Earnings Call Transcript - VSCO Q3 2024

Operator, Operator

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 Third Quarter 2024 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 Wynk, Vice President of External Financial Reporting and Investor Relations at Victoria's Secret & Company. Kevin, you may begin.

Kevin Wynk, Vice President of External Financial Reporting and Investor Relations

Good morning and welcome to Victoria's Secret & Company's Third Quarter Earnings Conference Call for the period ended November 2, 2024. 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 statement found in our SEC filings and in our press releases. Joining me on the call today is CEO, Hillary Super; and CFO Tim Johnson. We are available today for up to 45 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 investor section of our website. Thanks, and now I'll turn the call over to Hillary.

Hillary Super, CEO

Thanks, Kevin. Good morning everyone, and thank you for joining us. I'm pleased to be with you and honored to be leading these iconic brands at this pivotal moment in their evolution. Today I want to talk about where we are in our journey, our results from Q3, our outlook for Q4, and finally share my 90-day insights. But first, I want to thank the entire VS&Co team for such a warm welcome over my first three months. I have had a very effective onboarding and have been energized by their love for our customers, our brands, and our company. Their hard work and commitment are behind the impressive results we are sharing today, and I'm proud to be on this team with them. As you know, when we stood up VS&Co as an independent business in 2021, we also undertook a transformation focused on strengthening the core of our business, and establishing an operationally sound organization. Today, our strong Q3 performance indicates we've reached an important milestone in that transformation. In short, it's working and we're starting to see the results. Q3 sales growth was well ahead of our expectation, driven by broad-based strengths across our business. All regions, all channels, all major merchandise categories, and importantly, all brands, Victoria's Secret, PINK and Adore Me, leading to our best quarterly sales growth performance since 2021. I am particularly optimistic because these results were powered by emotional product that customers love and clear elevated brand storytelling. They were supported by exceptional shopping experiences and I believe that VS&Co offers the best experience in the mall significantly enhanced in digital. Lastly, our marketing and brand messaging integrated seamlessly with those shopping experiences and resonated deeply with existing customers, while attracting a new generation of customers to our brands. So what did that add up to? For the third quarter, sales increased 7% in total with mid-single digit growth in North America and over 20% growth from our international businesses. Strong sales, well-managed operations and disciplined inventory management led to healthy margins and a lower operating loss than originally forecasted. In North America, Victoria's Secret and PINK had positive year-over-year sales growth across all major merchandise categories both in stores and digital businesses. Traffic was up compared to last year in both channels with significant outperformance in our stores compared to the balance of the mall. Third-party market data indicates that sales in the overall intimates market in North America were down low single digits in the quarter, though our intimates business was positive in the quarter, which was encouraging. Victoria's Secret sales increased compared to last year and sales trends for all merchandise categories improved. Our beauty business continues to be our best performing category, followed by casual sleep and intimates, which also experienced growth. These categories are must-win for the holiday season, and our current trends are very encouraging. PINK sales trend also improved significantly in the quarter with sales for the brand increasing compared to last year. Specifically in apparel, we were encouraged by improving customer response to our PINK back-to-campus event in August and early holiday selling in October and through Q4 to date. Apparel experienced a significant trend change in the last four months and is a key opportunity to reinvigorate the PINK brand going forward. Outside of North America, our international business continued its strong performance in the quarter with system-wide retail sales of mid-teens, driven by growth with our franchise and travel retail partners and in our joint venture in China with our partner, Regina Miracle. During the quarter, I had the opportunity to meet many of our international partners ahead of the VS fashion show. I was inspired by their passion and commitment to our brands and I share in their excitement around our sales, profit, and growth opportunities around the world. Our sales and financial performance over the last 90 days was driven by several key initiatives aimed at repositioning the business for success in the upcoming holiday season and beyond, including creating meaningful and memorable connections with our customers through the return of PINK Friday at the last weekend of July, as our collegiate customers headed back to campus, and with the celebration of National Underwear Day in early August. We relaunched VSX, Sport Done in a uniquely VS way, combining performance, comfort and fashion with innovative designs that leverage body mapping and superior fabrics. VSX is not just a collection; it's a lifestyle with adjacent apparel categories that will drive higher shopping frequency and engagement. We kicked off the holiday season with the return of the VS Fashion Show in October, bringing fashion to the screens of millions of viewers around the world. For the first time ever, every look in the show was shoppable, allowing customers to purchase their favorite runway looks from our holiday assortment. In addition to driving brand awareness leading into the