
Speaker Change: Yes. Thanks for the question I know, there's been a lot written.
Timothy A. Johnson: Yeah, thanks for the question. I know there's been a lot written about and a lot of attention paid to promotions across retail. I think from our perspective, the promotion level year over year in the first quarter did impact our gross margin rate slightly and was effective in the business, as evidenced by driving past our original guidance from a sales perspective and the strength across both brands, as Martin mentioned. So we're confident it was a good performance in the first quarter.
Speaker Change: Attention paid to promotions.
Speaker Change: Across retail I think from our perspective, the promotion level year over year and first quarter.
Speaker Change: You did impact our gross margin rate slightly.
Martin: And was effective in the business as evidenced by driving past our original guidance from a sales perspective, and the strength across both brands as Martin mentioned so were confident it was a good do in first quarter as we move through second and third quarter, we start to anniversary. What we thought was a more promotional environment last year. So our year over year compares problem.
Timothy A. Johnson: As we move through the second and third quarters, we start to anniversary what we thought was a more promotional environment last year. So our year over year comparisons probably won't be as noticeable in the gross margin rate as we move forward as they were in the first quarter. Having said that, I don't think it's appropriate for us yet to start to think about letting up on promotion.
Martin: We wont be as noticeable in the gross margin rate as we move forward as they were in the first quarter, having said that I don't think it's appropriate for us yet to start to think about letting up on promotion and the reason I say that is.
Timothy A. Johnson: And the reason I say that is, as we move into the fall season, I think it's fair to assume the environment could continue to be challenging from a consumer standpoint. We're going to head into a national election cycle, which, from a media standpoint, and how we break through will continue to challenge the business or challenge retail in general. And then as we move into the fourth quarter, as you know, we have the shortest time on our calendar this year between Thanksgiving and Christmas.
Martin: As we move into the fall season, I think it's fair to assume.
Martin: The environment could continue to be challenging from a consumer standpoint, we're going to head into a national election cycle, which again from a media standpoint, and how we break through will continue to challenge. The business were challenged retail in general and then as we move into the fourth quarter. As you know we had the shortest time.
Martin: <unk> on our calendar this year between Thanksgiving and Christmas shopping days and the importance of each day will be more and more compressed so it would be difficult to imagine takes.
Timothy A. Johnson: So the shopping days and the importance of each day will be more and more compressed. So it would be difficult to imagine, you know, taking our foot off of the gas on promotions in this type of environment that we expect going forward. You know, having said that, as I mentioned, we feel very comfortable that what we're doing is driving incremental sales and incremental gross margin dollars. We've tested it.
Speaker Change: Taking our foot off the gas on promotions in this type of environment that we expect going forward, having said that as I mentioned, we feel very comfortable that what we're doing is driving incremental sales and incremental gross margin dollars we've tested it.
Speaker Change: We feel very comfortable in how we're managing inventory.
Timothy A. Johnson: We feel very comfortable in how we're managing inventory, as evidenced by delivering our inventory guidance for the first quarter. And I think, you know, what's in front of us and what we're more hopeful and more focused on is just as the newness grows, the newness should only grow from here from a merchandising perspective. And what that suggests from a pricing and promotional standpoint is something we're going to learn also. So I feel very comfortable about how we're managing the margin and inventory in the business.
Speaker Change: As evidenced by delivering on our inventory guidance in first quarter.
Speaker Change: I think whats in front of us and what we're what we're more hopeful of more focused on is just.
Speaker Change: As the newness grows the newness should only grow from here from a merchandising perspective.
And what does that.
Speaker Change: Suggest from a from a pricing and promotional standpoint is something we're going to learn and to also so feel very comfortable about how we're managing the margin and inventory in the business.
Speaker Change: Yeah.
Thanks, Bob.
Speaker Change: Next we'll go to the line of Lauren Chung from Evercore ISI. Please go ahead.
Warren Cheng: Next, we'll go to the line of Warren Cheng from Evercore ISI. Please go ahead.
Warren Cheng: Hey, good morning. Thanks for taking my question here.
