Victoria’s Secret’s net sales rose 25% in 2021, to $6.78 billion.
Supply chain challenges, inflation and global headwinds put a damper on Victoria’s Secret outlook for the year even as it reported fourth-quarter earnings and sales that beat analysts’ estimates.
In an earnings presentation, Victoria’s Secret, which went public as a standalone company in August, revealed that it plans to launch a digital-first brand, called Happy Nation, aimed at tweens. The brand will feature "undies, first bras, comfy clothing, and body care that parents and tweens can feel good about," the company said.
The retailer that its net income fell to $246 million, or earnings per share of $2.70, for the quarter ended Jan. 29, from $282 million, or earnings per share of $3.30, in the year-ago period. Analysts had expected earnings per share of $2.63.
Revenue rose 4% to $2.18 billion, exceeding estimates of $2.14 billion. Total comparable sales edged up 1%. Most of the gains throughout the quarter were made in stores. Revenue at Victoria’s Secret’s North American brick-and-mortar stores rose 12.2% to more than $1.3 billion.
For the full year, the company reported net sales of $6.785 billion, an increase of 25% compared to net sales of $5.413 billion for 2020. Total comparable sales increased 3% compared to 2020.
“Our associates across the globe focused on execution and delivered upon all of our financial expectations while continuing to transform our brand, enhance our customer experience and strengthen our dominant merchandise positioning in the intimates category,” stated CEO Martin Waters. “Twenty-twenty-one was a milestone year for our company, our first as a public company. We are keenly aware 2022 will present continued challenges for retailers in this inflationary environment.”
The retailer said it expects to close from 10 to 30 stores in 2022. It plans to open 15 new stores this year, with most featuring its new store-of-the-future design. All the new stores located off-mall. The company also plans to renovate 20 existing locations to the new design.
"We have a very high penetration of our store portfolio in malls right now, and we have a low penetration off malls, and that gives us opportunity," Waters told analysts on the company's earnings call.
Victoria’s Secret said it believes the challenging environment — ranging from supply chain pressures and rising inflation to the potential for consumer uncertainty with the recent global unrest — will likely continue for at least the first half of the year.
“With that as a backdrop, we believe our operating-income levels will be directionally in line with 2021 results, with the first half of the year below last year and the back half of the year returning to growth,” the company stated.
The retailer is forecasting first quarter 2022 sales to be in the range of $1.425 billion to $1.495 billion versus first quarter 2021 sales of $1.554 billion. Operating income is expected to be in the range of $80 million to $110 million compared to $225.7 million in 2021, with the decrease predominantly due to incremental supply chain cost pressures this year and ananniversarying of federal stimulus benefits which drove higher sales and operating income last year.
Earnings per share are estimated to be in the range of $0.70 to $0.95 compared to earnings per diluted share of $1.97 last year.
Victoria’s Secret ended the year with 933 stores worldwide, including 846 U.S. locations. It also operated 458 beauty and accessories stores.