Q4 2024 Victoria's Secret & Co Earnings Call
and Kevin Wynk.
Amanda: Good morning, my name is Amanda and I will be your conference operator today. At this time I'd like to welcome everyone to the Victoria's Secreting Company's fourth quarter, 2024 earnings conference call.
Scott: And now I'll turn the call over to Scott.
Amanda: Thanks, Kevin and good morning, everyone.
Amanda: Let me turn the call over to Hillary I wanted to take a moment to say Hello, and how excited I am to be here.
Amanda: Joining me us until about a month ago and I want to thank the team for the warm welcome.
Speaker Change: Joining during the year end financial close cycle, certainly makes the first days on the job exciting.
Hillary: I'm grateful for the opportunity to work alongside Hillary our leadership team and a passionate associates and for the opportunity to support our customers our brand and our company.
Speaker Change: I am excited about our future and I look forward to meeting and working with you all.
Speaker Change: That's all for now I'll go ahead, and turn the call over to Hillary.
Hillary: Thanks, Scott Good morning, everyone and thank you for joining us during the last call I shared insights from my first 90 days as well as my excitement and optimism for our future I'm happy to be back together today to continue that conversation first.
Hillary: First I want to talk about our Q4 results and outlook for 2025.
Hillary: I'll share details on our strategies for growth that we believe will unlock the full potential of our brands.
Hillary: But before I discuss Q4, I want to take a moment to thank TJ for his support during my first several months and for staying on with us to ensure a smooth transition with Scott.
Hillary: For your partnership T. J in the role you played in helping drive the result, we'll talk about today.
Hillary: Speaking of results I'm pleased to say they were strong in Q4 with sales up to last year across the us pink and our powerhouse beauty business.
Hillary: We want and the big moment and with a focus on execution. Our teams drove healthy margins controlled costs and manage inventories very well leading to Q4 operating income and EPS that exceeded our expectations.
Sales growth was driven by broad based strength across our business with sales up in all three brands in all channels in all markets.
In North America V S and paint both had positive year over year sales growth in stores and digital we were able to achieve this growth with fewer promotional days and offerings than last year, which is especially encouraging as we continue to test and learn our way to lower promotional activity in the business.
Hillary: From a merchandise perspective for B S. R. Giftable holiday product Assortments, driven by sleeping beauty across both brands were big winners with casual sleep is our top performing category.
We were excited to see that products that are quintessentially V. S heritage stripe and logo, all performed well, which I view as an indication of strong brand health. We also had success with Shimmer and shine products.
Hillary: Pink apparel had a significant trend change at the beginning of the fall season and its strong performance continued in Q4, along with sleep apparel drove the business during holiday.
Hillary: As you know we've been working to evolve pink product positioning and we're starting to see some positive signs of customer acceptance, both our modern reinventions of iconic heritage pieces and our most feminine styles, featuring sparkle and shine were top performers this holiday.
Hillary: As I mentioned, our beauty business was a standout in the fourth quarter as we push the boundaries of the accessible luxury with higher AUR items that were must have gifts of the season.
Hillary: With compelling product and strategic promotional activity or basket sizes, and traffic were up to last year with traffic outperforming them all.
Hillary: Courted by our best in mall store experience and dozens of digital enhancements, we had solid conversion on those increased traffic levels with strong product acceptance.
Hillary: Third party data shows that North American intimates market declined slightly this quarter. However for the second quarter in a row, we outperformed the market and encouraging sign of a growing strength and momentum.
Hillary: Our studies again this quarter showed that Gen Z is feeling much more positively about our brands are testament to our focused efforts to engage her it's exciting to see that she's not only noticing us, but connecting with what we stand for.
Hillary: Outside of North America, our international business continued its strong performance with retail sales up double digit in the quarter driven by growth with our franchise and travel retail partners along with strong performance in our joint ventures in China, and the U K. Our brand is strong around the world and our global partners and vendors are not only partners, but <unk>.
Hillary: Credible advocates.
Hillary: After my first holiday season, with the business I remain optimistic about what's ahead for V. S income, including what we're focused on it for Q1.
Hillary: Across every brand within our business spring is anchored by our icons, we're inspiring our loyal customers with modern take on all of her favorites and introducing them to a new generation of customers and.
Hillary: In February we re imagined are very sexy collection, expanding the iconic franchise to connect with more women with a broadened range of lift levels, we're offering a more personalized fit delivering sexy for everybody.
Hillary: Our teams are always listening and responding to customer feedback as evidenced by the new lately line dummy, which was designed for women, who loves glamour, but before prefer a more natural lift.
Hillary: And we continue to have momentum in sport and swim both categories in which our authority and expertise and brought it in innovation give us the competitive edge in what is a highly competitive market. We have leveraged our best at bras positioning to be the authority for on trend sexy swim that she feels incredible wearing.
Hillary: We are excited about the newness in swim this spring, which includes styles from pink by Franke, one of our strategic collaborations that has over indexed with the Gen Z customer and our most recent drop the collaboration also drove almost triple the average acquisition rate versus the core paint business, a promising indicator as we build our go forward collab strat.