Lauren Chung: Hey, good morning, Thanks for taking my question here I was wondering if you can give a little bit of a deeper diagnostic on why the international businesses is outperforming so significantly here, especially in China. I know there are some key structural differences is it something structural or are there lessons that you could learn from and applying to the U S.
Lauren Chung: Yeah.
Martin P. Waters: I was wondering if you could give a little bit of a deeper diagnostic on why international business is outperforming so significantly here, especially in China. I know there are some key structural differences. Is it something structural, or are there lessons that you could learn from and apply to the U.S.?
Speaker Change: Yes. Thank you for that question, maybe I'll give some context to international as a whole and then go a little deeper on on China. So our international business continues to be extremely strong.
Martin P. Waters: Yeah, thank you for that question. Maybe I'll give some context to international as a whole and then go a little deeper on China. So our international business continues to be extremely strong. It has been strong for a decade, but there are two markets where we have had challenges; one was the UK and one was China. When this management team took over, we changed the structure of both of those businesses to eradicate the losses that we were seeing.
Speaker Change: It has been strong for a decade, but for two markets, where we had challenges one was the U K one was China. When this management team took over we changed the structure at both of those businesses too.
Speaker Change: Eradicate the losses that we were seeing and so the business has gone from strength to strength in all five areas of the business. We're now.
Martin P. Waters: And so the business has gone from strength to strength in all five areas of the business. We're now in nearly 550 stores around the world. We have more digital sites than I can remember to count, multiple tens of digital sites, and we've seen excellent growth in retail sales and system-wide sales. I think we're in 65 countries with a physical presence, and we're shipping to over 200 countries, and we're super excited about the response that we see.
Speaker Change: Nearly 550 stores around the world we have.
Speaker Change: More digital sites than I can remember it's account multiple tens of digital sites and we've seen excellent growth in retail sales and system wide sales I think were in 65 countries with a physical presence.
Speaker Change: We're shipping to over 200 countries.
Speaker Change: And we're super excited about the response that we see just a couple of weeks ago, We launched a new store in Madrid Fantastic response.
Martin P. Waters: Just a couple of weeks ago, we launched a new store in Madrid, and we had a fantastic response. So just about all around the world, wherever the brand is popping up, we're seeing strong performance. We're also seeing strong performance on a like-for-like basis, which is very encouraging. So we will continue to focus on both physical retail and digital, opening about 90 new stores this year through our partner network. You're right to point out China as being very important.
Speaker Change: Just about all around the world, where the brand is pumping up we're seeing strong performance. We're also seeing strong performance on a like for like basis, which is very encouraging. So we will continue to focus on both physical retail and digital about 90, new stores this year.
Speaker Change: Through our partner network.
Speaker Change: You're right to point out China as being very important the big structural change that we made that which was a fantastic decision was to partner with Virgin America.
Martin P. Waters: The big structural change that we made there, which was a fantastic decision, was to partner with Regina Miracle, experts in China, experts in intimate apparel, longstanding partners of ours. We've been in business with them for over two decades, and we're fantastic partners both in the domestic business and in the international business.
Speaker Change: Experts in China experts in intimate apparel longstanding partners of ours, we've been in business with them for over two decades.
Speaker Change: And we have fantastic partners, both in the domestic business and in the international business that was the biggest single change.
Speaker Change: We market the brand around the world and elevated way, we find that we can be slightly less promotional in our international markets. We command a higher retail price than we do in the domestic market and generally working from a base of low single digit share is much easier has been working from it.
Martin P. Waters: We market the brand around the world in an elevated way. However, we find that we can be slightly less promotional in our international markets. We command a higher retail price than we do in the domestic market, and generally, working from a base of a low single-digit share is much easier than working from a base of 20 or 25 percent market share. So that's a big thing to remember about the difference. The overall presentation of the brand is substantially similar, and I think to the untrained eye, most people would say it's exactly the same. But under the covers, there are some important differences, particularly around the size curve, the mix of merchandise, some color variations, and some category focus.
Speaker Change: <unk> 20, or 25% market share.
