Victoria's Secret & Co.

Good morning. My name is Amanda, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Victoria's Secret & Company's second quarter 2025 earnings conference call. Please be advised that today's conference is being recorded. All parties will remain in a listen-only mode until the question and answer session of today's call. I would now like to turn the call over to Mr. Kevin Wink, Head of Investor Relations at Victoria's Secret & Company. Kevin, you may begin.

Thanks, Amanda. Good morning, and welcome to Victoria's Secret & Company's second quarter earnings conference call for the period ended August 2nd, 2025. As a matter of formality, I would like to remind you that any forward-looking statements we may make today are subject to our safe harbor statements found in our SEC filings and in our press releases. Joining me on the call today is Chief Executive Officer Hilary Stupor and Chief Financial and Operating Officer Scott Dichella. We are available today for approximately 30 minutes to answer any questions. Certain results we discuss on the call today are adjusted results and exclude the impact of certain items described in our press release and our SEC filings. Reconciliations of these and other non-GAAP measures to the most comparable GAAP measures are included in our press release, our SEC filings, and the investor presentation posted on the investors section of our website. Thanks, and now I'll turn the call over to Hillary.

Thanks, Kevin. Good morning, everyone. Thank you for joining us today. I'm excited to share that we continued our momentum in the second quarter, once again delivering results that beat our top and bottom line guidance. This growth reflects disciplined execution, the power of the evolving Victoria's Secret and Pink brands, and early impact of our path to potential strategy. Before we walk through the detailed results for the quarter, I want to take a moment to reflect on our progress during the past year since I joined. We have taken meaningful steps to reposition the business for sustained growth, led by our past potential strategy. A refreshed leadership team is in place, including a new chief marketing and customer officer and a new brand president model. We are executing with greater discipline and focus, moving faster with shorter production cycles, and bringing more innovation to market. Q1 demonstrated early progress and today we will discuss how this progress is continuing to unfold. I'm particularly encouraged to see how our efforts are starting to translate into higher quality product, a more engaging store experience, increased traffic, and more regular price selling. This would not be possible without the dedication and passion of our global team working in our stores, distribution centers, offices, and partner organizations. Together, we are operating with more energy, collaboration, and focus on delivering for our customers. While we have a lot more work to do, I'm now more confident than ever in the opportunity for this company and our ability to execute our strategy to grow shareholder value. We're still in the early days, but the direction is clear, the energy is real, and the progress is promising. Now let's walk through the highlights from the second quarter. We grew net sales 3% despite the digital outage in May, and grew comp sales 4%, both sequential improvements over the prior quarter and above our expectations. We delivered comp growth in both Victoria's Secret and Pink across our digital and in-store channels and all geographies. In Q2, we relied less on our semi-annual sale than prior years, as we had less inventory to mark down and a more compelling regular price offering. This drove lower discounts and higher AURs compared to last year. Going forward, we see an opportunity to further optimize unit inventory levels and continue to drive higher AURs. International remains a standout and helped drive the quarter's growth. Q2 net sales grew 22% year-over-year, while retail comps were up high single digits, reflecting the strength of our global partnership and growing brand relevance. A good example of how the team is delivering with sharper execution and more high-emotion storytelling is last month's launch of our Body by Victoria collection's new Flex Factor bra, which connected deeply with women and how they view wearing bras. The launch was a success, and we saw double-digit new customer growth at Victoria's Secret in the last week of the month when the campaign began. Momentum in the second quarter grew steadily as the quarter progressed. culminating in July, which was our strongest month of the quarter in terms of sales and new customer growth. We're pleased to share that this momentum continues into August. Importantly, growth in the second quarter was accompanied by improving gross margins, which were up year over year, even with the headwind from the evolving tariffs. We delivered gross margins of 35.6% for the quarter, 20 basis points above last year, and 60 basis points above our guidance. This reflects our evolving approach to promotions and more thoughtful discounting cadence, which together drove increased regular price selling. Adjusted operating income of $55 million exceeded the high end of our second quarter guidance by $20 million. During the quarter, store traffic significantly outpaced overall mall traffic, providing an additional lift to our performance that has continued into August. This strong foot traffic was driven by a combination of innovative products as well as improved marketing and enhanced visual merchandising. In the quarter, we made continued progress against the four pillars of our path to potential strategy, supercharging our bra authority, recommitting to pink, fueling growth and beauty, and evolving our brand projection and go-to-market strategy. First and foremost, we are supercharging our bra authority by focusing on reinforcing and building upon our leadership in bras. We're leaning on