holiday season, the show drove brand relevance, putting VS at the center of conversations in culture and fashion, with about 34 billion media impressions, 4 billion social media impressions, and an increase of more than 4 million followers on TikTok. Beauty is critical to our holiday success, and we started the season strong with compelling unique giftables like the Bombshell Advent Calendar and limited edition Bombshell Midnight holiday fragrance to ensure VS Beauty is at the top of every holiday wish list. Finally, we continue to deepen our understanding of our Victoria's Secret and PINK customer through our multi-tender loyalty program, which now has approximately 35 million members driving over 80% of our sales on a weekly basis. Looking forward, we are excited to see that our momentum from the third quarter continued through Black Friday and Cyber Monday. Our merchandise offering and giftable product assortments are clearly resonating with customers and driving traffic, both in stores and online. The strong product acceptance, supported by our best in-mall in-store experience and dozens of digital enhancements are driving solid conversion and basket size. While more anecdotal, I would be remiss if I didn't mention that as I've traveled stores over the last few weeks, I've noticed ours are often the busiest in the mall. We recognize that we have several large volume days and weeks ahead of us in December, and we are encouraged by the positive sales trends quarter-to-date and remain focused on winning each moment in the days ahead. For the fourth quarter 2024, we are forecasting net sales to increase approximately 2% to 4% compared to the same 13 weeks from the fourth quarter 2023. Our forecast assumes trends in North America remain relatively consistent with the third quarter, adjusted for the timing impacts and the retail calendar shift. At this forecasted level of sales, the fourth quarter 2024 adjusted operating income is now expected to be in the range of $240 million to $270 million. For the full year, we are increasing our sales and profit forecast to reflect third quarter outperformance and the positive start to the holiday season in November and early December. We now expect sales for the year to be up approximately 1% to 2% on a comparative 52 weeks from last year. At this forecasted level of sales, we now expect adjusted operating income for the year to be in the range of $315 million to $345 million. In summary, we are pleased with Q3 and optimistic about Q4. As promised, at the start of this call, I'd like to share a few observations from my first 90 days. In addition to being focused on executing and winning holiday, I've been listening, learning and thinking deeply about how we can supercharge the best of who we are. Much of my time has been spent with the product and brand teams and traveling to stores meeting our wonderful associates who are true ambassadors for our brands. Everything I've seen and learned so far has made me proud of who we are and confident in our future. The team has established a solid foundation that we can build upon and a business that has momentum and is showing early signs of the growth we all believe is in our future. I believe our biggest opportunity is to get the best of who we are back at the center of how we work in three ways: number one, the customer, making sure she is at the heart of every conversation, every decision, everything we do. We are doing well with our existing loyalty customers but I see opportunity to attract new customers by making sure our brands, products and go-to-market strategies are in sync with the pace of culture and are dialed into the ever-evolving world she lives in. Number two, brand and product. We need to continue to differentiate PINK and Victoria's Secret in every way, from product to marketing to in-store and online experiences. Speaking of PINK, I'm all in, and I see a lot of white space with the brand as an opportunity to reclaim our market share in apparel. I'm impressed with the work the team has done already to improve the PINK business, and I see opportunity for even more brand clarity and elevation, as well as a go-to-market strategy that is mobile first and culturally connected. Number three, innovation and brand heat. Victoria's Secret and PINK can and should not only be part of the cultural conversation but also creating cultural moments through products and marketing. We have proven we can do it both with big events like our VSX launch and the return of the fashion show and with viral moments like outfitting Sabrina Carpenter for her recent tour and our viral Satin PJ set. There's a lot of opportunity here, and we have the talent and brands to fulfill it. Customer, Brand, Innovation, watch for us to continue to leverage those areas to grow, deliver shareholder value, and most importantly, delight our customers. That includes this month as we execute holiday. Thank you. That concludes our prepared comments. At this time, we'd be happy to take any questions you may have.

Operator, Operator

Thank you. Our first question comes from Simeon Siegel with BMO Capital Markets. Your line is open.

Simeon Siegel, Analyst

Thanks everyone. Good morning. Welcome Hillary. And nice job on the progress. So from the outside, it kind of feels like a switch has been flipped, but obviously, there's much more to it. So it is amazing to see the Resonance PINK, Back to Campus, VSX launch, Fashion show. But can you speak to the why the seemingly sudden Resonance? How are you thinking about product versus marketing versus promotions at this point as the brands do appear to be regaining that perception among consumers? And then I don't know if this is Hillary or TJ, but we've gone back and forth over history with co-located versus independent stores, you're talking about closing, I think, 42, I think there's 35 renovations. You're talking about consolidating the co-located stores. Any color you can share on what you expect that would do to productivity and profitability as that progresses? Thanks very much.

