Victoria's Secret & Co.
12/05/2025 | Press release | Distributed by Public on 12/05/2025 06:17
Quarterly Report for Quarter Ending November 1, 2025 (Form 10-Q)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of financial condition and results of operations are based upon our Consolidated Financial Statements, which have been prepared in accordance with GAAP. The following information should be read in conjunction with our financial statements and the related notes included in Item 1. Financial Statements. References to "we," "us," "our," or the "Company" mean Victoria's Secret & Co. together with its subsidiaries.
Our operating results are generally impacted by economic changes. Accordingly, we monitor the retail environment using certain key industry performance indicators including competitor performance and mall traffic data. These metrics can provide insight into consumer spending patterns and shopping behavior in the current retail environment and assist us in assessing our performance as well as the potential impact of industry trends on our future operating results. Additionally, we evaluate a number of internal key performance indicators including comparable sales, gross profit, operating income and other performance metrics such as sales per average selling square foot in assessing our performance. To evaluate our net sales, we utilize traffic, conversion (which we define as the percentage of customers who visit our stores or digital sites and make a purchase), units per transaction, average unit retail (which we define as the average price per unit purchased) and average transaction value (which we define as units per transaction multiplied by average unit retail).
Executive Overview
Victoria's Secret & Co. operates globally recognized brands that specialize in women's intimate, apparel, personal care and beauty products:
•Victoria's Secret- A world-leading lingerie brand with a rich heritage of serving women worldwide.
•PINK- A vibrant fashion and lifestyle brand designated for young women, built on a strong foundation in intimates.
•Adore Me- A technology-driven, digital first brand that offers innovative, inclusive intimates for women of all sizes, budgets and lifestyles.
Together, these brands are united by a commitment to supporting women-helping them express confidence, sexiness and strength while fostering connection and community.
Our merchandise is available through our digital channels, in retail stores across the U.S., Canada and China, and through international stores, websites and mobile applications operated by partners under franchise, license, wholesale and joint venture arrangements. With a presence in approximately 70 countries, we benefit from strong global brand recognition, a compelling product assortment and a deep, lasting connection with our customers.
Net sales in the third quarter of 2025 increased 9%, to $1.472 billion, compared to the third quarter of 2024. In North America, net sales increased 5% in the stores channel and increased 4% in the direct channel compared to the third quarter of 2024. In the stores channel, the increase was driven by Victoria's Secret and PINK increases in average transaction value and conversion, while traffic remained flat compared to the third quarter of 2024. On a comparable basis, traffic in the stores channel increased compared to the third quarter of 2024. In the direct channel, Victoria's Secret and PINK increases in traffic and average transaction value were partially offset by a decrease in conversion compared to the third quarter of 2024. Net sales in our international channel increased 34% compared to the third quarter of 2024.
Our operating loss in the third quarter of 2025 improved $28 million, to $19 million, compared to the third quarter of 2024 and our operating loss rate (expressed as a percentage of net sales) improved to (1.3%) from (3.5%) in the third quarter of 2024. The improvement in operating loss compared to the third quarter of 2024 was primarily driven by an increase in net sales and gross profit, partially offset by increases in tariff costs, marketing expenses, store selling expenses and incentive compensation expenses.
We continue to focus on the key priorities of our Path to Potential strategic plan: Supercharge our Bra Authority; Recommit to PINK; Fuel Growth in Beauty; and Evolve Our Brand Projection & Go-To-Market Strategy. We are maintaining our disciplined approach, focusing on operational excellence, strategic capital allocation and continued investment in the capabilities that differentiate us in the marketplace. We remain committed to delivering value for our shareholders while building the foundation for sustained, long-term profitable growth.
For additional information related to our third quarter of 2025 and year-to-date 2025 financial performance, see "Results of Operations."
Tariffs and Macro Environment
We face near-term headwinds and ongoing uncertainty in the macro environment, which we have and will continue to manage aggressively. U.S. tariffs on imports from other countries, as well as additional threatened tariffs and any retaliatory measures by impacted exporting countries remains uncertain. We estimate tariffs, net of mitigation efforts, negatively impacted operating income (loss) by approximately $15 million and $25 million in the third quarter of 2025 and year-to-date 2025, respectively. We continue to identify and execute mitigation strategies as the tariff environment evolves.
Security Incident Involving Information Technology Systems
As previously disclosed, on May 24, 2025, we detected a security incident involving our information technology systems. We immediately enacted our response protocols and the incident has been resolved. All systems were restored and fully operational in the second quarter of 2025.
We conducted an investigation to ascertain the full scope and impact of the incident. This incident did not cause a material disruption to our operations or material adverse impact to our financial results. We estimate the security incident negatively impacted the second quarter and year-to-date 2025 net sales by approximately $20 million and operating income (loss) by approximately $14 million, which does not consider the impact of any potential insurance recoveries in future periods. We maintain cybersecurity insurance and the claim process for potential insurance recoveries related to this incident is ongoing.
Non-GAAP Financial Information
In addition to our results provided in accordance with GAAP above and throughout this Quarterly Report on Form 10-Q, provided below are non-GAAP financial measures that present operating income (loss), net income (loss) attributable to Victoria's Secret & Co. and net income (loss) per diluted share attributable to Victoria's Secret & Co. on an adjusted basis, which remove certain non-recurring, infrequent or unusual items that we believe are not indicative of the results of our ongoing operations due to their size and nature. The intangible asset amortization excluded from these non-GAAP financial measures is excluded because the amortization, unlike the related revenue, is not affected by operations of any particular period unless an intangible asset becomes impaired or the estimated useful life of an intangible asset is revised. We use adjusted financial information as key performance measures of our results of operations for the purpose of evaluating performance internally. These non-GAAP measurements are not intended to replace the presentation of our financial results in accordance with GAAP. Instead, we believe that the presentation of adjusted financial information provides additional information to investors to facilitate the comparison of past and present operations. Further, our definition of non-GAAP financial measures may differ from similarly titled measures used by other companies. The table below reconciles the most directly comparable GAAP financial measure to each non-GAAP financial measure.