Speaker Change: So that's a big thing to remember in the different the overall presentation of the brand is substantially similar and I think to the untrained eye. Most people would say it's exactly the same but under the covers there are some important differences, particularly around size cost around mix of merchandise some color variations some category.
Speaker Change: Because we have less of a focus on <unk> and our international markets more of a focus on glioma.
Martin P. Waters: We have less of a focus on pink in our international markets, more of a focus on glamour. So there are definitely differences, and that team is now 15 years old, with many members of that team being there from the beginning, and so very skilled, very practiced in how to market internationally, and the team just gets better and better. So a big shout-out to them and the China team for everything they're doing. I'd be remiss not to mention the UK as well, where our partner, Next, is a fantastic partner.
Speaker Change: So there are definitely differences and that team is now.
Speaker Change: 15 years old with many members of that team been that from the beginning.
Speaker Change: So very skilled very practiced in housing market internationally and the team just gets better and better so.
Speaker Change: To that end the China team for everything they're doing I'd be remiss not to mention the UK as well where our partner next is a fantastic partner.
Martin P. Waters: They know that market better than we do. They buy real estate better than we do, and we've moved that business from being loss-making to being nicely profitable. We had to close our flagship store on Bond Street just because the lease was up after about 13 years of occupation, and we'll be delighted to open a new flagship store in London next year. So that's an exciting milestone for the brand. So all in all, International is a very, very positive story. Thank you for asking.
Speaker Change: They know that market better than we do they buy real estate better than we do and we move that business from being loss, making to being nicely profitable and we had to close our flagship store on bond Street discloses. The lease was up about 13 years of occupation and we'll be delighted to open our new flagship store in London next year.
Speaker Change: So that's an exciting milestone for the brand. So all in all international is a very very positive story. Thank you for asking.
Martin P. Waters: Thanks, Martin. That's a really useful color. And then, as my follow-up, you talked a little bit in the prepared remarks about utilizing the new customer data you're getting from the multi-tender loyalty rollout. What's in the hopper there in terms of how we may see leverage those insights? Yeah, so
Speaker Change: Thanks Martin.
Speaker Change: As for color and then as my follow up you talked a little bit in your prepared remarks about utilizing our new customer data you're getting from the multi tender loyalty rollout what's in the hopper there in terms of how we may see leverage those insights.
Martin P. Waters: Yeah, so good question on insights. You know, Chris Rupp joined our business about 18 months ago, and her primary focus is in the area of insights, data, and customer experience. And we've made incredible progress across each of those areas. I mean, if I take digital enhancements, which is adjacent to data, since the beginning of Q1, we've had 75 new releases. We've had 45 new releases that are non-customer-facing. It's more releases, and more activity than we've ever had.
Speaker Change: Yes.
Speaker Change: So good question on insights, Chris Ralph joined our business about 18 months ago.
Speaker Change: Our primary focus is in the area of insights data on customer experience and we've made incredible progress across each of those areas I mean, if I take.
Digital enhancements, which is adjacent to data since the beginning of Q1. We've had 75 new releases that are customer facing we've had 45, new realistic releases that are non customer facing more more releases more activity than we've ever had and all of that is generating.
Martin P. Waters: And all of that is generating important insights for our customers and a stronger digital performance, which is driving our share in the digital environment, which is particularly interesting because most of our competition and all of the new competition that we've seen over the last five years is in the digital marketplace. So we're encouraged by that. Specifically on loyalty, as you know, we moved from a credit card arrangement to a multi-tender arrangement, and that's built our business to about 80% of our sales coming through that device, and something like 30 million customers taking advantage of that, which gives us a tremendous platform on which to learn.
Speaker Change: Potent insights for our customer and a stronger digital performance, which is driving our share in the digital environment, which is particularly interesting because most of our competition and all of the new competition that we've seen over the last five years is in the digital marketplace. So we're encouraged by that specifically on loyalty.
Speaker Change: As you know we moved from a credit card arrangement to a multi tender arrangement and that's built our business to about 80% of our sales coming through that device.