<unk>.
Hillary: Doubling down on Pink apparel, we are excited about the ongoing improvement in product execution. We continue to build on the momentum with modern takes on Pink Icahn, plus we've added a new layer of lifestyle outfitting that is resonating with customers.
Hillary: As we were seeing with early spring our fashion content is becoming more compelling with every force that and I'm looking forward to the continued progress within the pink business.
Hillary: Turning to beauty, our icon as Bombshell America's number one fragrance in March we will be celebrating bombshells, 15th anniversary by unveiling a bottle redesign and delivering activations, we know, we'll engage and excite our loyalists.
Hillary: I'm pleased by our movement back into major cultural moments alongside global stars. We are focused on driving relevance with today's consumer by meeting her in the moments and spaces that matter Victoria's secret product played a prominent role in Charlie actually excess performance that closeout, the grammys tape mcrae them, where our product in her newest music.
Hillary: Video and we recently partnered with Tiana Taylor on an exclusive product at it all of these moments resonated deeply with consumers and drove significant social media engagement.
Hillary: As we transition from holiday season to spring 'twenty five we recognize there are challenges shifting.
Hillary: Consumer confidence a volatile economy, and unseasonable weather impacting mall traffic, while we're actively managing today's headwinds. We're also building for the future with a strong foundation and globally recognized brands, we're positioned to navigate the present, while unlocking the full potential of the Aspen co for the long term.
Hillary: And now I'd like to talk about how we plan to realize that potential.
First I think it's important to acknowledge that we are building from a position of strength as the largest intimate apparel company in the world in North America, we have approximately 20% market share 25 million active customers and 38 million loyalty members. We have the second largest brand following in the world on social media with $88 million.
Hillary: On Instagram alone.
Hillary: Our growth plan, which we are calling path to potential will ensure we put the best of who we are back at the center of how we work we are playing offense leaning into our core strength and unlocking new opportunities.
Hillary: Our objective is clear drive value for all stakeholders by Supercharging, our two distinct compelling growth brands Victorias secret and pink complemented by a powerhouse beauty business and a strong digital first a dorm abrahams.
Hillary: Our path to potential is built around four key strategies that will allow us to accelerate growth differentiate our brands and reinforced our authority in the market.
Hillary: First we are recommitting to pink and winning the next generation of consumers.
Hillary: <unk> has long been a brand with deep emotional connections to young women today, we are focused on reestablishing the brands magic and market position we.
Hillary: We will deepen our relationship with the customer understanding her like never before and meeting her where she is in the way she wants.
Hillary: We're working to reclaim our position as a full lifestyle brand anchored in internet, but extending into more apparel accessories and beauty.
Hillary: We must clarify and elevate the brand by sharpening our identity thinking and operating as a social first brand and treating pink as a high potential growth engine that it has.
Hillary: Our second strategy Supercharging garage and reasserting our authority, we will lean on our industry, leading Brock variance to drive innovation first product development, ensuring we lead the industry in fit function and fashion. We will also expand our bra assortment to serve a wider range of customer needs and we will strengthen our marketing voice.
Hillary: And channel experience to serve her better.
Hillary: Our third strategy is fueling growth in lifestyle categories beauty sport and swim.
Hillary: We have a powerhouse beauty business and strong lifestyle brands that customers love and we will accelerate these categories by leaning into our beauty Authority authority building on our industry, leading fragrance business and expanding into new opportunities, which include beauty and pink.
Hillary: We will reclaim key adjacencies by applying our expertise and brought innovation quality and fit to revitalize our sport and swim businesses.
Hillary: Our fourth focus is on and evolve as an evolving our brand projection and go to market strategy.
Hillary: Culture technology and shopping behaviors shift so amongst our go to market strategy by staying true to our brand DNA, while adopting how we engage inspire and serve we will deepen connections with existing customers and attract new customers, while strengthening loyalty and driving long term growth.
Hillary: One of the ways, we will do that is by creating stronger differentiation between Victoria's secret and pink and everything from product to marketing to experience today the lines between the two brands are blurred.
Hillary: Or we will ensure that each brand is distinct but that they complement one another in a single ecosystem.
Hillary: We will elevate Victoria's secret of sexy glamorous accessible luxury while modernizing pinks brand identity and evolving the way, we communicate with the customer by becoming more agile and culturally connected we will create real time moments that resonate with our customers and keep us at the center of the conversations.
Hillary: Finally, we will leverage the full funnel and build a brand centric best in class Omnichannel experience to engage with her on her terms and as I've emphasized we see significant growth potential internationally and these strategies trends and our global footprint.
Hillary: To ensure that our strategy is not just aspirational, it's actionable sustainable and built to drive results. We are focused on three critical enablers.
Hillary: First our customer centric performance culture by.
Hillary: By deeply understanding our customers, how they shop, what they value and what inspires their loyalty, we create stronger connections drive repeat engagement and fuel sustainable growth.
