Victoria's Secret & Co. Q3 FY2025 earnings call

• Strategic pillars: The company's path to potential strategy includes supercharging bra authority, recommitting to PINK, fueling growth in beauty, and evolving brand projection.
• Fashion show impact: The Victoria's Secret Fashion Show had cultural impact, driving Intimates business growth and customer acquisition. It propelled the brand into cultural conversation, boosting mindshare, customer share, and market share.
• Customer acquisition: The total customer file grew for the first time this year, with growth from new customers, reversing the prior shrinking trend.
• Bra authority: Focus on market leadership in bras through innovation, education, digital marketing, and in-store experiences to unlock growth and deepen loyalty.
• PINK performance: PINK had double-digit sales growth, strong in apparel, with successful collaborations like Love Shack Fancy and presence in the fashion show driving awareness and connection.
• Beauty growth: Beauty is a high-frequency category with opportunity to increase customer purchase, investing in innovation and talent to fuel growth.

Net sales for the third quarter were $1.47 billion, a 9% increase year-over-year. Adjusted gross margin expanded by 170 basis points, and earnings grew by 45%. Growth was seen across Victoria's Secret, PINK, and Beauty. The international business achieved its third consecutive quarter of double-digit retail sales growth. The Intimates business returned to growth, up mid-single digits, gaining over 1% share in the U.S. Intimates market. The Beauty business grew low single digits. In North America, the Victoria's Secret brand had a mid-single-digit sales increase, while PINK saw a low double-digit sales increase. Internationally, reported sales reached $265 million, a 34% growth, with retail sales growing in the high teens, particularly strong in China's digital channel.

• Full-year net sales outlook raised to $6.45 billion to $6.48 billion (prior $6.33 billion to $6.41 billion).
• Adjusted operating income outlook raised to $350 million to $375 million (prior $270 million to $320 million).
• Adjusted net income per diluted share outlook raised to $2.40 to $2.65 (prior $1.80 to $2.20).
• Fourth quarter net sales forecasted to be $2.17 billion to $2.2 billion.
• Fourth quarter adjusted operating income expected to be $265 million to $290 million.
• Expected fourth quarter adjusted gross margin rate to be 37% to 38%.

• Tariffs: Estimated net tariff impact of approximately $90 million for 2025, with $65 million in the fourth quarter, mitigated by optimizing costs, diversifying sourcing, and pricing adjustments.

Q: Could you elaborate on maintaining momentum post fashion show and market share opportunities?

A: Hillary Super mentioned that momentum from the fashion show is seen in traffic and international growth, and the company will continue its path to potential strategies, with a pipeline of innovation in various categories.

Q: Elaborate on strategies to pull back on promotions and its impact on gross margin?

A: Scott Sekella stated that the company continues to pull back on promotions, using GWPs effectively, with success in Black Friday, and promotions being a multiyear journey that contributes to gross margin expansion.

Q: Change in rate of new customer acquisition and its profile?

A: Hillary Super said new customers include 18-24-year-olds, have a higher average order value, and there is growth across all income cohorts.

Q: EBIT margin profile and pace of expansion?

A: Scott Sekella said a low double-digit EBIT margin is achievable over the next couple of years, leveraging growth and strategic investments.

Q: Beauty progress, marketing of new customers, and Store of the Future?

A: Hillary Super talked about beauty optimization and marketing to new customers, while Scott Sekella discussed enhancements to the Store of the Future to better drive the path to potential strategy.

Q: Apparel mix, lead time in pink apparel?

A: Hillary Super said the pink apparel mix is above 40%, and the company is working on shortening lead time in pink apparel.

Q: Beauty home launch, pink beauty, marketing spend?

A: Hillary Super mentioned beauty hires and home launch learnings, while Scott Sekella said marketing spend will tick up to support growth.

Q: Gross margin ex tariffs and margin trajectory?

A: Scott Sekella said the ex-tariff gross margin is on an upward trend, with mitigation efforts to offset tariff headwinds over time.