Speaker Change: Something like 30 million customers, taking advantage of that which gives us a tremendous platform on which to run I would say we're at the beginning of the beginning of how we market to that audience on a personalized basis, but the future of marketing in this country and around the world will be personalized and so having.
Martin P. Waters: I would say we're at the beginning of the beginning of how we market to that audience on a personalized basis, but the future of marketing in this country and around the world will be personalized. And so having a very strong data estate, having a relationship with customers where you understand their preferences informs the opportunity to give them a curated and personalized experience. And that's the new frontier for us. As I say, we're at the beginning of the beginning, and so I see upside in that area. And I'm very grateful that we have the team that we have working on it because we've significantly enhanced our capability in that area in the last 18 months or so.
Speaker Change: A very strong data estate, having a relationship with customers, where you understand that preferences informs the opportunity to give them a curated and individual experience and thats the new frontier for us as I say, we're at the beginning of the beginning and so I see upside in that arena.
Speaker Change: I'm very grateful that we have the team that we have working on it because we have significantly enhanced our capability in that area in the last 18 months or so.
Speaker Change: Thanks, Mark and good luck.
Martin P. Waters: Thank you.
Speaker Change: Next we'll go to the line of John Kim from TD Cowen. Please go ahead.
Jungwon Kim: Next, we'll go to the line of Jonah Kim from TD Cowan. Please go ahead.
Jungwon Kim: Thank you for taking my question. It was nice to see you. So, what's your expectation for the remainder of that particular business, and also, would love to get any update on the Adore Me business, how that's tracking versus your expectations. Thank you so much.
Jungwon Kim: Thank you for taking my question it was nice to see.
Jungwon Kim: But what's your expectation for the remainder of.
Jungwon Kim: For that particular business and also would get would love to get any update on the army bases.
Jungwon Kim: Shocking.
Speaker Change: Thank you so much.
Martin P. Waters: Yeah, we got the Adore Me question, but we didn't get the first question. Sorry, could you repeat the first question?
Speaker Change: Yes, we got the domain question, but we didn't get the first question sorry could you repeat the first question.
Jungwon Kim: Yeah, just on the paint business. You've seen improvement there. What's your expectations for the remainder of the year? How will that business do?
Speaker Change: Yeah, just on paint business, you've seen improvement there what's your expectations for the remainder of the year, how that business will evolve.
Speaker Change: Sorry, none of us got which business you're talking about would you say it again slowly what business you are talking about right.
Jungwon Kim: Sorry, none of us understand what business you're talking about. Could you say it again slowly? What business are you talking about?
Jungwon Kim: It's the pink business. Pink. Pink.
Speaker Change: Ink business Pink Pink got it alright.
Martin P. Waters: Got it. Yep. Okay. I'll take the Dormy question first.
Speaker Change: Okay I'll take the dual my question, so, yes, nuomi is going well.
Martin P. Waters: So, yeah, Dormy is going well. For the year, we're on track for growth in sales and operating income. We continue to work very closely with the team on technology and marketing synergies. As a reminder, we set out at the beginning of the year to pursue three synergies. The first was to sell a Dormy on victoriasecret.com and to do so in a dropship environment so we don't carry inventory, done. Very strong performance in that arena, adds to our curated marketplace, gives us broader size inclusivity than we've had before, gives us access to different kinds of fashion and price points than we've had before, so pleased with that. The second synergy was around Tryon at Home.
Speaker Change: For the year, we're on track for growth in sales and operating income we continue to work very closely with the team on technology and marketing synergies reminder, we set out at the beginning of the year to issue three synergies. The first was to sell Adobe on Victoria's secret Dot com and to do so in a job.
Speaker Change: Ship environment. So we don't carry inventory Don very strong performance in that arena adds to a curated marketplace gives us broader size inclusivity and we've had people gives us access to different kind of fashion price point than we've had before so pleased with that second synergy was around try on at home very important marketing.
Martin P. Waters: Very important marketing initiative, and I should have mentioned that when we were talking about data in the previous question. We have been in test mode for the last couple of months on Tryon at Home. We hope that that will go live later this year and will be a very, very exciting and interesting marketing innovation driven off of the Adorme platform. And then, thirdly, other loyalty-based features like subscriptions and other member services, which will come in 2025.