Hillary Super, CEO

Hi, Simeon, thanks for the question. I'll start-off and then TJ can fill in anywhere that's necessary. So on your first question, Victoria's Secret first. Our brand is about sexy, glamorous, accessible luxury and I think that we were building towards that with the new team that was put in place about 12, 18 months ago, and that was in the works. I think the fashion show really doubled down on that. When you look at what's working in the business, it is exactly that. It is sexy, glamorous and accessible luxury. In terms of our sexy side, it's really the brand – the bra franchises such as Dream and Wicked with lots of shine in the intimate assortment driving that success in beauty. Beauty is very broad-based but what's exciting to me is the upper price points in the beauty assortment. They’re very, very luxurious and we're talking $100, $200 plus things that are doing really, really well. And then branded goods. So things that are literally logo-driven, which indicates strong brand health, like our heritage Stripe collection which was in the fashion show and is a huge part of our Q4 assortment. It’s just incredible. It’s not a perfect storm because it was very purposeful, but the assortment strategy married with marketing strategy and a big upper funnel event just really came together in a very powerful way. In terms of PINK, I think we're very much earlier in that trajectory. We have had a few fits and starts, but apparel being the big driver there. I would say lots of virality through TikTok driving much of our success, with a lot of heritage pieces such as the flare and branded fleece. As we move into holiday, I would say shine in both brands is working across the board. So lots and lots of positive things there. On your second question around stores, this is something that I'm thinking a lot about especially as it relates to PINK and how we've pulled back on PINK. We've been traveling stores, really thinking specifically about that, and we are in the early stages of that. As you know, and we've reported before, store performance has been successful on many levels and the unit economics are quite positive. What I want to make sure is, one, are we delivering on the promise of sexy, glamorous and accessible luxury in our store design and maybe thinking about ways that we can elevate that design. Two, are we allocating appropriate square footage for each line of business and with PINK specifically, how are we making PINK feel like PINK in those combined stores? That's what's on my mind. TJ, please feel free to add anything.

Tim Johnson, CFO

No, I think you covered most of what we've been thinking about in terms of the future. I'd just say that to your question, the stores we are closing this year and the plans we have for next year fall into two buckets. There are situations where we're downsizing a store that already has a Victoria's Secret and PINK, but the store was just too large from origination. In other cases, we are bringing a stand-alone store from Victoria's Secret together with a stand-alone store for PINK to make a combined location. In each of those situations, we are seeing not just a little bit of productivity improvement, but rather a significant amount of productivity improvement. We may begoing from either a stand-alone or combined situation where we have 15,000 or 18,000 square feet in the mall down to 10,000 or 12,000 and seeing a reduction in square footage that could be 25%, 30%, 35% and a productivity improvement that is larger than that and a profit improvement that's meaningful. There’s also an operational improvement in how Becky and the teams can operate a combined location versus multiple. So there's a lot to like about it. But to Hillary's point, we do want to make sure that whatever we end up with in location, in a store, both brands are appropriately sized.

Simeon Siegel, Analyst

Thanks a lot guys. Best of luck for year end and happy holidays to you and your families.

Hillary Super, CEO

Thank you.

Operator, Operator

Thank you. Our next question comes from Brooke Roach with Goldman Sachs. Your line is open.

Brooke Roach, Analyst

Good morning. Thank you so much for taking our question. Hillary, you spoke about elevating brand heat through creating the conversation and moving into Flex marketing opportunities. You've also mentioned TikTok a few times here this morning. Can you talk about what we should expect on the evolution of your marketing strategy where you might spend those dollars and the percent of sales that you might spend on marketing over time? And then just as a follow-up for TJ, can you talk a little bit more about the promotion plans that you have for holiday? If you continue to outperform your plans, what do we see in promo plans on a go-forward basis?

Hillary Super, CEO

Thanks, Brooke. Sure, I'll start. In terms of marketing spend, I wouldn't expect – I would expect consistent marketing spend as we go forward. So no change there. It's really how we spend and how we bring things to market, which looks different for Victoria's Secret versus PINK. The first thing I would say is we need to be using the full funnel and need to be meeting the customer where she is, which may differ for both brands. Victoria's Secret is the queen of the launch, and that's not going to change, but we also need to think about product evangelism in Victoria's Secret, and that's really more of a mid-funnel idea. And on the lower funnel, lots of segmentation and being mindful of our diverse audience of customers and how to reach them best. Regarding PINK, I often talk about TikTok, and I spend significant time on TikTok myself. That platform has really changed this customer base and the culture around her. If you think about the inception of PINK, TikTok didn’t exist. The customer is much more sophisticated today than she was back then; she has real-time access to ideas, fashion and movements. We need to think about what that means for content creation, launching campaigns in PINK, and how to genuinely connect with her online. You'll see a shift over time in how we go to market in PINK. I also believe we haven't yet fully explored collaborations and partnerships, which is something I’m very interested in doubling down on.

