Midway through its reinvention, Victoria’s Secret is showing signs of recovery

Victoria’s Secret & Co has seen signs of recovery as sales and net income edged up in the fourth quarter following a period of declines.

The company reported net income of US$181 million for the 14-week ended February 3, compared to net income of $173 million for the 13-week fourth quarter of FY22.

Net sales were up 3 per cent year-on-year to $2.082 billion, while total comparable sales decreased 6 per cent.

According to Neil Saunders, MD of GlobalData, the extra week helped Victoria’s Secret return to growth, as sales would be down 0.9 per cent without it.

However, the number is still pleasing because the decline has softened substantially from the mid-single percentage posted over the past six months, he continued. Compared to 2021, fourth-quarter sales – minus the extra week – are down 7.9 per cent, much better than the 12.2 per cent two-year decline posted in the third quarter.

Saunders described the period as the “golden quarter”, during which the business saw some relief from relatively strong Black Friday trade and was helped by good demand for Christmas gifting. Still, trade over the quarter was “choppy” and the core Victoria’s Secret brand continues to suffer from a loss of customers, which translated to a drop in comparable sales.

“All that said, we appreciate that Victoria’s Secret is only mid-way through its journey of reinvention, so more time is needed for things to come together,” the analyst remarked.

For the full year, the company booked a net income of $109 million compared to $348 million in FY22. Net sales fell 3 per cent to $6.182 billion and total comparable sales dropped 9 per cent.

The brand forecasts 52-week FY24 net sales to be about $6 billion, down by the “low single digits”. According to Saunders, this suggests Victoria’s Secret is not getting back to growth any time soon despite the gradual improvement throughout the year. 

“This is partly understandable given the continued softness among consumers, but it also underlines how much work is left to do in the process of brand reinvention. The company may now be headed in the right direction, but is moving at a relatively slow pace,” he concluded.

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