Hillary: A culture centered on the customer empowers, our associates to innovate and to deliver experiences that not only meet expectations, but exceed them turning transactions into lasting relationships.
Hillary: To accelerate the customer impact drive results and gain share we are moving to a leadership structure with brand presidents, leading product facing functions for Victoria's secret Pink and beauty. This change will ensure we have the leadership focus clarity and expertise needed to accelerate growth.
Hillary: We are also currently searching for a CMO to evolve our global go to market strategy helped build deeper customer connections elevate storytelling and drive more data driven marketing optimized across the full funnel.
Hillary: The second enabler is an evolved product development process, we are moving beyond abroad centric approach implementing multiple tracks tailored to each category, making our teams faster more agile and more innovative not just in broad development, but in apparel as well.
Hillary: Our third enabler is an efficient operating model, we are focused on doing fewer things better investing where it matters, most on our customers and streamlining costs and non customer facing areas.
Hillary: In closing, we faced some near term headwinds and ongoing uncertainty in the macro environment, which we will manage aggressively as we also do the work I just outlined to unlock the full potential of our brands and business I'm confident and energized because we have clear strategies for growth. We are moving swiftly to a leadership structure to execute.
Hillary: With focus and impact and we are positioning ourselves for long term sustainable growth.
Hillary: This is our moment to build the future for V S and go stronger more innovative more connected to the customer than ever and I'm confident in our plan our team and the opportunities ahead.
Hillary: That concludes our prepared comments and at this time, we'd be happy to take any questions you might have.
Hillary: Thank you, 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 each participant to limit themselves to one question and one follow up to allow ample time to respond to each participant that.
Hillary: You may wish to participate in this portion of the call. Our first question. We will go to the line of Matthew Boss from J P. Morgan Your line is open.
Great. Thanks, So Hillary maybe could you elaborate on the drivers of the gradual improvement that you embedded through the year, what do you see as transitory within some of your near term trends and maybe if you could speak to the product pipeline for the back half of the year at both vs and pink.
Hillary: Sure thing I'm, not going to speak too specifically about product launches because we want to keep those under the cover but I would say embedded in our forecast is number one first and foremost getting teams in place and getting leaders in place and so I would say a major major driver of the improve.
Hillary: <unk> will be through marketing.
Through marketing through the full funnel and the differentiation of the two brands. So I would say that as a major driver. The second is incremental improvement in both pink and Victoria's secret brands as we play our learnings forward and then third is a number of tent pole moments that we have planned are really beginning.
Hillary: In the August time frame. So you will see us pace those out across the back half of the year.
Hillary: And really.
Hillary: In the front half of the year, we are a little more quiet in terms of our marketing building out that muscle getting ready for the back half and Youll start to see those types of moments really accelerate in the back half as well as product launches.
Hillary: Some fun collaborations.
Hillary: Great Best of luck.
Hillary: Okay.
Adrian: Thank you. Our next question comes from the line of Adrienne <unk> with Barclays. Adrian Your line is open great. Thank you very much Hillary I'm interested to you you arrived in September and you've made some changes very quickly on sort of inventory and kind of new product wondering over what horizon, you just mentioned.
Adrian: August over what horizon sort of do you think that you will have your false imprint on kind of the product and then secondarily you know couple of things that you had said I think on the October meet and greet was that the inventory productivity was being hampered by the production lead times. So if you can talk about some F.
Adrian: On that front and my last quick one is it's clear that you're pulling back on promotions that sometimes leads to a slowdown or some sluggishness in inventory velocity, but the profitability is better. So can you talk about kind of that shaping and how you know the margins before you get that acceleration in sales. Thank you very much.
Adrian: Sure.
Adrian: First question around full imprint.
Adrian: <unk>.
Adrian: It will be iterative I don't I don't envy.
Adrian: Envision a big curtains open up moment for each brand, you'll see incremental improvement each month I would say the impact on the first half of the year. It was really an optimization. It's on narrowing focus maximizing the big ideas neutralizing some of the things that were more worried about actually.
Adrian: Focusing a little bit more on the lower funnel and marketing and then we are buying fall as we speak. So so you know I've had more involvement in that and we'll have more increasing involvement in future seasons after that but I would say based based on product development timelines really.
Adrian: <unk> really spring 'twenty six will be the season that I would've been here through the entire process.
Adrian: Second question around inventory lead time Yep.
Adrian: Production.
Adrian: Production lead times.
Adrian: I would say we're in pretty good shape, there are places where we have incredible.
Adrian: Agility underwear being a big area around that I would say some of the pink apparel areas, we've been able to make real headway with them and then I would say the new leadership structure is really designed to enable us to pull apart those product development processes. So that we can cater to a specific customer into specific categories.
Adrian: So that's a big piece of this work, we actually have a tiger team develop devoted who have stepped out of their roles for a short period of time to really engineer. This new process I would say, we have a little bit of ones, but in the old world a little bit of one foot in the new world, but we're making progress on the areas, where we see we need to be much more agile.