Tim Johnson, CFO

And I think the second part of your question, Brooke, regarding the promotion aspect — maybe I’ll take third quarter first. I think from a promotional standpoint, we ran the promotions that we intended from the beginning of the period through Q3. Nothing really changed meaningfully in the plan. However, what we saw was the customer response to those promotions was much stronger than originally forecasted, contributing to the upside volume and upside margin dollars. This did mean promotions had a bit more of an impact on the rate, but again our rate was still well within our guidance range. As we think about fourth quarter, we actually feel the promotional environment should be relatively flat year-over-year, meaning the dollars we allocate towards promotions, and the events we direct towards promotions, recognizing we have a compressed calendar. We came into the quarter thinking promotional impact would remain flat. The strong business through November and Black Friday, Cyber Monday, and the follow-on after Cyber Monday have been encouraging. As we get closer to December 25, while we need to remain diligent, we must look closely at promotions and evaluate if there's an opportunity to do a little less than originally forecasted based on the strength of business. I just want to remind you that we're seeing significant improvements in both inventory and margin management.

Brooke Roach, Analyst

Great. Thank you so much. Best of luck as you go through holiday.

Hillary Super, CEO

Thanks.

Operator, Operator

Our next question comes from Alex Stratton with Morgan Stanley. Your line is open.

Alex Stratton, Analyst

Okay. Thank you so much. Congrats on a great quarter. I wanted to focus on the digital business. It seems like that had some real standout momentum. So curious what you attribute that to and what that percentage of the business can be over time? And then one quick secondary question is just on the recent momentum. Is that driven by a new customer or existing customer, a combination of both? I'd love some thoughts on that as well. Thanks a lot.

Tim Johnson, CFO

Yes. I'll take the first part of that and then ask Hillary to chime in. I think from a digital perspective, Alex, whether it is digital or stores, it all starts with product. The strength of product year-over-year that the team has created really is the driving force behind our results. You know from following us for a while, we've anticipated the third quarter when a lot of the newness arrived. I think additionally, in digital, we've made multiple investments in people, processes, and technology to help drive the digital business. In the last quarter, some significant engagement opportunities went live, like badging on our site, keeping customers signed in, which improves conversion and drives up average basket size. I would also highlight that we brought some of our media buying operations in-house from third-party providers, yielding much more efficient spend and improved traffic results as a result. At the end of October, both the holiday set and the fashion show's traffic significantly helped the digital business, in addition to the stores. So we’re seeing great results across the board. Regarding customers, our loyalty program launched just last year, and now has over 35 million members. That's a sizeable customer base, and many existing customers are shopping more often and spending more. However, our recent market data suggests that we’ve also seen new customer growth for the first time in several months.

Hillary Super, CEO

Just one thing to add here: I’ve been eager to get our customer and brand health data. While it will take some time, we’ve seen a significant uptick with Gen Z in our brand equity results for November in terms of both consideration and brand equity. This is incredibly exciting, and we will monitor and report further on this as we move forward.

Tim Johnson, CFO

Thank you, Alex.

Alex Stratton, Analyst

Thank you, good luck.

Operator, Operator

Hi, good morning everyone. Let me add my congrats. Two questions. First for Hillary, you talked about a lot of change over the last four months in apparel, which I assume predominantly talks to PINK. Can you just give us a little bit more insight on what changes in KPIs you've seen that's given you renewed confidence? And then on TJ, real quick, just I'm trying to understand the Adore Me payments that are being made this year, I think it's like $200 million – I was trying to make sure I understood. Is that because of the business outperforming? How should we think about that impacting cash flow? And then is there more payments in future years if the business continues to outperform?

