Victoria's Secret & Co. Q2 FY2025 earnings call

• Continued momentum in Q2, beating top and bottom line guidance. • Progress on Path to Potential strategy, including supercharging bra authority, recommitting to PINK, fueling Beauty growth, and evolving brand projection. • Body by Victoria launch on July 23 drove customer engagement and acquisition. • PINK x LoveShackFancy collaboration was record-breaking, with strong traffic and large basket sizes. • Return of Victoria's Secret Fashion Show on October 15 as a key brand moment. • Store traffic outpaced overall mall traffic, driven by innovative products, marketing, and visual merchandising. • Beauty business had eighth consecutive quarter of growth, up mid-single digits.

Net sales for Victoria's Secret & Co. were $1.459 billion, up 3% year-over-year. Comp sales grew 4%. Victoria's Secret and PINK brands both saw low single-digit sales growth with sequential improvement. North America bra sales were down low single digits but Q2 showed sequential improvement, and market share in total bras grew by approximately 0.5 point. Beauty business had eighth consecutive quarter of growth, with sales up mid-single digits, led by body care, seasonal fragrance, and Mist Collection. International net sales grew 22% to $228 million, with system-wide retail sales up low double digits, strong in China digital channel. Revenue contribution: Beauty represented a significant portion, with intimates (bras, panties) also key segments.

• Raised full-year net sales guidance to $6.33 billion to $6.41 billion from prior $6.2 billion to $6.3 billion. • Maintained adjusted operating income range for fiscal 2025 at $270 million to $320 million. • Adjusted for tariff impacts, with net tariff impact estimated at $100 million in 2025. • Maintained adjusted net income per diluted share range at $1.80 to $2.20. • Projected third-quarter net sales in range of $1.39 billion to $1.42 billion. • Expected third-quarter adjusted operating loss range of $35 million to $55 million. • Capital expenditures expected to be approximately $200 million in fiscal 2025, down from $220 million.

• Tariff impacts: Net tariff impact estimated at $100 million in 2025, with approximately 80 basis points pressure from air freight rates and tariffs in Q2. • Macro environment uncertainty: Need to navigate complex macro conditions while executing strategy. • Inventory optimization challenges: Ongoing efforts to optimize unit inventory levels and assortment across products and stores.

Q: How thinking about implication of end of de minimis exemption?

A: De minimis exemption isn't a big part of how we go to market, largely e-com distribution centers in Columbus, not material impact.

Q: Thoughts on innovation over back half and into '26, including Beauty?

A: VS has deep pipeline of bra innovation, PINK focuses on cultural connections and collaborations. Beauty has opportunity for innovation too, building on current momentum.

Q: Gross margin, pricing, and Store of the Future traffic?

A: Pulling back on promos, continuing to drive regular priced sales. Store of the Future remodel or partial shows double-digit sales lift from pre to post.

Q: International business performance and go-to-market strategy?

A: International business up nicely, core categories of Beauty and intimates strong. Go-to-market strategy similar globally as in North America.

Q: Fashion show focus and SG&A for it?

A: Fashion show details to be unveiled, marketing dollars flat year-over-year with movements between quarters.

Q: Intimates category, specifically panties pressure?

A: Core intimates business improved in Q2, panties strong in both brands, bras saw full priced selling positive but less comp due to less semiannual sale.

Q: Holiday season plans and fashion learnings?

A: Focus on holiday gifting, importance of drumbeat of newness and content, shifting messaging to capitalize on sport and Valentine's Day later in quarter.

Q: Inventory planning and pricing power?

A: Working on shortening production lead times, optimizing size breakdowns and assortments. Pricing power exists where emotion, quality, and marketing align, with strategic price modifications considered.

Q: Tariff impact and mitigation for this year and next?

A: Tariff impact estimated at $100 million in 2025, with $70 million mitigation. Mitigation includes optimizing costs, diversifying sourcing, and select pricing adjustments; more mitigation in 2026 with efforts on less air, more ocean freight and resourcing out of different countries.