| Third Quarter | Year-to-Date | ||||||||||||||||||||||
| (in millions, except per share amounts) | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||
| Reconciliation of Reported to Adjusted Operating Income (Loss) | |||||||||||||||||||||||
| Reported Operating Income (Loss) - GAAP | $ | (19) | $ | (47) | $ | 42 | $ | 42 | |||||||||||||||
| Amortization of Intangible Assets (a) | 6 | 6 | 19 | 19 | |||||||||||||||||||
| Restructuring and Other One-time Items (b) | 7 | 13 | 20 | 13 | |||||||||||||||||||
| Adore Me Acquisition-related Items (c) | 6 | - | 6 | 1 | |||||||||||||||||||
| Adjusted Operating Income (Loss) | $ | - | $ | (28) | $ | 87 | $ | 74 | |||||||||||||||
|
Reconciliation of Reported to Adjusted Net Income (Loss) Attributable to Victoria's Secret & Co.
|
|||||||||||||||||||||||
|
Reported Net Loss Attributable to Victoria's Secret & Co. - GAAP
|
$ | (37) | $ | (56) | $ | (23) | $ | (28) | |||||||||||||||
| Amortization of Intangible Assets (a) | 6 | 6 | 19 | 19 | |||||||||||||||||||
| Restructuring and Other One-time Items (b) | 7 | 13 | 20 | 13 | |||||||||||||||||||
| Adore Me Acquisition-related Items (c) | 6 | 1 | 6 | 4 | |||||||||||||||||||
| Tax Effect of Adjusted Items | (4) | (3) | (9) | (7) | |||||||||||||||||||
|
Adjusted Net Income (Loss) Attributable to Victoria's Secret & Co.
|
$ | (22) | $ | (39) | $ | 13 | $ | 1 | |||||||||||||||
|
Reconciliation of Reported to Adjusted Net Income (Loss) Per Diluted Share Attributable to Victoria's Secret & Co.
|
|||||||||||||||||||||||
|
Reported Net Loss Per Diluted Share Attributable to Victoria's Secret & Co. - GAAP
|
$ | (0.46) | $ | (0.71) | $ | (0.28) | $ | (0.36) | |||||||||||||||
| Amortization of Intangible Assets (a) | 0.06 | 0.06 | 0.17 | 0.17 | |||||||||||||||||||
| Restructuring and Other One-time Items (b) | 0.07 | 0.13 | 0.19 | 0.13 | |||||||||||||||||||
| Adore Me Acquisition-related Items (c) | 0.07 | 0.02 | 0.07 | 0.06 | |||||||||||||||||||
|
Adjusted Net Income (Loss) Per Diluted Share Attributable to Victoria's Secret & Co.
|
$ | (0.27) | $ | (0.50) | $ | 0.15 | $ | 0.01 | |||||||||||||||
________________
(a)In both the third quarter of 2025 and 2024, we recognized amortization expense of $6 million ($5 million after-tax) in general, administrative and store operating expense, related to our definite-lived intangible assets. In both year-to-date 2025 and 2024, we recognized amortization expense of $19 million ($14 million after-tax) in general, administrative and store operating expense, related to our definite-lived intangible assets. For additional information, see Note 2, "Acquisition" and Note 7, "Long-Lived Assets" included in Item 1. Financial Statements.
(b)In the third quarter of 2025, we recognized pre-tax charges of $7 million ($6 million after-tax), $6 million included in general, administrative and store operating expense and $1 million included in buying and occupancy expense, related to activities to continue to restructure our executive leadership team and organizational structure, as well as income related to a one-time item. Year-to-date 2025, we recognized pre-tax charges of $20 million ($16 million after-tax), $17 million included in general, administrative and store operating expense and $3 million included in buying and occupancy expense, related to activities to continue to restructure our executive leadership team and organizational structure, as well as net expense related to other one-time items. In the third quarter and year-to-date 2024, we recognized a pre-tax charge of $13 million ($11 million after-tax) in general, administrative and store operating expense related to the appointment of a new CEO and the elimination of two executive officer roles to restructure our executive leadership team.
(c)In the third quarter and year-to-date 2025, we recognized pre-tax expense of $6 million ($5 million after-tax) included in general, administrative and store operating expense related to the financial impact of purchase accounting items and professional service costs related to the acquisition of Adore Me. In the third quarter of 2024, we recognized pre-tax expense of $1 million ($1 million after-tax), income of less than $1 million included in general, administrative and store operating expense and interest expense of $2 million, related to the financial impact of purchase accounting items related to the acquisition of Adore Me. Year-to-date 2024, we recognized pre-tax expense of $4 million ($5 million after-tax), expense of $1 million included in general, administrative and store operating expense and interest expense of $4 million, related to the financial impact of purchase accounting items related to the acquisition of Adore Me. For additional information, see Note 2, "Acquisition" included in Item 1. Financial Statements.
Store Data
The following table compares U.S. company-operated store data for the third quarter of 2025 to the third quarter of 2024 and year-to-date 2025 to year-to-date 2024:
| Third Quarter | Year-to-Date | ||||||||||||||||||||||||||||||||||
| 2025 | 2024 | % Change | 2025 | 2024 | % Change | ||||||||||||||||||||||||||||||
| Sales per Average Selling Square Foot (a) | $ | 137 | $ | 127 | 8 | % | $ | 408 | $ | 390 | 5 | % | |||||||||||||||||||||||
| Sales per Average Store (in thousands) (a) | $ | 948 | $ | 877 | 8 | % | $ | 2,814 | $ | 2,677 | 5 | % | |||||||||||||||||||||||
| Average Store Size (selling square feet) | 6,914 | 6,878 | 1 | % | |||||||||||||||||||||||||||||||
| Total Selling Square Feet (in thousands) | 5,337 | 5,468 | (2 | %) | |||||||||||||||||||||||||||||||
________________
(a)Sales per average selling square foot and sales per average store, which are indicators of store productivity, are calculated based on store sales for the period divided by the average, including the beginning and end of period, of total square footage and store count, respectively.