Adrian: And in terms of promotions, we have just started that work and I think it's a delicate balance you know the brand the product. The story has to be very strong in order for us to be able to do that and we were able to start proving that out in the holiday week, we were able to forgo a full box promo and mid December that we were up.
Adrian: [noise] against from last year, and we were also able to reduce the amount of days and other events across the quarter did we give up a little bit of top line I think we probably gave up a little but we're really pleased that we were able to take that out of our base and we're looking for opportunities going forward to do that as well I would say the most recent traffic and weather patterns have made.
Adrian: Got a little bit more difficult to do but we will continue to be relentless in looking for those opportunities as we move through the year fans.
Speaker Change: Fantastic Best of luck and thank you.
Speaker Change: Thank you. Our next question comes from Simeon Siegel with BMO capital markets. Simeon Your line is open.
Speaker Change: Hey, everyone. Good morning, Scott Welcome T. J, it's been great working with you. Thanks Best of luck on your next chapter.
Speaker Change: Hey, Larry Thanks for the path to potential detail any way to quantify the topline opportunity within those various pillars, just maybe thinking about how youre viewing various opportunities across brands categories and regions.
Speaker Change: Maybe in quantitative.
Speaker Change: Detail and then just given the comment about expanding beyond branch centric could you share how much of the opportunity as you see it to grow is rooted in recapturing lost revenue with each segment versus expecting maybe the go forward company revenues competition to look different than the past. Thank you.
Speaker Change: Okay. There were a lot of questions in there.
Speaker Change: Let me see if I can take a crack at that so we have we are we are at the beginning of our <unk> work. So this is the beginning of the strategy rollout. So I do not have exact numbers, we will you will play.
Speaker Change: Plan to share that in the back half of the year, but I will say there is a tremendous amount of opportunity in pain and that is where my eyes are sat right now that is where I'm spending a lot of time thinking about how we invest in that business, how we resource that business, how we talk about that business and pull it apart from <unk>, so that would be my first.
Speaker Change: I would say in the intimates category knowing that it is it is a category that has been struggling in the overall market.
Speaker Change: Our goal there is really to defend in the short term.
Speaker Change: We build our innovation pipeline and on a longer term view and then the lifestyle categories are they're really they're just very strong for us and if you look back to history. In these categories. They were a very significant amount of volume in the past and we feel very confident that we can recapture a lot a lot of that and I think.
Speaker Change:
Speaker Change: That will help our customer file it'll help us with acquisition it'll help us with attracting younger customers and Theres a lot to like about the lifestyle piece of this and I put I put a lot of focus on that as we move forward.
Speaker Change: All right that's great. Thank you and then just one quick follow up any meaningful divergence in regions or customer demographic profiles and Jeremy said that you guys have seen.
Jeremy: Yeah in terms of its.
Speaker Change: So we don't hear you.
Speaker Change: Regions, Yes, I mean, the warmer weather regions were definitely several points above the colder weather regions. So.
Speaker Change: Speaks to the weather impacts from back half of jam through fab and as we didn't see reach that were warmer than the all regions were elevated.
Speaker Change: Off that trend so definitely from a regional perspective, we saw differences.
Speaker Change: Perfect. Thanks, a lot guys best of luck for the year.
Speaker Change: Hum.
Speaker Change: Thank you. Our next question comes from Cory Tarlow with Jefferies. Corey Your line is open.
Cory Tarlow: Great. Thanks, and good morning. So I was wondering if you could talk about the opportunity that you see.
Cory Tarlow: In creating some of these separate tracks for product lines in terms of your strategy and how this plays and the opportunity with particular categories that.
Cory Tarlow: Or has been historically very important for the company like twin.
Cory Tarlow: And Atlantic and then also if you could also just comment on Valentine's day anything that was working during that time frame that would also be very helpful. Too. Thank you so much.
Cory Tarlow: Sure.
Cory Tarlow: Multiple tracks.
This is essential.
Cory Tarlow: We are currently on a.
52 ish week calendar really anchored in the lead times around bras, we have made progress on having chase calendars to really supplement that in key categories, but I fundamentally believe that apparel should not be on a 52 week calendar and so we're looking to drastically reduce that through our raw materials strategy partnering with our <unk>.
Cory Tarlow: Anders different ways of working and our product development process and the goal would be in things like I'll just use a pink apparel as an example, we should be growing like 26 weeks for that.
Cory Tarlow: And you know that that will be a big shift and a big unlock to bring decision, making closer to customer and I'm very excited about the potential of what that will add to our business and you mentioned swim and CT bodes very technical both have nuances in the product development process that are very different from other categories and so separate.
Cory Tarlow: Adding that out and women's sport, maybe maybe a little less about the speed and a little bit more about the technical product engineering piece of it and so having experts dedicated to that on a different track should really one enable much better product execution and number two shouldn't.
Cory Tarlow: <unk> agility in the places where we needed the most.
Cory Tarlow: Valentine's day.