Kevin Lee: Kevin I Should've mentioned that when we were talking about data in the previous question. We have been in test mode for the last couple of months on try on at home that we hope that that will go live later this year.
Kevin Lee: We are very very exciting and interesting marketing innovation driven off of the <unk> platform and then thirdly other loyalty base features like subscription or amendments as member services, which will come in 2025, so whether it's in the core Standalone business, where we're seeing.
Martin P. Waters: So whether it's in the core standalone business, where we're seeing good performance from Adorme and from Daily Look, or whether it's on the technology side, we're very pleased with the way that things are going, and as we get to the end of the year, we'll be celebrating the second year of our ownership of that business. The other thing that's interesting about Adorme is that they provide an incubator opportunity for us. So as we think about AI and Gen AI in particular, Adorme is the tip of the spear.
Kevin Lee: Good performance from a dual man from daily look or whether it's on the technology side. We're very pleased with the way the things are going as we get to the end of the VA will anniversary the second gear.
Kevin Lee: All of our ownership of that business. The other thing that's interesting about the domains that they provide an incubator opportunity for us. So as we think about AI and Gen. II in particular, a domain is that typically span.
Martin P. Waters: They're a small, agile, technology-led business who can test and tiptoe into that kind of environment for us, and Victoria's Secret can pick up the learnings on the back end. So we're very pleased to have Adorme as part of our family and delighted with how things are going. In pink, as we repeatedly say, it's a turnaround strategy. The business had got away from the core of who the customer is.
Kevin Lee: Small agile technology led business, who can test.
Speaker Change: Kitco into that kind of environment for us in Victoria's secret can pick up the learnings on the backend. So we're very pleased to have a dual managed part of our family and I'm delighted with how things are going in pink as we repeatedly say it's.
Speaker Change: It's a turnaround strategy it could not have been more.
Speaker Change: More color.
Speaker Change: If we think about two years ago, when we identified the problems in that business.
Speaker Change: The business had got away from the core of who the customer is we want that customer to be collegiate useful evolving confident optimistic.
Martin P. Waters: We want that customer to be collegiate, youthful, evolving, confident, optimistic, and the assortments that we had two years ago didn't look like that at all. So the team has been rebuilding. We have new talent in place who've been in place for the last 12, 18 months, and they're really getting after it and re-energizing the entirety of the company. I would say the four watchwords that I would give you around PINK are youthful, evolving, confident, and optimistic.
Speaker Change: And the Assortments that we had two years ago. It didn't look like that at all so the team has been rebuilding we.
Speaker Change: We have new talent in place who've been in place for the last 12 to 18 months and they're really getting after it.
Speaker Change: And re energizing the entirety of the <unk>.
Speaker Change: Company I would say the full watchwords that I would give you around paying are useful evolving confident or optimistic that's what you should see from others and that shows up in the categories that are performing best for us which are.
Martin P. Waters: That's what you should see from us, and that shows up in the categories that are performing best for us, which are, to repeat myself, the Frankies collaboration, Flair Bottoms, and the Natalia Bryant collaboration was very strong. We see good growth in sleep, in sports bras, and Corset Tops, you know, across the board where we have merchandise that points to youthful, evolving, confident, and optimistic. We're doing well. So very pleased with the team and how they're doing in that environment. More to do, no question. It remains a drag on the company as a whole, but I am cautiously optimistic as we go into the rest of the year.
Speaker Change: To repeat myself to frankly use collaboration flab bottoms.
Speaker Change: Natalia Bryant collaboration was very strong we see good growth in sleep and sports bras and costs across the board, where we have merchandise point that useful evolving confident and optimistic we're doing well. So I am very pleased with the team and how they're doing in that environment more to do.
Speaker Change: No question.
Speaker Change: <unk> is a drag on the company as a whole.
Speaker Change: But cautiously optimistic as we go into the the rest of the year.
Speaker Change: Thank you so much.