The following table represents store data for year-to-date 2025:
| Stores at | Stores at | ||||||||||||||||||||||
| February 1, 2025 | Opened | Closed | November 1, 2025 | ||||||||||||||||||||
| Company-Operated: | |||||||||||||||||||||||
| U.S. | 782 | 12 | (26) | 768 | |||||||||||||||||||
| Canada | 24 | 1 | (1) | 24 | |||||||||||||||||||
| Subtotal Company-Operated | 806 | 13 | (27) | 792 | |||||||||||||||||||
| China Joint Venture: | |||||||||||||||||||||||
| Beauty & Accessories (a) | 30 | - | (9) | 21 | |||||||||||||||||||
| Full Assortment | 40 | 3 | (1) | 42 | |||||||||||||||||||
| Subtotal China Joint Venture | 70 | 3 | (10) | 63 | |||||||||||||||||||
| Partner-Operated: | |||||||||||||||||||||||
| Beauty & Accessories | 324 | 33 | (18) | 339 | |||||||||||||||||||
| Full Assortment | 181 | 29 | (4) | 206 | |||||||||||||||||||
| Subtotal Partner-Operated | 505 | 62 | (22) | 545 | |||||||||||||||||||
| Adore Me | 6 | - | (2) | 4 | |||||||||||||||||||
| Total | 1,387 | 78 | (61) | 1,404 | |||||||||||||||||||
________________
(a)Includes seven partner-operated stores as of November 1, 2025.
The following table represents store data for year-to-date 2024:
| Stores at | Stores at | ||||||||||||||||||||||
| February 3, 2024 | Opened | Closed | November 2, 2024 | ||||||||||||||||||||
| Company-Operated: | |||||||||||||||||||||||
| U.S. | 808 | 16 | (35) | 789 | |||||||||||||||||||
| Canada | 23 | 1 | - | 24 | |||||||||||||||||||
| Subtotal Company-Operated | 831 | 17 | (35) | 813 | |||||||||||||||||||
| China Joint Venture: | |||||||||||||||||||||||
| Beauty & Accessories (a) | 34 | 2 | (5) | 31 | |||||||||||||||||||
| Full Assortment | 36 | 2 | - | 38 | |||||||||||||||||||
| Subtotal China Joint Venture | 70 | 4 | (5) | 69 | |||||||||||||||||||
| Partner-Operated: | |||||||||||||||||||||||
| Beauty & Accessories | 307 | 22 | (12) | 317 | |||||||||||||||||||
| Full Assortment | 156 | 24 | (5) | 175 | |||||||||||||||||||
| Subtotal Partner-Operated | 463 | 46 | (17) | 492 | |||||||||||||||||||
| Adore Me | 6 | - | - | 6 | |||||||||||||||||||
| Total | 1,370 | 67 | (57) | 1,380 | |||||||||||||||||||
________________
(a)Includes twelve partner-operated stores as of November 2, 2024.
Results of Operations
Third Quarter of 2025 Compared to Third Quarter of 2024
Operating Loss
For the third quarter of 2025, our operating loss improved $28 million, to $19 million, compared to an operating loss of $47 million in the third quarter of 2024, and the operating loss rate (expressed as a percentage of net sales) improved to (1.3%) from (3.5%). The drivers of our operating loss results are discussed in the following sections.
Net Sales
The following table provides net sales for the third quarter of 2025 in comparison to the third quarter of 2024:
| 2025 | 2024 | % Change | |||||||||||||||
| Third Quarter | (in millions) | ||||||||||||||||
|
Stores - North America
|
$ | 778 | $ | 738 | 5 | % | |||||||||||
| Direct | 429 | 411 | 4 | % | |||||||||||||
| International (a) | 265 | 198 | 34 | % | |||||||||||||
| Total Net Sales | $ | 1,472 | $ | 1,347 | 9 | % | |||||||||||
_______________
(a)Results include consolidated joint venture sales in China, royalties associated with franchise partners sales, wholesale sales, and beginning in the third quarter of 2025 direct sales in the European Union. Direct sales in the European Union were $12 million in the third quarter of 2025. Prior to the third quarter of 2025, direct sales in the European Union are reported in our Direct channel.
The following table provides a reconciliation of net sales from the third quarter of 2024 to the third quarter of 2025:
| (in millions) | |||||
| 2024 Net Sales | $ | 1,347 | |||
| Sales Associated with Stores Included in the Comparable Stores Calculation | 32 | ||||
| Sales Associated with New, Closed and Non-comparable Remodeled Stores, Net | 10 | ||||
| Direct Channels (a) | 60 | ||||
| Credit Card Programs | 2 | ||||
| International Wholesale, Royalty and Sourcing | 21 | ||||
| Foreign Currency Translation | - | ||||
| 2025 Net Sales | $ | 1,472 | |||
_______________
(a)Results include net sales for all direct channels operated by the Company (in North America and International) and the direct channel in China operated by our consolidated joint venture.
The following table compares the third quarter of 2025 comparable sales to the third quarter of 2024:
| 2025 | 2024 | ||||||||||
| Comparable Sales (Stores and Direct) (a) | 8 | % | 3 | % | |||||||
| Comparable Store Sales (a) | 5 | % | 2 | % | |||||||
_______________
(a)The percentage change in comparable sales represents direct and comparable store sales. The percentage change in comparable store sales represents the change in sales at comparable stores only and excludes the change in sales from our direct channels. The change in comparable sales provides an indication of period over period growth (decline). A store is typically included in the calculation of comparable sales when it has been open 12 months or more and it has not had a change in selling square footage of 20% or more. Individual stores are excluded from the comparable sales calculation if they have been closed for four consecutive days or more and direct channels are excluded from the comparable sales calculation if they have been closed for 24 consecutive hours or more. Upon re-opening, the stores and direct channels are included in the calculation. Additionally, stores are excluded if total selling square footage in the mall changes by 20% or more through the opening or closing of a second store. The percentage change in comparable sales is calculated on a comparable calendar period as opposed to a fiscal basis. Comparable sales attributable to our international stores are calculated on a constant currency basis.
