Shoppers may be feeling depressed about soaring prices, but they’re still shelling out big bucks for new bras and underwear. victoria’s secret.
The lingerie retailer on Tuesday raised its full-year outlook after beating first-quarter revenue expectations, citing lower customs costs and more customers buying products at full price. Victoria’s Secret stock ended up 47%.
“We had very consistent double-digit (sales) growth across Victoria’s Secret, Pink, beauty channels, digital, in-store and internationally, all performing very well,” CEO Hilary Super said in an interview with CNBC. “Supercharging bras is one of our most important initiatives, where we’re seeing double-digit (like-for-like sales growth). And I think the loyalty that bras create and the anchor that they have in the business is so important.”
Super added that the company grew sales while reducing promotions “significantly” and gained market share during the quarter, especially among shoppers aged 18 to 24.
Some retailers experienced strong growth in the first quarter, which can be attributed to increased tax refunds. Scott Sekera, Victoria’s Secret’s finance chief, said that while some customers took advantage of the extra stimulus money to shop in stores, it was a “normal amount” and the trend has been consistent so far this quarter, even as tax refunds have dried up for many.
According to LSEG, Victoria’s Secret expects full-year sales to be between $7.03 billion and $7.13 billion, up from the previous range of $6.85 billion to $6.95 billion and well above expectations of $6.99 billion.
The company also raised its full-year guidance for adjusted opening earnings by more than $100 million. Adjusted operating income is expected to be in the range of $550 million to $580 million, up from the previous range of $430 million to $460 million.
Sekera said he raised his outlook as higher-than-expected sales strengthened leverage on fixed costs and also factored in lower tariffs after much of President Donald Trump’s sweeping mandate was ruled illegal.
“All of this is predicated on the experience we had in Q1, the momentum going into Q2 and how we feel about the start of the second half,” Sekera said.
The company also issued a rosy outlook for the current quarter, while some of its peers have issued conservative outlooks as they monitor whether consumers will cut back on spending without a boost from tax refunds. LSEG said it expected sales to be between $1.59 billion and $1.62 billion, higher than its forecast of $1.56 billion.
Here’s how Victoria’s Secret’s fiscal first quarter results compare to Wall Street expectations, based on a survey of analysts by LSEG.
Earnings per share: 60 cents adjusted, 30 cents expected; Revenue: $1.56 billion, $1.52 billion expected.
The company reported net income of $47.7 million, or 56 cents per share, for the three months ended May 2, compared with a loss of $1.66 million, or 2 cents per share, a year earlier. Excluding one-time restructuring charges, Victoria’s Secret’s earnings per share were 60 cents.
Sales were $1.56 billion, an increase of about 15% from $1.35 billion in the same period last year. Comparable sales, which include store and e-commerce revenue, rose 13%, beating expectations of 11.4%, according to Street Accounts.
Victoria’s Secret’s performance marks another milestone for the company. Super, who has been with the retailer for about two years, said the management team she installed is celebrating its one-year anniversary and the turnaround efforts they have been working on are starting to pay off.
“Once you get into that year, you start to double your contributions. You see patterns, you see where things are going, and I think you can really synergize your work,” Super said. “We’re still in the early stages. I think we have a good idea of where we’re going. If anything, as we continue to build these strategies and grow these businesses, we’ll see new opportunities. So it’s important to phase them in and make sure we’re committed to what we’re doing.”
Super said the company saw sales growth across all income groups during the quarter, but most importantly those with annual revenue of less than $50,000 and those with annual revenue of $200,000 or more showed the most growth, showing that its products, not price or discounts, are winners.
Since Super took over, she has worked to reconnect Victoria’s Secret with its core identity: a sexy lingerie brand that sacrifices comfort to offer products that are more emotional than practical. She has been working to grow the beauty business, reinvigorate the Pink brand, and reinvent the bra line that serves as the backbone of the entire company.
In recent years, Victoria’s Secret has faced savvy new competitors, including changing attitudes about beauty standards and criticism of the perpetuation of unrealistic stereotypes, especially through models.
Grocers have been working to address some of these problems while building businesses that can attract a new generation of shoppers.
One thing that helps the company is its large store footprint in malls, something that has been criticized in the past.
“We are very good at that from practical experience and our stores have proven to be a competitive advantage,” Super said. “Those are the places she wants to go and the experiences she wants to have for her.”