Cory Tarlow: I'll take that opportunity to just talk a little bit about about January and February in general so.
Cory Tarlow: Definitely saw a macro shift in the environment as it relates to traffic sort of mid January into mid February.
Cory Tarlow: We know what the macro factors are there we know.
Cory Tarlow: We know it was whether we know it's consumer confidence we know that in our business, we see a big uptick in cash and debit purchases coming from tax returns that were delayed this year, we see in our regional selling that.
Cory Tarlow: The warm weather climates did considerably better than the cold weather climates that being said there is an opportunity to really look in the mirror as well and make sure that we are playing forward every single learning possible. So when I think about that sort of mid January to mid February timing I would say there are a couple of things we could've done better one is that we.
Cory Tarlow: Pulled marketing spend into Q3 for the fashion show and I think one of the hindsight is coming out of the fashion show is that.
Cory Tarlow: That halo in terms of traffic was about eight to 10 weeks. So in hindsight I think we pulled back a little too too far on marketing and we should have had some other.
Cory Tarlow: Whether it was around sport or Valentine's day in January to really drive that heat and awareness and traffic. So that would be the first the second is that we didn't buy the Valentine's day big enough. So we blew through sleep, which was one of the big drivers of holiday, we blew through it in a couple of weeks and basically sold out by the time, we got to the beginning of February.
Cory Tarlow: That's a big one and then the third is really thinking about launch strategies in bras and that's something we've done for many many many years.
Cory Tarlow: And I think in the new environment one of the things. We're learning is that when we go hard against one thing isn't always necessarily lifting everything and so we need to find a way to talk about our launch in a powerful way and also talk about all the other broader offerings that we have at the same time and that there'll be a new thing for us that we're working to.
Cory Tarlow: On that very quickly so that that would be my diagnosis of.
Cory Tarlow: Of the three weeks and I would just I would just add that three weeks doesn't make a quarter and it doesn't make a year and we're working tirelessly to.
Cory Tarlow: Make that up as we move forward into the balance of the year.
Cory Tarlow: Great. Thank you best of luck.
Speaker Change: Thank you. Our next question comes from Jonna, Kim with TD Cowen John Your line is open.
Jonna Kim: Thank you for taking my questions. Thank you want to guide for the year, what could potentially drive upside or downside to your your guide as you look.
Speaker Change: We look forward and then just a follow up on that.
Speaker Change: Store of the future format instead of what are you seeing it at this point with your concepts that have been lies and what are you baking in in terms of potential less problem. Those concept as you continue to roll them out. Thank you so much.
Speaker Change: Okay.
Speaker Change: Joanna can you repeat repeat the first part we think we think we heard something about guide we think we caught us for the future. So yeah, sorry, I first squadron of cold. So yeah, yeah, well the voices is somewhat God why yeah, that's potential upside or downside to your guide for the full year like what's the key factors that could potentially drive upside or downside.
Speaker Change: Sorry to hear current year guide.
Speaker Change: Yes.
Speaker Change: Scott So.
Speaker Change: <unk> for the year.
Speaker Change: Regarding you talked about Q1, and some of the near term headwinds, we're facing we do see it.
Speaker Change: Improving throughout the year.
Speaker Change: Especially around a lot of a good product and strategy changes that <unk> already outlined.
Speaker Change: In terms of cost and whatnot.
Right now we're faced with some higher transportation costs, both in Ocean and air in the first part of the year, we do expect to start lapping that in the back half of the year in the back half of the year right now those where we've got the impact of the tariffs plan that we've called out so we've got.
Speaker Change: 10% assumed on China for the balance of the year, that's going to be worth about $10 million to $20 million.
Speaker Change: And so those are the sort of.
Speaker Change: Your inputs.
Speaker Change: With regard for the year. So when you when you think about all of our gradual improvements.
Speaker Change: Where we see the year going in terms of store of the future.
Speaker Change: The early results are quite positive we are ramping that up throughout the year, we've got more full and partial store of the futures in the works this year.
Speaker Change: Last year by.
Speaker Change: By year end, we should have about 95% of our top 100 doors converted and we look to continue into the out years, but early returns have been very positive.
Speaker Change: Yes, Julien if I could just one one additional thought on the guide because I think it's important we have seen some of the sell side notes this morning and just to.
Speaker Change: Just to clarify if you look at our guide for the year at six 2% to $6 3 billion.
Speaker Change: We're looking at really flattish to maybe up a 100 million or up.
Speaker Change: One or two points for the year. We gave you the guide for Q1, which was essentially down two to down four so where I'm going Joanna is the balance of the year and our guys were really saying.
Speaker Change: Low single digits, plus one to plus two or three so not necessarily the same trend that we saw in fall, but definitely improvement from spring. So we think thats something thats attainable for the business for the reasons that Hillary just mentioned around product and marketing changes that you should expect going forward.
Speaker Change: And then similarly from an Oi perspective.