Net sales in the third quarter of 2025 increased $125 million, or 9%, to $1.472 billion compared to $1.347 billion in the third quarter of 2024.
In the stores channel, our North America net sales increased $40 million, or 5%, to $778 million compared to the third quarter of 2024 driven by an increase in average transaction value due to increases in average unit retail and units per transaction. The increase in net sales in our stores channel was also driven by an increase in conversion, while overall traffic remained flat compared to the third quarter of 2024. On a comparable basis, traffic in the stores channel increased compared to the third quarter of 2024.
In the direct channel, net sales increased $18 million, or 4%, to $429 million compared to the third quarter of 2024 as an increase in traffic and an increase in average transaction value due to increases in units per order and average unit retail were partially offset by a decrease in conversion. The increase in net sales in our direct channel was partially offset by a shift in the reporting of net sales to the international channel due to a change of fulfillment location whereby direct sales to customers in the European Union are now fulfilled by our distribution center in Europe as opposed to our distribution center in the Columbus, Ohio area.
In the international channel, net sales increased $67 million, or 34%, to $265 million compared to the third quarter of 2024. Increases in net sales in the third quarter of 2025 compared to the third quarter of 2024 were primarily driven by increases in net sales in China and sourcing sales to our partners. The increase in net sales in the third quarter of 2025 compared to the third quarter of 2024 was also due to a shift in the reporting of net sales to the international channel due to a change of fulfillment location whereby direct sales to customers in the European Union are now fulfilled by our distribution center in Europe as opposed to our distribution center in the Columbus, Ohio area.
Gross Profit
For the third quarter of 2025, our gross profit increased $68 million compared to the third quarter of 2024 to $536 million, and our gross profit rate (expressed as a percentage of net sales) increased to 36.4% from 34.8%.
The increase in gross profit dollars compared to the third quarter of 2024 was due to the increase in merchandise margin dollars primarily driven by an increase in net sales and a decrease in promotional activity, partially offset by an increase in tariff costs. Buying and occupancy expenses were approximately flat compared to the third quarter of 2024 as a decrease in rent expenses was offset by increases in incentive compensation expenses and expenses related to activities to continue to restructure our executive leadership team and organizational structure.
The gross profit rate increase compared to the third quarter of 2024 was primarily driven by leverage in buying and occupancy expenses as a result of the increase in net sales and a decrease in promotional activity, partially offset by an increase in tariff costs.
General, Administrative and Store Operating Expenses
For the third quarter of 2025, our general, administrative and store operating expenses increased $40 million, or 8%, to $555 million compared to the third quarter of 2024. The increase in general, administrative and store operating expenses compared to the third quarter of 2024 was primarily due to increases in marketing expenses, store selling expenses and incentive compensation expenses. The increase in general, administrative and store operating expenses compared to the third quarter of 2024 was also due to an increase in charges related to Adore Me purchase accounting items and professional service costs, partially offset by a decrease in expenses related to activities to continue to restructure our executive leadership team and organizational structure.
The general, administrative and store operating expense rate (expressed as a percentage of net sales) decreased to 37.7% from 38.2% compared to the third quarter of 2024 primarily due to leverage as a result of the increase in net sales.
Interest Expense
For the third quarter of 2025, our interest expense decreased $4 million to $18 million compared to the third quarter of 2024 primarily due to our lower average outstanding debt and lower average borrowing rates for our ABL Facility and Term Loan Facility.
Benefit for Income Taxes
For the third quarter of 2025, our effective tax rate was 16.0% compared to 21.3% in the third quarter of 2024. The third quarter of 2025 rate differed from our combined estimated federal and state statutory rate primarily due to foreign earnings taxed at a lower rate than our combined estimated federal and state statutory rate and a change in geographical mix of earnings. The third quarter of 2024 rate differed from our combined estimated federal and state statutory rate primarily due to foreign earnings taxed at a lower rate than our combined estimated federal and state statutory rate.
Results of Operations
Year-to-Date 2025 Compared to Year-to-Date 2024
Operating Income
For year-to-date 2025, operating income remained flat at $42 million compared to year-to-date 2024, and the operating income rate (expressed as a percentage of net sales) remained flat at 1.0%. The drivers of the operating income results are discussed in the following sections.
Net Sales
The following table provides net sales for year-to-date 2025 in comparison to year-to-date 2024:
| 2025 | 2024 | % Change | |||||||||||||||
| Year-to-Date | (in millions) | ||||||||||||||||
|
Stores - North America
|
$ | 2,325 | $ | 2,267 | 3 | % | |||||||||||
| Direct | 1,268 | 1,290 | (2 | %) | |||||||||||||
| International (a) | 691 | 567 | 22 | % | |||||||||||||
| Total Net Sales | $ | 4,284 | $ | 4,124 | 4 | % | |||||||||||
_______________
(a)Results include consolidated joint venture sales in China, royalties associated with franchise partners sales, wholesale sales, and beginning in the third quarter of 2025 direct sales in the European Union. Direct sales in the European Union were $12 million in the third quarter of 2025. Prior to the third quarter of 2025, direct sales in the European Union are reported in our Direct channel.
The following table provides a reconciliation of net sales from year-to-date 2024 to year-to-date 2025:
| (in millions) | |||||
| 2024 Net Sales | $ | 4,124 | |||
| Sales Associated with Stores Included in the Comparable Stores Calculation | 54 | ||||
| Sales Associated with New, Closed and Non-comparable Remodeled Stores, Net | 9 | ||||
| Direct Channels (a) | 46 | ||||
| Credit Card Programs | 2 | ||||
| International Wholesale, Royalty and Sourcing | 51 | ||||
| Foreign Currency Translation | (2) | ||||
| 2025 Net Sales | $ | 4,284 | |||
_______________
(a)Results include net sales for all direct channels operated by the Company (in North America and International) and the direct channel in China operated by our consolidated joint venture.
