- Q3 Net Sales Surge Reached $1.47 billion, a 9% increase YoY, with comparable sales growth of 8%.
- Gross Margin Expansion Adjusted gross margin expanded 170 basis points to 36.5%, driven by lower discounting and cost leverage.
- Intimates Market Share Gains U.S. Intimates business grew mid-single digits, capturing over 1% additional market share.
- Fashion Show Impact Generated 61 million streaming views (+60% YoY) and 9 million new social followers.
- Raised Full-Year Outlook Projected net sales of $6.45–6.48 billion and adjusted operating income of $350–375 million.
Segment Performance
The International business grew at an accelerated pace, with retail sales up over 30% in China. The Victoria's Secret Fashion Show drove significant business impact, with streaming views reaching 61 million, up 60% from the previous year, and nearly 9 million new social followers. The strong results reflect growth across all businesses, including Victoria's Secret, PINK, and Beauty.
Margin Expansion and Outlook
The third-quarter adjusted gross margin rate was 36.5%, 170 basis points above last year, driven by leverage on buying and occupancy expenses, strength in regular price selling, and lower discounting. The company expects a net tariff impact of approximately $90 million in fiscal year 2025 and plans for a 200 basis point increase in gross margin, excluding gift card breakage and tariffs.
Valuation and Growth Prospects
With a P/S Ratio of 0.61, the stock appears to be reasonably valued. Analysts estimate next year's revenue growth at 3.9%. The company's ROE is 26.07%, indicating strong profitability. The EV/EBITDA ratio is 13.67, suggesting a moderate valuation. The company is well-positioned to deliver a strong holiday season and a solid finish to fiscal 2025, driven by initiatives in its path to potential strategy, including product innovation, brand strength, and customer experience.
Growth Initiatives
The company is focused on driving growth across all categories, including apparel, panties, and bras. AURs are increasing, driven by a shift to full-price selling and reduced promotions. The company expects this momentum to continue into next year. The beauty business has been strong, with a two-year stack, and is an area of focus for growth.
Operational Efficiency
The company is continuing to optimize its Store of the Future concept, including better assortment and optimization of pink and beauty products. The apparel mix is now above 40% of the pink business, with a goal of 50-60% over time. Lead time on the apparel side has improved, and there are opportunities to expedite it further.