Speaker Change: Guiding or essentially flat to down close to $50 million year over year. The bulk of that decrease is guided to in the first quarter. So you are seeing Oi, our operating income improvement in Q2 through Q4 so.
Speaker Change: I want to make sure that that's well understood. This is not a significant hockey stick in the back half of the year or anything like that it's really an expectation that over time, we will return back to that plus one plus two here in North America.
Speaker Change: Which again clearly we were trending much stronger than that in the fall season.
Speaker Change: Alright, thank you.
Speaker Change: Thank you. Our next question comes from Alex Straightened with Morgan Stanley Alex Your line is open.
Perfect. Thanks for taking the question maybe first for Hillary it's clear you're super focused on paying more so than the other banners in other parts of the business right. Now can you just elaborate on what's it telling you that that that's the right banner refocus on comparative Victoria.
Speaker Change: And then just a second question either for Scott or Hillary is just can you dive into the biggest category pain points at Victoria's and pink right now and any sort of plans to improve those and twenty-five thanks a lot.
Speaker Change: Sure I'll take that I'll, just start by saying I wouldn't categorize that I'm much more focused on pink MBS I think there are two different trajectories in their business.
Speaker Change: So first on the first on the pink side.
Speaker Change: When you really dig in and look at the history of Pink what it used to be what it is today. There is just enormous opportunity when you look at the market landscape there is enormous opportunity.
Speaker Change: And when you look at some of the decisions independent of themselves that were made over time, it's a little bit of a death by 1000 paper cuts and so when I stand back and look at that I see opportunity and I see opportunity in apparel specifically.
Speaker Change: And you can get at that faster.
Speaker Change: And so there's a lot of work to do with Pink Theres a lot of scrubbing of the total brand position. There's a carving out of this brand that needs to happen. There is a re imagining of it to make it as magical to this generation as it once was to a previous generation and I think that is within our grasp so I'm passionate about that at the same.
Speaker Change: Time.
Speaker Change: So passionate about Victoria's secret and I believe there is tremendous opportunity there I think Victoria secret is farther along and its product development and sort of product resonance path.
Speaker Change: I think the work Mds is about supercharging the lifestyle piece of the business that I believe will ultimately leave the core business.
Speaker Change: And I think it's about sort of brand voice, how we go to market, how we utilize full funnel a little bit more more slanted to marketing where pink is work across the entire business. So I hope that that clarifies that in terms of categories Whats working whats.
Speaker Change: What's working and driving the business right now it is lifestyle categories that is driving the business right now where we're seeing the growth we're seeing it in sport, we're seeing it in swim we're seeing in accessories.
Speaker Change: We're seeing it in pink apparel.
Speaker Change: So that is where we are seeing strength right now I would say that in Broz as an example, very sexy is good.
Speaker Change: But as I, just mentioned and the last question.
Speaker Change: I think the unlock for us is making sure that when we launch abroad. It lifts all boats and that that's the work that we have to do in that area.
Speaker Change: Thanks, so much good luck.
Speaker Change: Thank you. Our next question comes from Murray T O Serna with UBS Marcio. Your line is open.
Speaker Change: Great. Good morning, Thanks for taking my questions, maybe one thing that I wanted to check.
Speaker Change: A more detailed I remember like from the Investor day from a couple of years ago and you still have.
Speaker Change: Around $40 million of savings, but I think we're.
Speaker Change: Or should materialize in 225 I was just wondering if that's still the case and where should we see that and then maybe could you elaborate a little bit on two things.
Speaker Change: On the marketing.
Speaker Change: I wanted to do like more marketing to show like to differentiate like one brand.
Speaker Change: Ping from Victoria's Secret could you just talk a little bit more about like what are some initiatives on that that side and then lastly on any product launches that you've already done like not talking about anything that's coming but anything that you've already done that you would highlight across again, both brands or do you think.
Speaker Change: Worth, noting thank you so much.
Speaker Change: Yes, I'll take the first part memory. So I think on the savings go you're referring to the $250 million to transform the foundation goal the company set back in October.
Of <unk>.
Speaker Change: 'twenty two is when we first introduced it.
Speaker Change: We saw about $90 million of savings in 2023 that we communicated I.
Speaker Change: I would suggest to you that the company saw closer to almost $200 million of.
Speaker Change: Cost savings in 2024, and we think that.
Speaker Change: Largely completed that that three year goal is here in the first two years now having said that we're confident there are opportunities to continue to be more efficient in the model go forward.
Speaker Change: And we are confident that the leverage point still remains in that 1% to 2% range or said differently, we need a 1% to 2%.
Speaker Change: Growth number in North America sales to generate leverage in the model I think if you take a look at how the year progressed in 2020 for.
Speaker Change: We're confident we saw gross margin or average unit cost reductions.
Speaker Change: That saved money and showed up in our margin rate.
Speaker Change: <unk> for the year and then from an SG&A standpoint, I hope, it's not lost on the group that SG&A dollars.
Speaker Change: On a 52 week basis, we're actually down year over year, even though sales were up and incentives.
