Victoria’s Secret Q1 2025 slides: Sales dip as retailer shifts to partner-operated model

Victoria’s Secret & Co. (NYSE:VSCO) released its first quarter 2025 earnings presentation on June 11, revealing a slight decline in sales and a more significant drop in profitability as the company continues its strategic shift toward more partner-operated locations.

Quarterly Performance Highlights

The lingerie and beauty retailer reported Q1 2025 net sales of $1.35 billion, down slightly from $1.36 billion in the same period last year, with comparable store sales declining 1%. Adjusted operating income fell to $31.7 million from $39.6 million in Q1 2024, while adjusted earnings per share dropped to $0.09 from $0.12 a year earlier.

The company’s gross profit margin contracted to 35.2% from 36.9% in the prior-year period, reflecting ongoing challenges in the North American intimates market, which has experienced a slight overall decline according to previous company statements.

As shown in the following consolidated income statement, Victoria’s Secret managed to reduce its general, administrative and store operating expenses to $444.3 million from $461.7 million year-over-year:

On a GAAP basis, the company narrowed its net loss to $1.7 million ($0.02 per share) from $3.6 million ($0.05 per share) in Q1 2024, showing some improvement in its bottom line despite operational challenges.

Detailed Financial Analysis

Victoria’s Secret’s balance sheet showed total assets of $4.58 billion as of May 3, 2025, up from $4.38 billion in the comparable period. The company’s operating lease assets increased significantly to $1.53 billion from $1.32 billion, while property and equipment decreased to $762.9 million from $804.8 million, reflecting the company’s evolving real estate strategy.

The retailer’s capital expenditures increased to $42.8 million in Q1 2025 from $38.5 million in Q1 2024, indicating continued investment despite the challenging sales environment. Depreciation and amortization expenses decreased to $61.7 million from $65.3 million year-over-year.

The following selected data highlights the company’s capital expenditure and depreciation trends:

Victoria’s Secret’s stock closed at $22.20 on June 10, 2025, down 2.29% and showing minimal movement in premarket trading on the day of the earnings presentation. The stock remains closer to its 52-week low of $13.76 than its high of $48.73, reflecting investor concerns about the company’s performance and strategy.

Strategic Initiatives

A key element of Victoria’s Secret’s strategy is the ongoing shift from company-operated to partner-operated stores. The 2025 forecast shows the company expects to reduce its company-operated store count by 16-23 locations while increasing partner-operated stores by 41-60 locations.

The following store count forecast illustrates this strategic pivot:

This shift represents a continued evolution of Victoria’s Secret’s business model, potentially reducing direct operational costs while expanding the brand’s global reach through partnerships. The company projects its total store count will increase by 15-46 locations (1-3%) by the end of 2025, despite the reduction in company-operated selling square footage.

The non-GAAP reconciliation provides further insight into the company’s adjusted performance metrics, highlighting the impact of restructuring activities and acquisition-related expenses:

Forward-Looking Statements

Victoria’s Secret maintained its full-year 2025 outlook, projecting net sales of $6.2-6.3 billion and adjusted operating income of $270-320 million. For the second quarter, the company expects net sales of approximately $1.38-1.41 billion.

The detailed 2025 outlook is presented below:

The company forecasts adjusted earnings per share of $1.80-2.20 for the full year, with capital expenditures of approximately $220 million and adjusted free cash flow of $150-200 million, down from $286 million in 2024.

This free cash flow projection is detailed in the following non-GAAP financial information:

Victoria’s Secret faces several challenges in 2025, including consumer confidence concerns, potential weather-related disruptions, and the need to differentiate its Victoria’s Secret and Pink brands in a competitive landscape. However, with a significant 20% market share in the North American intimates market and growing international business, the company maintains a strong position from which to execute its strategic initiatives despite the current headwinds.

Full presentation:

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