Speaker Change: Next we will go to the line of Alex <unk> from Morgan Stanley. Please go ahead.
Alexandra Ann Straton: Next, we'll go to the line of Alex Straton from Morgan Stanley. Please go ahead.
Alex: Perfect. Thanks, so much for taking the question, maybe one for Mark and one for T. J. So Martin you.
Alexandra Ann Straton: Perfect. Thanks so much for taking the question. Maybe one for Martin and one for TJ.
Martin P. Waters: So Martin, you noted some intimate market improvement in North America. Any sense for what enabled that trend change and then the magnitude? I'm wondering if it impacts your view from here. And then TJ, you were pretty upbeat on the digital result, though I did notice the sales declined year over year after growing throughout last year. So can you help me just understand the change in trends there? Thanks so much.
Speaker Change: Noted in.
Speaker Change: Thank you Ms market improvement in North America, any sense for what enabled that dot trend change and then the magnitude I'm wondering if that impacts your view from here and then T. J just a pretty upbeat on the digital resolve though I did notice that the sales declined year over year after growing throughout last year. So can you help me just.
Speaker Change: I understand the change in trend there. Thanks, so much.
Martin P. Waters: Thanks, Alex. I appreciate the question. So I'll take the market share question. I think there are three headlines in my mind about market share. Number one, the overall market decline that we've seen for the past five quarters has improved. Now, there's some noise in the first quarter around 53rd Week and Easter shift, and so on. So it's not a brilliant performance compared to the prior year, but undisputedly, the overall market was better in the first quarter.
Alex: Thanks, Alex I appreciate the question.
Speaker Change: So I'll take the market share question I think there are three headlines in my mind about market share number one the overall market decline that we've seen for the past five quarters improved.
Speaker Change: Some noise in the first quarter around 50, <unk> week, and Easter shift and so on so it's not a brilliant compare to prior year, but undisputedly.
Speaker Change: The overall market was better in the first quarter not a massive turnaround, but it was definitely better second half in line would be as I said earlier, our share remains essentially flat at 20%. There are some puts and takes within that digital up a notch stores down a notch sports bras showing growth for the first time in as long.
Martin P. Waters: Not a massive turnaround, but it was definitely better. The second headline would be, as I said earlier, our share remains essentially flat at 20%. There are some puts and takes within that. Digital up a nudge, stores down a nudge, sports bras showing growth for the first time in as long as I can remember, and solid performance in bras and panties. The third headline would be around what we call Marple, March, and April, which was the strongest performance we've seen in a while.
Speaker Change: As I can remember and solid performance in bras and panties.
Martin P. Waters: I really don't want to get into month on month looking at reviews of market share. It's a very short period of time, but we are encouraged that both the market and our performance were good during the Marple period. So, early days, we're pleased that it looks like a turnaround in the market that we'd anticipated might not happen until the very back end of this year. So, we hope that it sustains and builds from here. Why would it be? I don't know.
Speaker Change: Headline would be around what we call model March and April which was the strongest performance we've seen in a while I really don't want to get into month on month looking at reviews of market share. It's a very short period of time, but we are encouraged that both the market and outperformed.
Speaker Change: <unk> were good during the market during the Marpol period. So early days, we're pleased that it looks like a turnaround in the market that we'd anticipated might not happen until the very back end of this year. So hope that it sustains and builds from here why wouldnt. They don't know I mean, we were very surprised that there was a decline at all.
Martin P. Waters: I mean, we were very surprised that there was a decline at all. Over the long run that I've been in this business, 16 years, I don't remember seeing a decline in the intimates market. So it's unusual to have had a decline. And so I hope it's a
Speaker Change: In the long run that we've been in that I've been in this business 16 is don't remember seeing decline in the insurance market. So it's unusual to have had declined.
Timothy A. Johnson: And so I hope its a return to situation normal nothing overly structural going on in the world at large as far as we can detect so probably just a normalization in a correction I would say T. J yeah to your second question Alex on that from a digital perspective again really looking at trends.