The following table compares year-to-date 2025 comparable sales to year-to-date 2024:
| 2025 | 2024 | ||||||||||
| Comparable Sales (Stores and Direct) (a) | 4 | % | (2 | %) | |||||||
| Comparable Store Sales (a) | 3 | % | (4 | %) | |||||||
________
(a)Comparable sales results for year-to-date 2025 exclude the impact from lost sales from our direct channels during the period of time the direct channels were closed as a result of the May 2025 security incident involving our information technology systems. The percentage change in comparable sales represents direct and comparable store sales. The percentage change in comparable store sales represents the change in sales at comparable stores only and excludes the change in sales from our direct channels. The change in comparable sales provides an indication of period over period growth (decline). A store is typically included in the calculation of comparable sales when it has been open 12 months or more and it has not had a change in selling square footage of 20% or more. Individual stores are excluded from the comparable sales calculation if they have been closed for four consecutive days or more and direct channels are excluded from the comparable sales calculation if they have been closed for 24 consecutive hours or more. Upon re-opening, the stores and direct channels are included in the calculation. Additionally, stores are excluded if total selling square footage in the mall changes by 20% or more through the opening or closing of a second store. The percentage change in comparable sales is calculated on a comparable calendar period as opposed to a fiscal basis. Comparable sales attributable to our international stores are calculated on a constant currency basis.
Net sales year-to-date 2025 increased $160 million, or 4%, to $4.284 billion compared to $4.124 billion year-to-date 2024.
In the stores channel, our North America net sales increased $58 million, or 3%, to $2.325 billion, compared to year-to-date 2024 as an increase in average transaction value due to increases in average unit retail and units per transaction was partially offset by a decrease in traffic. Conversion was flat compared to year-to-date 2024. On a comparable basis, traffic in the stores channel increased compared to year-to-date 2024.
In the direct channel, net sales decreased $22 million, or 2%, to $1.268 billion compared to year-to-date 2024. We estimate the website closure due to the security incident negatively impacted net sales in the second quarter of 2025 by approximately $20 million. Excluding the impact from the security incident, increases in traffic, units per order and average unit retail were offset by a decrease in conversion compared to year-to-date 2024. The decrease in net sales in our direct channel was also due to a shift in the reporting of net sales to the international channel due to a change of fulfillment location whereby direct sales to customers in the European Union are now fulfilled by our distribution center in Europe as opposed to our distribution center in the Columbus, Ohio area.
In the international channel, net sales increased $124 million, or 22%, to $691 million compared to year-to-date 2024. Increases in net sales year-to-date 2025 compared to year-to-date 2024 were driven by increases in net sales in China, sourcing sales to our partners, royalties earned associated with franchise sales in many countries outside of North America and our wholesale arrangements. The increase in net sales year-to-date 2025 compared to year-to-date 2024 was also due to a shift in the reporting of net sales to the international channel due to a change of fulfillment location whereby direct sales to customers in the European Union are now fulfilled by our distribution center in Europe as opposed to our distribution center in the Columbus, Ohio area.
Gross Profit
For year-to-date 2025, our gross profit increased $58 million compared to year-to-date 2024 to $1.529 billion, and our gross profit rate (expressed as a percentage of net sales) remained flat at 35.7%.
The increase in gross profit dollars compared to year-to-date 2024 was primarily due to the increase in merchandise margin dollars primarily driven by an increase in net sales and a decrease in promotional activity, partially offset by an increase in tariff costs. Buying and occupancy expenses were approximately flat compared to year-to-date 2024 as a decrease in rent expenses was offset by an increase in incentive compensation expenses, a $6 million gain on sale of certain non-store corporate-related assets in the second quarter of 2024 and an increase in expenses related to activities to restructure our executive leadership team and organizational structure.
The gross profit rate remained flat compared to year-to-date 2024 primarily driven by leverage in buying and occupancy expenses as a result of the increase in net sales and a decrease in promotional activity, offset by an increase in tariff costs.
General, Administrative and Store Operating Expenses
For year-to-date 2025, our general, administrative and store operating expenses increased $58 million, or 4%, to $1.487 billion compared to year-to-date 2024. The increase in general, administrative and store operating expenses compared to year-to-date 2024 was primarily driven by increases in store selling expenses, incentive compensation expenses and marketing expenses. The increase in general, administrative and store operating expenses compared to year-to-date 2024 was also due to increases in charges related to Adore Me purchase accounting items and professional service costs and expenses related to activities to continue to restructure our executive leadership team and organizational structure.
The general, administrative and store operating expense rate (expressed as a percentage of net sales) remained flat at 34.7% compared to year-to-date 2024 primarily due to leverage as a result of the increase in net sales, offset by an increase in expenses noted above.
Interest Expense
For year-to-date 2025, our interest expense decreased $13 million to $53 million compared to year-to-date 2024 primarily due to our lower average outstanding debt and lower average borrowing rates for our ABL Facility and Term Loan Facility.
Provision for Income Taxes
For year-to-date 2025, our effective tax rate was (42.9%) compared to (7.8%) year-to-date 2024. The year-to-date 2025 rate differed from our combined estimated federal and state statutory rate primarily due to additional tax expense related to share-based compensation awards that vested in fiscal year 2025 and due to non-deductible liabilities related to contingent consideration and contingent compensation payments under the terms of the Merger Agreement. The year-to-date 2024 rate differed from our combined estimated federal and state statutory rate primarily due to additional tax expense related to share-based compensation awards that vested in fiscal year 2024.