Speaker Change: Compensation was up for the year. So there was a lot of good work that's already been done by the team having said that we think theres opportunity going forward I think your other two questions. If we caught them right were around marketing and product launches that have already been completed and if there is any.
Speaker Change: Dialogue on those.
Speaker Change: Cheryl.
Speaker Change: So and marketing I would say the focus for the two the two brands a little bit different so in <unk>, we already have very very high awareness. So the goal is really consideration.
Speaker Change: We are doing very very well with our existing and reactivated customers.
Speaker Change: Highest retention rates in many many years highest spend highest margin per customer.
Speaker Change: Our retention rates so much good going on there were a little slow on acquisition and so that about consideration for us and as we double down on sexy glamorous accessible luxury that doesn't change, but I think what is sexy in 2025 is something different than what it was a few years ago and how do we evolve.
Speaker Change: With culture and connect with the consumer and make her see us in a different light to introduce new consumers to this brand that is the goal in BFS I would say in addition to that we have an opportunity to rebalance the spend across the funnel focus more in the mid to lower funnel and be much more thoughtful about when we're spending in the upper <unk>.
Speaker Change: And also we can we can reach more consumers.
Pink its different its more about awareness.
Speaker Change: We have not been aggressively marketing pink, we need we need to evolve our look and feel there and when we feel the look and feel is right. When we feel we have the right partnership strategies. When we feel we have the right collaboration strategies, which we are aggressively working towards we will turn that on and it's just a different tactic for that.
Speaker Change: Brand and then you have to stand back and say, Okay. We have an ecosystem.
Speaker Change: Of our loyalty program of our store real estate.
Speaker Change: How do we leverage the two together for the power of the entire enterprise and so you have to have your put one foot in the brands and the special needs of the brands and then the other foot and how do you optimize the entire file and Thats. The work Thats ahead of us.
Speaker Change: Okay.
Speaker Change: And rather than the product sorry.
Speaker Change: Product launches.
Speaker Change: Q4 is not really a time for product launches. It's all about getting so we don't typically launch a lot in Q4, I would say that sport is probably the most recent place where we launched we re launched <unk> B S X in a big way in October very successful, we followed up with a relaunch of the knockout in.
Speaker Change: January also very successful I think our positioning on best at Bras and sport is a real competitive differentiator and something that we plan to lean into and were having lot of success there.
Speaker Change: Great.
Speaker Change: One quick follow up I don't know if you mentioned this in your guidance.
Speaker Change: How should we think about.
Speaker Change: The promotional activity.
Speaker Change: Like I said are going to be like more promotional versus last year flat or slightly lower just wanted to get a sense of that.
Scott: Yes, so Scott.
Scott: For the year were planning promos to be down so heavily we've touched on it it's more about some of the big box promos that we will be pulling back on we still will be promoting especially on the traffic driving categories both through.
Scott: Without the year, we do expect to.
Scott: Less promotions to be a sort of a tailwind on gross margin.
Speaker Change: Got it. Thank you so much and good luck.
Scott: Yeah.
Speaker Change: Thank you. Our next question comes from Ike <unk> with Wells Fargo. Your line is open.
Giuliano: Good morning, everyone. This is giuliano answer al.
Speaker Change: Just a quick question on international wondering if we could get some more color on what's going on there with the shift you saw from <unk> and maybe any growth expectations I'm for one two in Nebraska here if possible. Thank you.
Speaker Change: Yes, I think Julien I'll start and everybody else can can kind of jump in I think from our perspective, another successful fourth quarter and holiday season for the international team.
Speaker Change: We think we.
Speaker Change: In the prepared comments, we commented on really.
Speaker Change: Double digit growth from a retail perspective around the world with really all markets participating, particularly strong business and our franchise and travel retail markets.
Speaker Change: Joint venture with the UK partners at next.
Speaker Change: And then our China business also was very solid during the fourth quarter, even though we had some transfer of volume of some pull forward of volume into Q3 because of the calendar shift on singles day. So we feel like around the world. The business performed quite well in international I think it's important to note that we had new <unk>.
<unk> come online.
Speaker Change: Particularly in Vietnam in Argentina would be two dimension in 2024 and there are more planned for 2025 I think Additionally, as we turn the turn the page and come into 2025, we will start to see as the year goes on positive benefit from our European distribution center that the teams have been working on a third.
Speaker Change: Third party distribution center in the Netherlands that will particularly help support not just growth in and around the European countries, but also our digital business. So we'll be able to be much much faster to customer from a digital perspective satisfying those orders from.
Speaker Change: From the Netherlands area versus satisfying those from back here in Columbus, So a lot to like about the digital or the digital opportunity in international but just the international opportunity in general as we move into 2025, we will continue to expand the number of countries that we have a physical footprint and countries.
Speaker Change: Serbia, Slovenian Slovakia, and others that are on tap for the new year.
Speaker Change: Additionally, as I mentioned, just the opportunity to be closer to customer with product. We think is a big big win as we go forward.
Speaker Change: Okay.
