Victoria's Secret & Co. Reports First Quarter 2025 Results

Victoria's Secret & Co. (VSCO) reported Q1 2025 net sales of $1.353 billion, exceeding their guidance, but flat compared to Q1 2024, with comparable sales down 1%. Adjusted operating income of $32 million also surpassed expectations. The company reaffirmed its full-year 2025 sales guidance of $6.2 billion to $6.3 billion, but lowered the adjusted operating income outlook to $270 million to $320 million, citing an increased tariff impact.

Analysis

Victoria’s Secret & Co. (VSCO) reported first-quarter 2025 financial results that, while exceeding its own guidance for sales and adjusted operating income, depicted a challenging operational landscape. Net sales for Q1 2025 were $1.353 billion, marginally above the guided range of $1.30 billion to $1.33 billion, yet essentially flat compared to $1.359 billion in Q1 2024. Total comparable sales registered a 1% decline, following a 5% decrease in the prior year's comparable quarter. GAAP operating income fell to $20 million from $26 million year-over-year, while adjusted operating income, at $32 million, beat the company's $10 million to $30 million guidance but was down from $40 million in Q1 2024. The company reported a net loss of $2 million ($0.02 per diluted share), an improvement from a $4 million net loss ($0.05 per diluted share) in the prior year, while adjusted net income was $7 million ($0.09 per diluted share), near the high end of its guidance but down from $9 million ($0.12 per diluted share) in Q1 2024. Segment performance showed strength in International sales, which grew 9.3% to $198.4 million, while North American store sales declined 1.1% and Direct sales fell 3.5%. The company reaffirmed its full-year 2025 net sales guidance of $6.2 billion to $6.3 billion. However, it revised its full-year adjusted operating income forecast downwards to $270 million to $320 million, from a previous range of $300 million to $350 million, attributing this reduction to an anticipated $50 million net tariff impact. The second-quarter 2025 net sales are projected to be between $1.380 billion and $1.410 billion, implying a slight year-over-year decline, with adjusted operating income expected between $15 million and $35 million.

Key Decisions for Investors

• Investors should carefully evaluate the implications of the reaffirmed full-year sales guidance juxtaposed with the lowered adjusted operating income outlook, which signals potential margin compression primarily due to the $50 million tariff impact.
• Monitor the company's ability to manage costs and navigate macroeconomic uncertainties, particularly focusing on strategies to improve comparable sales which declined 1% in Q1.
• Assess the progress in key growth initiatives, such as the Beauty business, PINK apparel, sport, and swim categories, and their capacity to offset persistent softness in other areas and drive overall profitability despite the challenging retail environment and increased tariff burden.