Timothy A. Johnson: Yeah, your second question, Alex, from a digital perspective, really looking at trends throughout the quarter, as much as the quarter in total. So we saw the digital trends move in a positive direction throughout the quarter, again, supporting April as the biggest month and also outperforming stores. So we're seeing digital grow as a percent of the mix.
T. J: Throughout the quarter.
T. J: As much as the quarter in total so we saw the digital trends.
T. J: Move in a positive direction throughout the quarter again supporting April was the biggest month and also outperforming.
Speaker Change: Stores, So we're seeing digital grow as a percentage of the mix.
Speaker Change: As Martin mentioned, the volume of customer facing changes again, the accumulative effect on that is what we're seeing build through Q1, obviously sets us up well for for Q2 I think Additionally, just from a actual reporting standpoint.
Timothy A. Johnson: As Martin mentioned, the volume of customer-facing changes, again, the accumulative effect on that is what we're seeing build through Q1, and obviously, sets us up well for Q2. I think additionally, just from an actual reporting standpoint, as we come across the end of the quarter, we really recognize sales based on when the customer receives it. So the importance of that is, again, as the business got stronger, as we move through the quarter on a retail basis, we could see the sales happening at the end of April, but those will likely be recorded in May when the customer receives the product. So there is a little bit of a timing difference between them.
Speaker Change: As we come across the end of the quarter, we really recognize sales based on when the customer receives that so the importance of that is again as the business got stronger as we move through the quarter on a retail basis, we could see the sales happening at the end of April those likely get recorded in may when the customer receives the products. So there is a little.
Speaker Change: Bit of timing difference there and then again the feedback on the enhancements to the site, whether it's fewer clicks or removing category landing pages visual search Stoppable video Martin mentioned trying to home in test mode, just the volume of opportunities.
Timothy A. Johnson: And then, again, the feedback on the enhancements to the site, whether it's fewer clicks or removing category landing pages, visual search, shoppable video, Martin mentioned trying it out in test mode, just the volume of opportunities and strengths that we've built over a number of months and invested in are just now coming home and starting to show up in a positive way in results. So we're seeing that show up in better traffic trends.
Speaker Change: <unk> strengths that we've built over a number of months and invested in are just now coming home and starting to show up in a positive way in results. So.
Speaker Change: We're seeing that show up in better traffic trends, we're seeing it show up in improved conversion again week on week month on month. So.
Timothy A. Johnson: We're seeing it show up in improved conversion, again, week on week, month on month. So that's what we're really pointing to when you hear us talk optimistically about the digital business. So that's what we're seeing currently, and what we know is kind of that cumulative or building effect that will support the balance for the year.
Speaker Change: That's what we're really pointing towards when you hear us talk optimistically about the digital business. What we're seeing currently and what we know is kind of that cumulative or building effect that will support the balance of year.
Ivy: Thanks, Alex. Ivy, let's go with one more question. I think we have time for one more, please.
Speaker Change: Thanks, Alex Ivy, Let's go with one more question I think we have time for one more please.
Marni Shapiro: Our final question will go to Marni Shapiro from the Retail Tracker. Please go ahead.
Speaker Change: Our final question will go to the line of Marni Shapiro from the retail tracker. Please go ahead.
Martin P. Waters: Hey guys, congratulations!
Marni Shapiro: Hey, guys. Congratulations honestly pink is notably different than I'd love to comment about off color because I think the colors now look significantly better.
Martin P. Waters: Honestly, pink is notably different, and I loved your comment about off-color because I think the colors now look significantly better. I'm curious if you could just talk a little bit more about pink, though. Are you seeing the lapsed shopper come in? Are you bringing in a new shopper there? And I'm curious how you feel about, I know the apparel inventory has been a big part of the conversation there. How do you feel about the level and the balance of apparel versus intimates at Pink, and how should we think about where that balance is in the back half of the year?
Marni Shapiro: Curious if you could just talk a little bit more about pink, though are you seeing the lap shopper come in are you, bringing in a new shopper there and I'm curious how you feel about I know the apparel inventory has been a big part of the conversation there how do you feel about the level and the balance of apparel versus intimates are paying them and how should we think of that.