our unparalleled bra experience to drive innovation-first product development, ensuring we lead the industry in fit, function, and fashion. We are also expanding our bra assortment to serve a wider range of customer needs. Our efforts are beginning to deliver results. During the quarter, while North America bra sales were down low single digits, Q2 showed sequential improvement over Q1, and in Q2, according to third-party data, we grew market share by approximately half a point in total bras, including almost a full point of share in traditional bras. Importantly, bras also saw growth in regular price selling. While we're encouraged by this progress, we still see meaningful upside as we continue to innovate and refresh the assortment with a focus on comfort. We're excited about upcoming product launches in bras. In September, we're debuting the world's best sports bras featuring the starting five, as well as the Dream Sheer Wicked Bra, a sexy unlined balcone bra that we anticipate will be a top performer. We saw a strong response to our Body by Victoria's launch on July 23rd. This was the first time in years that a bra launch has driven growth in other bra franchises, driving growth in bras overall. This was a breakthrough and a testament to our ability to meet customer needs across core performance and lifestyle categories, driving deeper connections and sustained growth. We're also seeing very strong results in the broader intimates category, notably for the 18 to 44-year-old segment, a key demographic for us. VS&Co gained market share in Q2 in intimates across the total industry and across the specialty market compared to last year, with total intimate dollar share growth coming from total bra sales. Our next pillar is recommitting to pink and winning the next generation of consumers. While pink has long been a brand with deep emotional connections to young women, we recognize it lost some of its spark. The assortment shifted to intimates, and its offerings saw too much overlap with Victoria's Secrets. Pink strayed from its roots as a lifestyle brand grounded in apparel designed to meet the needs of customers aged 18 to 24. We believe Pink is more than just a product line and we're committed to putting it back into focus with a digital and social first approach designed to meet the next generation where they are. From product design to brand storytelling, we're redefining how Pink shows up and we're excited about the momentum already starting to build. Today we are focused on reestablishing the brand's magic and market position. We will deepen our relationship with the pink customer, understanding her like never before, and meeting her where she is in the way she wants. We're feeling the buzz build, and nowhere is it clearer than in our new Love Shack Fancy collaboration launched this quarter. Earlier this month, we dropped the limited edition pink Love Shack Fancy collection, a joyful collision of pastel romance and playful edge. Our customers didn't just shop it. They lit up our social channels, shared their looks, and turned it into a full-on moment. Engagement soared, and energy is still going strong. This was a record-breaking collaboration for both Pink and Love Shack Fancy. Our best sellers were pink icons, including logo styles, our signature dog, and our top-performing item, the $200 Letterman Jacket. Strong traffic and exceptionally large basket sizes drove outsized results, all achieved with zero discounting. These factors underscore the brand's pricing power, product desirability, and the effectiveness of our assortment strategy. This collaboration came about as an idea at last year's fashion show and was executed on our new 26-week production lead time calendar. This speaks to our team's disciplined approach in a dynamic environment and our ability to make agile business decisions when we see an opportunity. Our momentum was also evident by the strong response to our Pink Friday event, which launched at the end of the second quarter. The in-store activation drove a significant increase in new customers the week it ran. Since most of the digital activation associated with the event falls in Q3, the second quarter results only reflect a partial benefit from the event. Pink was up low single digits in the second quarter, a clear improvement from Q1. Growth was led by double-digit increases in apparel with margin expansion driven by regular price sales. We also saw a healthier quality of sales with regular price sales at 5% in the Pink brand, including up 18% specifically in apparel, reflecting our focus on rebalancing our assortment. We were pleased to see significant improvement in new customer acquisition at Pink with double-digit improvement in new customer counts during the quarter, showing that our efforts are resonating with customers. Turning to the next pillar of our strategy, fueling growth in beauty. We have a powerhouse beauty business representing approximately 1 billion of sales domestically and approaching 2 billion at retail globally. Our customers love Victoria's Secret Beauty and we're accelerating beauty categories by leaning into our product authority, building on our industry leading fragrance business, expanding into new opportunities and helping drive traffic into our two brands. In the second quarter, beauty remained a standout as we delivered our eighth consecutive quarter of growth. Sales in our beauty business were up mid-single digits with growth across all major categories led by body care, seasonal fragrance, and our mist collection, which delivered low teens growth. We see a significant opportunity in beauty, which is a much larger market than Intimates, about four times the size of the Intimates market in the U.S., according to third-party data, and offers a clear runway for growth. We already have gained real traction, and with a newly hired brand president in place, along with expanded marketing resources, we are poised to continue to build on our