Scott: Scott the only thing I would add is beyond the new country growth. The other thing thats exciting as we are comping mid single digits.
Speaker Change: As well so it's both.
Speaker Change: The white space, new opportunity growth positive comps as well.
Speaker Change: Great. Thank you so much.
Speaker Change: Thank you. Our next question comes from Brooke Roach with Goldman Sachs broke your line is open.
Speaker Change: Good morning, and thank you for taking our question. How are you, hoping you could speak to the size of your sport and swim businesses today as well as the growth opportunity that you see this year and medium term as you establish those larger businesses and then for Scott Yeah. There's been a lot of discussion about marketing today on the call was hoping.
Speaker Change: You could contextualize your expectations for SG&A for the year, and how that might trend as a percent of sales.
Speaker Change: Move throughout the rest of the year. Thank you.
Speaker Change: Sure I will start with sport and swim are relative to the total of Vf's inco business relatively small still growing quite.
Speaker Change: Quite nicely across all of last year and into this year, so definitely see it as a big growth opportunity.
Speaker Change: <unk>.
Speaker Change: A small part of the potential of even if we just look back to what it used to be it is not even close to what it used to be so feel like there's a long runway there and.
Speaker Change: And a real expertise that we have in this category that we can draw on.
Speaker Change: Early reads in spring are looking very very good so the moment momentum continues and we and we.
Speaker Change: We plan to build on it.
From a from a marketing SG&A perspective, marketing is largely going to be.
Speaker Change: That year on year, so, it's really more about how and where and when we spend that.
Speaker Change: That'll be different year on year, but the actual borrowers will be larger.
Speaker Change: We flattish from a total SG&A perspective.
Speaker Change: T J code of alluded.
Speaker Change: We need one to two points of growth, particularly in North America to leverage so thanks Scott.
Speaker Change: Slight deleverage on SG&A driven by some of the.
Speaker Change: The wage increases and whatnot.
Speaker Change: Kurt.
Speaker Change: As we did in the plus one 2% of growth Thats, where it will start to leverage on Australia.
Speaker Change: Great. Thanks, so much best of luck going forward.
Marni Shapiro: Thank you. Our next question comes from Marni Shapiro with the retail tracker Marni. Your line is open.
Marni Shapiro: Thanks, guys and congratulations on some of the progress that tank that Valentine's day set.
Marni Shapiro: I think it was the best I've seen in five years, maybe longer than that even it was fantastic.
Speaker Change: So I wanted to dig in just a little bit on paying you gave a pretty clear indication of what your goal is marketing wise on BS with sexy glamorous Lux Im curious.
Speaker Change: What like those three words are for pink and if youre not there yet and you're still working on it that's okay, but I'm curious what you're thinking about it today because that shopper that young girl is different today than that young girl was when the brand was born.
Speaker Change: And then just also curious we've talked a lot about marketing here you talked a lot about the success of.
Speaker Change: The fashion show and the Halo. It gave should we assume that the fashion show is going to be a thing in 'twenty five and what should the marketing look like across the quarters will it be a little less lumpy than this year than it was last year.
Speaker Change: Are you spying on me Martin.
Speaker Change: Obviously [laughter].
Speaker Change: I've been talking about those three were upwards quite a bit.
Speaker Change: The reality is as I think we need to go and do do a lot of studies about this consumer before we nail those three words.
Speaker Change: We're in the process of putting together a research plan to really reconnect with this customer before landing it and certainly we have ideas around this we know it has been at the heart of this brand we have a good idea of where we're going but I think we need to study this customer very carefully before putting that line in the sand.
Speaker Change: You asked about the fashion show so yes, the fashion show I am glad you asked about that actually because it's a really great story I think all in all the fashion show was a huge success, we know that it improved brand sentiment, especially with our target younger audience as well.
Speaker Change: Saw continued strength in our retained and reactivated customer file we sustained positive traffic and it looks like it's about eight to 10 weeks of tailwind coming off of the fashion show at the most important time of the year. So I think that's a very important learning, but I think we need to follow it up with something in that sort of late December into January time period.
Speaker Change: And that was the opportunity so to answer your question, Yes, we should we should see marketing be more leveled out there will be there will be a spike with the fashion show, but it won't be to the same degree.
Speaker Change: So the show will be back though in 'twenty five.
Speaker Change: Yeah.
Speaker Change: We are still working through that there will be some activation of some sort that is significant in the back half of the year and we're working through a number of options around that so there'll be more to share in.
Speaker Change: Future earnings calls excellent. Thank you guys.
Speaker Change: Thank you that is all the time, we have for questions, Kevin and I will hand, the call back to you.
Speaker Change: Okay, great. Thanks, Amanda that concludes our call. This morning. Thank you for your interest and we have some go thanks, everyone have a great day.
Speaker Change: Okay.
Speaker Change: Thank you all for participating in the Victoria's Secret <unk> company's fourth quarter 2024 earnings call that concludes today's conference. Please disconnect at this time and enjoy the rest of your day.