FINANCIAL CONDITION
Liquidity and Capital Resources
Liquidity, or access to cash, is an important factor in determining our financial stability. We are committed to maintaining adequate liquidity. Cash generated from our operating activities provides the primary resources to support current operations, growth initiatives, seasonal funding requirements and capital expenditures. Net cash provided by (used for) operating activities is impacted by our net income (loss) and working capital changes. Our net income (loss) is impacted by, among other things, sales volume, seasonal sales patterns, success of new product introductions, profit margins and income taxes. Historically, sales are higher during the fourth quarter of the fiscal year due to seasonal and holiday-related sales patterns. Generally, our need for working capital peaks during the summer and fall months as inventory builds in anticipation of the holiday period.
Our ability to fund our operating needs is primarily dependent upon our ability to continue to generate positive cash flow from operations, as well as borrowing capacity under our ABL Facility, which we rely on to supplement cash generated by our operating activities, particularly when our need for working capital peaks in the summer and fall months as discussed above. Management believes that our cash balances and funds provided by operating activities, along with the borrowing capacity under our ABL Facility, taken as a whole, provide (i) adequate liquidity to meet all of our current and long-term obligations when due, (ii) adequate liquidity to fund capital expenditures, and (iii) flexibility to consider investment opportunities that may arise. However, certain investment opportunities or seasonal funding requirements may require us to seek additional debt or equity financing, and there can be no assurance that we will be able to obtain additional debt or equity financing on acceptable terms, if at all, in the future.
We expect to utilize our cash flows to continue to invest in our brands, talent, capabilities and strategic initiatives as well as to repay our indebtedness over time. We believe that our available short-term and long-term capital resources are sufficient to fund our working capital and other cash flow requirements over the next 12 months.
Working Capital and Capitalization
Based upon our cash balances and cash provided by our operating activities, along with the borrowing capacity under our ABL Facility, we believe we will be able to continue to meet our working capital needs.
The following table provides a summary of our working capital position and capitalization as of November 1, 2025, February 1, 2025 and November 2, 2024:
|
November 1, 2025 |
February 1, 2025 |
November 2, 2024 |
|||||||||||||||
| (in millions) | |||||||||||||||||
| Net Cash Provided by (Used for) Operating Activities (a) | $ | (174) | $ | 425 | $ | (249) | |||||||||||
| Capital Expenditures (a) | 163 | 178 | 150 | ||||||||||||||
| Working Capital | 454 | 66 | 260 | ||||||||||||||
| Capitalization: | |||||||||||||||||
| Long-term Debt | 1,347 | 973 | 1,414 | ||||||||||||||
| Victoria's Secret & Co. Shareholders' Equity | 653 | 640 | 429 | ||||||||||||||
| Total Capitalization | $ | 2,000 | $ | 1,613 | $ | 1,843 | |||||||||||
| Amounts Available Under the ABL Facility (b) | $ | 358 | $ | 533 | $ | 291 | |||||||||||
(a)The November 1, 2025 and November 2, 2024 amounts represent thirty-nine-week periods and the February 1, 2025 amounts represent a fifty-two-week period.
(b)For the reporting period ended November 1, 2025, the availability under the ABL Facility was limited to the maximum aggregate commitment amount of $750 million, less outstanding borrowings of $375 million and letters of credit of $17 million. For the reporting period ended February 1, 2025, the availability was limited by our borrowing base of $550 million, less letters of credit of $17 million. For the reporting period ended November 2, 2024, the availability under the ABL Facility was limited to the maximum aggregate commitment amount of $750 million, less outstanding borrowings of $440 million and letters of credit of $19 million.
Cash Flow
The following table provides a summary of our cash flow activity for year-to-date 2025 and 2024:
| Year-to-Date | |||||||||||
| 2025 | 2024 | ||||||||||
| (in millions) | |||||||||||
| Cash and Cash Equivalents, Beginning of Period | $ | 227 | $ | 270 | |||||||
| Net Cash Used for Operating Activities | (174) | (249) | |||||||||
| Net Cash Used for Investing Activities | (163) | (133) | |||||||||
| Net Cash Provided by Financing Activities | 360 | 272 | |||||||||
| Effects of Exchange Rate Changes on Cash and Cash Equivalents | (1) | 1 | |||||||||
| Net Increase (Decrease) in Cash and Cash Equivalents | 22 | (109) | |||||||||
| Cash and Cash Equivalents, End of Period | $ | 249 | $ | 161 | |||||||
Operating Activities
Net cash used for operating activities reflects net loss adjusted for non-cash items, including depreciation and amortization, share-based compensation expense and deferred tax expense, as well as changes in working capital. Net cash used for operating activities year-to-date 2025 was $174 million, a decrease in net cash flows used for operating activities of $75 million compared to year-to-date 2024. The decrease in net cash flows used for operating activities in year-to-date 2025 was primarily driven by lower net operating cash outflows associated with working capital changes of $65 million and a decrease in net loss of $14 million compared to year-to-date 2024. The most significant working capital driver resulting in the decrease in net operating cash outflows year-to-date 2025 compared to year-to-date 2024 is related to the timing of payments for the increase in inventory levels and increased duty accruals related to the additional tariffs imposed year-to-date 2025.
Investing Activities
Net cash used for investing activities year-to-date 2025 was $163 million, consisting solely of capital expenditures. The capital expenditures were primarily related to our store capital program and investments in technology and logistics related to our strategic initiatives to drive growth and support productivity.
Net cash used for investing activities year-to-date 2024 was $133 million, consisting primarily of $150 million of capital expenditures, partially offset by $16 million of proceeds on the sale of certain non-store corporate-related assets. The capital expenditures were primarily related to our store capital program and investments in technology related to our strategic initiatives to drive growth.
We are estimating capital expenditures to be approximately $200 million for fiscal year 2025. We expect that our capital expenditures will continue to be focused on our store capital program along with investments in technology and logistics related to our strategic initiatives to drive growth and support productivity.
Financing Activities
Net cash provided by financing activities year-to-date 2025 was $360 million, consisting primarily of borrowings of $545 million under the ABL Facility, partially offset by $170 million of repayments under the ABL Facility.
Net cash provided by financing activities year-to-date 2024 was $272 million, consisting primarily of borrowings of $460 million under the ABL Facility, partially offset by $165 million of repayments under the ABL Facility and a $16 million payment for contingent consideration related to the acquisition of Adore Me.