momentum. Looking ahead, we have a strong pipeline of newness and franchise amplification. This includes our very sexy restage that's set this week, bare franchise expansion, the bombshell seasonal launch, and category expansion through the launch of home fragrance. We're also focused on sustaining growth in mist and body. On to our final pillar. We're evolving our brand projection and go-to-market strategy to reflect shifts in culture, technology, and shopping behaviors. By staying true to our brand DNA while adapting to how we engage, inspire, and serve, we are deepening connections with existing customers and attracting new ones while strengthening loyalty and driving long-term growth. We are starting to see positive momentum in rebalancing our marketing funnel and driving incremental traffic across both our digital and store channels. During the quarter, according to third-party data, one of the strongest customer growth segments at BS&Co was the 18 to 24 age group, and these efforts drove improved customer acquisition and growth in our customer file, which positions us well as we move into the back half of the year. We saw sequential improvement during the quarter and in July, growing our total customer file, which was up 5%, with growth across new, existing, and reactivated customers. Going forward, we are laser-focused on continuing to grow our customer file, with a focus on new customers between 18 to 44. It's clear that our new Chief Marketing and Customer Officer, Elizabeth Price, is leading a compelling shift in how we show up. More purposeful, more provocative, and more aligned with who our customer is today. This is just the beginning and there's much more to come. I'd now like to take a moment to give more details on key initiatives for the second half of the year and share why we are excited. There is real momentum in our business. We are focused on executing and delivering results in our core businesses. We continue to navigate a complex macro environment and we are taking several steps to mitigate tariff impacts by operating more efficiently, which Scott will address later, while continuing to invest in our brands, our products, and the customer experience. Fundamentally, we believe that the investments we're making in brand building and innovative marketing are even more impactful during uncertain times. In a business driven by emotion, our ability to spark connection with our customer enables our brands to stand out and remain a top choice. We remain focused on growth and intimates with bras as the center of our universe. We are committed to leading in both everyday comfort and bold feminine style, ensuring we can meet her wide range of needs for her multifaceted life. Our July Body by Victoria launch was a step forward and will continue to bring newness, comfort, and innovation in wireless, sports, and core bras, while also leaning into the sexier side of our assortment with collections like Very Sexy and the upcoming Wicked Refresh. We're excited about the return of the Victoria's Secret Fashion Show on October 15th. The event will build on last year's success, serve as a key brand moment that both honors our heritage and solidifies our position as a brand that shapes, not just follows, the future of fashion. Looking ahead to the holiday season, we're committed to being the destination for gifting. Last year, we saw how much our customers value accessible luxury that feels personal and truly special. Over the past year, our teams have poured their creativity and passion into expanding our covetable gifting assortment, offering a thoughtfully tiered good, better, best selection across key categories, including beauty, sleep, and pink apparel. This holiday, we're ready to help our customers celebrate the moments and people that matter the most. Beyond holiday, we see Valentine's Day as another significant growth opportunity and a key moment to deepen our customer engagement. We look forward to sharing more about our Valentine's Day plans in the months to come. Before concluding, I want to take a moment to reflect on what this business and the Victoria's Secret brand have the potential to represent to our consumer. At its core, we're in the business of feelings, of sparking connection and confidence. Our opportunity goes far beyond product. It's about helping our customers feel seen, celebrated, and comfortable in their own skin. We believe deeply in this promise, and we're committed to doing it better moving forward. That promise, celebrating how our customer feels, is central to how we're evolving the brand. We know there's no single definition of sexy. Beauty standards are different for every person, and so does what makes her heart race. Sexy isn't a singular look, it's a feeling. You know it when you feel it. You respond to it. Our future brand expression will honor that. It won't be confined to one image or ideal. It will be a creative platform that embraces the many ways women embody confidence, sensuality, and strength. You're already seeing the first expression of this with our recently launched Very Sexy campaign. The message is clear. We continue to embrace sexiness, but we're evolving to serve our customer more holistically and provide the full spectrum of what she wants and needs from us. and we are seeing this show up with an acceleration in Victoria's Secret sales trends through this week. You'll see our vision further take shape as we continue at the steady drumbeat of brand moments in the coming months, including our fashion show this fall and then more significantly in our spring line. We are firmly in growth mode. We achieved growth last year, and we are continuing to improve our performance this year when product, brand emotion, and marketing come together, it creates a powerful cycle that deepens customer engagement and drives strong, sustained results. While we have more work to do, we're building momentum, and we intend to keep going. I'll now turn it over to Scott.