Speaker Change #100: About where that balances in the back half of the year.
Speaker Change #101: Thank you Mani and as always we appreciate your encouragement for those that don't know Mani runs a fantastic track of it gives us real time feedback and other brands.
Martin P. Waters: Thank you, Marni. And as always, we appreciate your encouragement. For those that don't know, Marni runs a fantastic tracker that gives us real-time feedback on other brands. And you're more right than not, Marni, I will tell you.
Speaker Change #102: And you're more right than not money I would tell you.
Martin P. Waters: And we are pleased that the performance in pink is across all categories. So, our intimates business has been good, and our apparel business has been better. You're right to suggest that the balance between those two might need to adjust.
Speaker Change #103: We are pleased that the performance in pink is across all categories. So our intimates business has been good and our apparel business has been better youre right to suggest that the balance between those two might adjust I think we got overly long.
Martin P. Waters: I think we got overly long in intimates and under-invested in apparel, and that's primarily because what we were doing in apparel wasn't working. It became self-fulfilling that we had less inventory, and we had less buy. We've got to change that.
Speaker Change #103: Intimates and under invested in apparel and that is primarily because what we were doing in empower and apparel wasn't working it became self fulfilling that we had less inventory than we had less by we've got to change that pancake fundamentally a young person's brand to show up in multiple categories. She comes into the franchise through apparel, we got to be good at apparel as the most import.
Martin P. Waters: Pink is fundamentally a young person's brand who shops multiple categories. She comes into the franchise through apparel. We've got to be good at apparel. It's the most important thing to do. So you should see the balance.
Speaker Change #103: One thing to do so you should see the balance.
Speaker Change #104: <unk> thing that intimates is important but less dominant on intimates more dominant on all aspects of apparel in terms of the customer clearly it's the Gen Z customer.
Martin P. Waters: Still seeing that intimates are important, but less dominant on intimates, and more dominant on all aspects of apparel. In terms of the customer, clearly, it's a Gen Z customer. Very, very, very good news for Victoria's Secret & Co as a whole is that we over-index on Gen Z. We really do, particularly on Victoria Secret Pink. So that gives us an unfair advantage that if she's coming in for Victoria's Secret, we should be able to get her for pink at the same time. It's really, as you know, all about the merchandise. The customer is there.
Speaker Change #104: The good news very very very good news for Victoria's secret because our hope is that we over index on Gen Z, we really do.
Speaker Change #105: Leon Victoria's secret.
Speaker Change #105: So that gives us an unfair advantage that issue if he's coming in for Victoria's secret, we should be able to get up a bank at the same time, it's really as you know all about the merchandise the customer is that she has.
Martin P. Waters: She has a high curiosity about what we're doing. We've just got to deliver really compelling merchandise assortments. And as I said, I feel confident the team is on it. We're being more bullish, and we're putting more of our inventory behind the brand as we get more conviction, as we get more confidence, and we see the results coming in. So again, thank you, Barney, for your encouragement. And thank you, everybody, for your calls this morning. We appreciate it.
Speaker Change #105: Hi, curiosity people, what we're doing we just got to deliver really compelling merchandise assortments and as I said I feel confident in the team on it we're being more bullish on.
Speaker Change #105: We're putting more of our inventory be heightened the brand as we get more conviction as we get more confidence and we see the results coming in so again, thank you Bonnie for your encouragement.
Speaker Change #105: Everybody for your calls this morning, we appreciate it.
Unknown Executive: Thanks, everyone. That concludes the call this morning. We appreciate your continuing interest in Victoria's Secret. Have a great day.
Speaker Change #106: Thanks, everyone that concludes the call. This morning, we appreciate your continuing interest in Victoria's secret have a great day.
Unknown Executive: Thank you all for participating in the Victoria's Secrets & Company first quarter 2024 earnings conference call. That concludes today's conference. Please disconnect at this time and enjoy the rest of your day.
Thank you all for participating in the Victoria Secrets <unk> Company first quarter 2024 earnings Conference call that concludes today's conference. Please disconnect at this time and enjoy the rest of your day.