Common Stock Share Repurchases
Our Board determines share repurchase authorizations, giving consideration to our levels of profit and cash flows, capital requirements, current and forecasted liquidity, and restrictions placed upon us by our borrowing arrangements, as well as financial and other conditions existing at the time. We use cash flows generated from operating activities to fund any share repurchases. Once authorized by our Board, the timing and amount of any share repurchases are made at our discretion, taking into account a number of factors, including market conditions.
In March 2024, our Board approved the March 2024 Share Repurchase Program, authorizing the repurchase of up to $250 million of our common stock, subject to market conditions and other factors, through open market, accelerated share repurchase or privately negotiated transactions, including pursuant to one or more Rule 10b5-1 trading plans. The March 2024 Share Repurchase Program is open-ended in term and will continue until exhausted.
We have not repurchased any shares of our common stock under the March 2024 Share Repurchase Program. As of November 1, 2025, we were authorized to repurchase up to $250 million of our common stock under the March 2024 Share Repurchase Program.
Dividend Policy and Procedures
We have not paid any cash dividends since becoming an independent, publicly traded company. We cannot guarantee that we will pay a dividend in the future or continue to pay any dividends if and when we commence paying dividends. The declaration and amount of any dividends to holders of our common stock will be at the discretion of our Board and will depend upon many factors, including our financial condition, earnings, cash flows, capital requirements of our business, covenants associated with our debt obligations, legal requirements, regulatory constraints, industry practice and any other factors the Board deems relevant. We would use cash flow generated from operating and financing activities to fund our dividends.
Long-term Debt and Borrowing Facilities
The following table provides our outstanding Long-term Debt balance, net of unamortized debt issuance costs and discounts and any current portion, as of November 1, 2025, February 1, 2025 and November 2, 2024:
|
November 1, 2025 |
February 1, 2025 |
November 2, 2024 |
|||||||||||||||
| (in millions) | |||||||||||||||||
| Senior Secured Debt with Subsidiary Guarantee | |||||||||||||||||
|
$384 million Term Loan due August 2028 ("Term Loan Facility")
|
$ | 380 | $ | 382 | $ | 383 | |||||||||||
|
Asset-based Revolving Credit Facility due May 2030 ("ABL Facility")
|
375 | - | 440 | ||||||||||||||
| Total Senior Secured Debt with Subsidiary Guarantee | 755 | 382 | 823 | ||||||||||||||
| Senior Debt with Subsidiary Guarantee | |||||||||||||||||
|
$600 million, 4.625% Fixed Interest Rate Notes due July 2029 ("2029 Notes")
|
596 | 595 | 595 | ||||||||||||||
| Total Senior Debt with Subsidiary Guarantee | 596 | 595 | 595 | ||||||||||||||
| Total | 1,351 | 977 | 1,418 | ||||||||||||||
| Current Debt | (4) | (4) | (4) | ||||||||||||||
| Total Long-term Debt, Net of Current Portion | $ | 1,347 | $ | 973 | $ | 1,414 | |||||||||||
Cash paid for interest was $40 million and $49 million for year-to-date 2025 and 2024, respectively.
Issuance of Notes
In July 2021, we issued $600 million of 4.625% notes due in July 2029 in a transaction exempt from registration under the Securities Act of 1933, as amended. The obligation to pay principal and interest on the 2029 Notes is jointly and severally guaranteed on a full and unconditional basis by certain of our wholly-owned subsidiaries. The issuance costs are being amortized through the maturity date and are included within Long-term Debt on the Consolidated Balance Sheets.
Credit Facilities
We have a senior secured term loan B credit facility with an original principal amount of $400 million, which will mature in August 2028. The discounts and issuance costs from the Term Loan Facility are being amortized through the maturity date and are included within Long-term Debt on the Consolidated Balance Sheets. We are required to make quarterly principal payments on the Term Loan Facility in an amount equal to 0.25% of the original principal amount of $400 million. We made principal payments for the Term Loan Facility of $1 million during both the third quarter of 2025 and 2024 and $3 million during both year-to-date 2025 and 2024.
Interest on the loans under the Term Loan Facility is calculated by reference to Term SOFR or an alternative base rate, plus an interest rate margin (i) in the case of Term SOFR loans, ranging from 3.36% to 3.68% and (ii) in the case of alternate base rate loans, equal to 2.25%. The obligation to pay principal and interest on the loans under the Term Loan Facility is jointly and severally guaranteed on a full and unconditional basis by certain of our wholly-owned domestic subsidiaries. The loans under the Term Loan Facility are secured on a first-priority lien basis by certain assets of ours and our subsidiary guarantors that do not constitute priority collateral under the ABL Facility and on a second-priority lien basis by priority collateral under the ABL Facility, subject to customary exceptions. As of November 1, 2025, the interest rate on the loans under the Term Loan Facility was 7.58%.
We also have a senior secured asset-based revolving credit facility. The ABL Facility allows for borrowings and letters of credit in U.S. dollars or Canadian dollars and has aggregate commitments of $750 million. The availability under the ABL Facility is equal to the lesser of (i) the borrowing base, determined primarily based on our eligible U.S. and Canadian credit card receivables, eligible accounts receivable, eligible inventory and eligible real property, and (ii) the maximum aggregate commitment amount of $750 million.
In May 2025, we amended our ABL Facility. The amendment, among other things, (1) extends the maturity date of the ABL Facility to the earlier of (a) May 2030 and (b) the date that is 91 days prior to the scheduled maturity date of certain outstanding material indebtedness with a principal balance exceeding $50 million to the extent that certain availability and financial covenant thresholds are not met on such date, (2) reduces the applicable interest rate on borrowings under the ABL Facility (a) in the case of loans bearing interest based on Term SOFR or Term CORRA, to 1.50% to 1.75%, (b) in the case of alternate base rate loans and Canadian base rate loans, to 0.50% to 0.75% and (c) by removing the credit spread adjustment on SOFR-based borrowings and (3) replaces CDOR with Term CORRA with respect to Canadian borrowings.
