Victoria’s Secret & Co. (NYSE:VSCO) Q4 2022 Earnings Call Transcript

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Timothy Johnson: Yes. Alex, as it relates to Q1 sales, candidly, all suggest that we’re looking at more current trends in our business relative to performance. More so than back to 2019, understanding that the business is in a much different place. And it was and much more aggressive kind of liquidation mode or inventory liquidation to move back during those times. So, if I think about the most recent trends in the business, and third and fourth quarter or fall season with North America predominantly being down high single digits, very strong performance in our international business, which was accretive to the total sales numbers that we report in the fall season. In large part, we expect those trends to continue into first quarter.

So, from a first quarter perspective, we would expect North America to be down high single digits. We would expect the international business in terms of system-wide retail sales to still be up in the low double digits. We’re seeing that happen now, and we’re seeing nice response and kind of growth quickly in China, in particular, as stores have begun to reopen. So, feel very good about the international part of the business. And then obviously, we get the benefit of reporting a in our results for the first time. And in the first quarter alone, that will add about four point to 4.5-point increase in terms of growth. So that’s how we get from negative high singles to negative mid-singles with the addition of Adore Me. I think the one item of note because I know that then reading some of the sell-side notes from last night and even this morning, the first quarter guide from a sales perspective was a little different than maybe some were expecting Just to underline for you something Martin mentioned in his prepared comments, and that was the drag in the quarter of the impact of PINK apparel being challenging.

That drag of about four points. We’re expecting that to continue on into the first quarter and potentially into early second quarter until some of the new merchandise that Martin mentioned starts to arrive. So, I think, Alex, if there’s a slight disconnect in terms of our expectations for first quarter sales and maybe what — the Street was expecting. Clearly, in fairness to you, you didn’t have visibility to our thoughts around PINK and PINK apparel. So hopefully, that helps.

Operator: Thank you. Our next question comes from Matthew Boss with JPMorgan. Your line is open.

Amanda Douglas: Great. Thanks. It’s Amanda Douglas on for Matt. So, Martin, maybe to start, you cited expectations for higher promotional activity in the first quarter in the release. Could you expand on your mindset for promotional activity throughout this year as you manage the business with healthier inventories? And then maybe whether or not you see an opportunity for AUR growth with your new bra launches?

Martin Waters: Yes. Thanks for the question, Amanda. So, my mindset on promotional activity is consistent with what I’ve said in previous calls. And it has less to do with being over inventoried or under inventoried and more to do with getting fair share in — or more in a highly competitive environment. So, when the consumer is feeling less affluent, when she has less money to put food on the table, when she has less money to spend on discretionary items, we all have to be as aggressive as we can in trying to get our share of that wallet. We’re competing with beauty. We’re competing with vacation — we’re competing with vacations. We’re competing with all kinds of competitors who are after that discretionary spend. And while the best way for us to compete on that is with newness and to talk about emotional content, and fresh merchandise, that’s definitely the best way to go to market.

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