Victoria’s Secret & Co. (VSCO Quick QuoteVSCO - Free Report) posted first-quarter fiscal 2024 results, wherein the top and bottom lines surpassed the Zacks Consensus Estimate. Earnings beat the consensus estimate for the second straight quarter.

In the first quarter, Victoria's Secret saw a steady improvement in sales trends across its physical stores and online platforms in North America. This positive momentum was evident for both the Victoria’s Secret and PINK brands. Despite a tough retail landscape and high competition in promotions, the company successfully increased gross margin rate compared to the previous year by effectively managing inventory and strategically driving customer traffic.

Q1 in Detail

Victoria’s Secret reported adjusted earnings of 12 cents per share, beating the Zacks Consensus Estimate of 11 cents. The figure decreased from 28 cents in the year-ago quarter.

Net sales decreased 3.4% year over year to $1,359.4 million. However, the metric beat the Zacks Consensus Estimate of $1,346 million. The company’s comparable sales declined 5% on a year-over-year basis.

VSCO’s net sales from the Stores – North America channel came in at $729.1 million, down 7.2% year over year. Direct channel’s net sales declined 3.4% to $448.8 million. Net sales from the International channel rose 15.6% to $181.5 million.

Margin & Costs

The gross profit declined 0.2% year over year to $501.3 million. Meanwhile, the gross margin increased 120 basis points to 36.9% in the quarter under review. Cost of sales came in at $858.1 million, down 5.2% year over year.

General, administrative and store operating expenses increased 0.2% to $475.1 million. It incurred interest expenses of $21.7 million, lower than $22.5 million in the prior-year quarter.

Outlook

For the second quarter of fiscal 2024, management expects net sales to decline in the low single digit range. It registered net sales of $1.427 billion in the prior-year quarter. Adjusted operating income for the quarter is forecast to fall in the range of $30-$45 million, based on the projected level of sales. It anticipates adjusted net income in the band of 5 cents to 20 cents per share.

The company projects net sales for fiscal 2024 to reach approximately $6 billion, indicating a low-single-digit decrease compared with a year ago. Based on these anticipated sales figures, the adjusted operating income for fiscal 2024 is estimated  between $250 million and $275 million.

Shares of this Zacks Rank #3 (Hold) company have soared 26.2% in the past month compared with the industry’s growth of 5.9%.

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