Prior to the amendment of the ABL Facility, interest on the loans under the ABL Facility was calculated by reference to (i) Term SOFR or an alternative base rate and (ii) in the case of loans denominated in Canadian dollars, CDOR or a Canadian base rate, plus an interest rate margin based on average daily excess availability ranging from (x) in the case of CDOR loans, 1.50% to 2.00%, (y) in the case of alternate base rate loans and Canadian base rate loans, 0.50% to 1.00%, and (z) in the case of Term SOFR loans, 1.60% to 2.10%.
Unused commitments under the ABL Facility accrue an unused commitment fee ranging from 0.25% to 0.30%. The obligation to pay principal and interest on the loans under the ABL Facility is jointly and severally guaranteed on a full and unconditional basis by certain of our wholly-owned domestic and Canadian subsidiaries. The loans under the ABL Facility are secured on a first-priority lien basis by our eligible U.S. and Canadian credit card receivables, eligible accounts receivable, eligible inventory and eligible real property and on a second-priority lien basis on substantially all other assets of ours, subject to customary exceptions.
We borrowed $545 million and $460 million from the ABL Facility year-to-date 2025 and 2024, respectively, and made repayments of $170 million and $165 million under the ABL Facility year-to-date 2025 and 2024, respectively. As of November 1, 2025, there were borrowings of $375 million outstanding under the ABL Facility and the interest rate on the borrowings was 5.63%. We had $17 million of outstanding letters of credit as of November 1, 2025 that further reduced our availability under the ABL Facility. As of November 1, 2025, our remaining availability under the ABL Facility was $358 million.
Due to seasonal and holiday-related sales patterns, borrowings under the ABL Facility typically peak in the third quarter as inventory builds in anticipation of the holiday period. Subsequent to the end of the third quarter of 2025 and as of December 4, 2025, borrowings of $210 million remained outstanding under the ABL Facility and are expected to continue to decrease through the fourth quarter.
Our long-term debt and borrowing facilities contain certain financial and other covenants, including, but not limited to, the maintenance of financial ratios. The 2029 Notes and the Term Loan Facility include the maintenance of a consolidated coverage ratio and a consolidated total leverage ratio, and the ABL Facility includes the maintenance of a fixed charge coverage ratio and a debt to EBITDAR ratio. The financial covenants could, within specific predefined circumstances, limit our ability to incur additional indebtedness, make certain investments, pay dividends or repurchase shares. As of November 1, 2025, we were in compliance with all covenants under our long-term debt and borrowing facilities.
Credit Ratings
The following table provides our credit ratings as of November 1, 2025:
| Moody's | S&P | ||||||||||
| Corporate | Ba3 | BB- | |||||||||
| Senior Secured Debt with Subsidiary Guarantee | Ba2 | BB+ | |||||||||
| Senior Unsecured Debt with Subsidiary Guarantee | B1 | BB- | |||||||||
| Outlook | Stable | Stable | |||||||||
Contingent Liabilities and Contractual Obligations
Contractual Obligations
Our contractual obligations primarily consist of long-term debt and the related interest payments, operating leases, purchase orders for merchandise inventory and other long-term obligations. These contractual obligations impact our short-term and long-term liquidity and capital resource needs. Except with respect to the additional $375 million of outstanding borrowings under the ABL Facility as of November 1, 2025, there have been no material changes in our contractual obligations since February 1, 2025, as discussed in "Contingent Liabilities and Contractual Obligations" in our 2024 Annual Report on Form 10-K. Certain of our contractual obligations may fluctuate during the normal course of business (primarily changes in our merchandise inventory-related purchase obligations, which fluctuate throughout the year as a result of the seasonal nature of our operations).
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
We did not adopt any new accounting standards during the third quarter of 2025 that had a material impact on our results of operations, financial position or cash flows.
Internal-Use Software
In September 2025, the FASB issued ASU 2025-06, Targeted Improvements to the Accounting for Internal-Use Software, which is intended to modernize the accounting for internal-use software costs, primarily by removing references to project stages from capitalization criteria and further clarifying the threshold entities apply to begin capitalizing costs. This standard will be effective for interim and annual reporting periods beginning in fiscal year 2028, with early adoption permitted. This standard may be applied prospectively, retrospectively or using a modified transition approach. We are currently evaluating the impacts of adopting this standard on our consolidated financial statements and related disclosures.
Disaggregation of Income Statement Expenses
In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which is intended to improve expense disclosures, primarily by requiring disclosure of disaggregated information about certain income statement expense line items on an annual and interim basis. This standard will be effective for annual reporting periods beginning in fiscal year 2027 and for interim periods beginning in fiscal year 2028, with early adoption permitted. The updates required by this standard should be applied prospectively, but retrospective application is permitted. We are currently evaluating the impact of adopting this standard on our disclosures.
Income Taxes
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which is intended to enhance the transparency and decision-usefulness of income tax disclosures, primarily by requiring enhanced disclosure for income taxes paid and the effective tax rate reconciliation. This standard will be effective for annual reporting periods beginning in fiscal year 2025. The updates required by this standard should be applied prospectively, but retrospective application is permitted. We do not expect this standard to have a material impact on our results of operations, financial position or cash flows.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of financial statements in conformity with GAAP requires management to adopt accounting policies related to estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period, as well as the related disclosure of contingent assets and liabilities at the date of the financial statements. On an ongoing basis, management evaluates its accounting policies, estimates and judgments, including those related to inventories, long-lived assets, claims and contingencies, income taxes and revenue recognition. Management bases our estimates and judgments on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates.
There have been no material changes to the critical accounting policies and estimates disclosed in our 2024 Annual Report on Form 10-K.
Victoria's Secret & Co. published this content on December 05, 2025, and is solely responsible for the information contained herein. Distributed via Edgar on December 05, 2025 at 12:17 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]