Hillary Super, CEO

Hi. You're a little hard to hear. I think you asked me about apparel and what we're learning there. I would point to a couple of things. In the Victoria's Secret brand, I would highlight the launch of VSX as an incredibly successful initiative based on our modern go-to-market strategy. We know that when we offer great complementary apparel products, it increases customer frequency and brand engagement. In PINK, certain apparel categories are doing very well, which stands out against our historic performance at the brand’s peak, where clothing was the leading driver. We've become more intimate-led in apparel over time, and I think it's critical to diversify our offerings. Beyond apparel, we have an immense opportunity with accessories and beauty in PINK, further diversifying our assortment to meet the expectations of today's customer.

Tim Johnson, CFO

For the second part of your question concerning the Adore Me payments, there are three contingent payment items: one based on technology synergies, one on continuation of employment, and the third tied to actual performance metrics including sales and EBITDA targets during the two-year period, 2023 and 2024. The $200 million referenced is included in our cash flow forecast for Q4 and the full year, occurring in January, tied to the fixed component and completion of synergy deliverables Since the performance component relies on year-end results, payment for that would occur in Q1 2025, once we conclude our auditing procedure. So timing varies between these payments due to the differing nature of the requirements.

Ike Boruchow, Analyst

Thanks so much.

Operator, Operator

Thank you. Our next question comes from Matthew Boss of JPMorgan.

Matthew Boss, Analyst

Great. Thanks. Hillary, can you elaborate on driving the balance between top-line growth and gross margin expansion? Or with promotions expected flat to slightly down in the fourth quarter on 2% to 3% top-line growth, do you see this as a potential multi-year inflection in the model? And to that point, TJ. What do you see as the potential markdown recapture opportunity as we think about next year? Or any change to the 39% to 40% gross margin by FY '26 as a target?

Hillary Super, CEO

Sure. I will start there. We are absolutely looking for opportunities anywhere we can to be less promotional and more brand forward. I think we are getting to a point where our product and storytelling are starting to stand on their own, particularly in the Victoria's Secret brand. We're looking for any possible opportunities in the future. I think the landscape has changed given event dynamics like elections and shorter selling seasons. Our decision to keep promotional strategy flat was aimed at capitalizing on earlier opportunities within the selling timeline. We discovered that we banked more than anticipated and experienced larger than expected big days while maintaining consistent performance in between those days. As we approach December, we'll aim to identify instances where we can reduce promotional activity while driving better seasonal margins. I'm excited about this journey as we focus on strengthening cultural relevance and opportunities aligned with product on occasion.

Tim Johnson, CFO

Regarding your second question, our focus is on building effective promotions to yield better margin dollars. We've seen the historical context where strong business performance corresponds to lower promotional rates. Significant progress in margin dollars was achieved through enhanced operations and product strength. Our base business is performing well, indicating that our customers are responding positively to our promotional strategy, leading to better sales trends over time. We're truly enthusiastic about this opportunity to evolve our promotional strategy.

Matthew Boss, Analyst

Great, thanks, best of luck.

Hillary Super, CEO

Thanks Matt.

Operator, Operator

Our next question comes from Dana Telsey with Telsey Group. Your line is open.

Dana Telsey, Analyst

Hi, good morning. Nice to see the progress. Hillary, in your assessment of the stores as you've gone around the country, as you look at the classification, the space allocation, what do you see as the opportunities going forward? And with the store of the future, are there any new visions that you have to enhance what's been there already? And just lastly, can you remind us about China manufacturing and sourcing given what could be tariffs coming up? Thank you.

Hillary Super, CEO

Hi, Dana, thanks. I'll start and then pass it to TJ. I've been in multiple stores across several states over the past few weeks and months. Overall, the Store of the Future looks great, creating a proud brand moment. It enhances product visibility, but we need to discuss space allocation significantly. We scaled back PINK aggressively due to weak trends, but with Gen-Z favoring in-store experiences, we see the need to re-evaluate those combined spaces, particularly where we have shop-in-shop situations. Looking ahead, PINK needs to become more balanced towards apparel, which requires proper storefront design and experience. Vice versa, VS feels solid, though I believe beauty can feel even more elevated within our store of the future. This positioning of accessible luxury is crucial, and we can enhance that experience as well. We're asking whether the pace of remodeling suits our needs or if we can accelerate this process. Those are questions we’re asking ourselves.

Tim Johnson, CFO

The large majority of our product is sourced from Vietnam, Sri Lanka, and Indonesia. Regarding your question on China, the impact is relatively small at single-digit percentages, which involves some apparel and beauty but also includes localized products. The teams have effectively downplayed the dependence on China over time, focusing on sourcing and manufacturing in other locations worldwide.

Dana Telsey, Analyst

Thank you.

Operator, Operator

Thank you. Our next question comes from Adrienne Yih with Barclays. Your line is open.

Adrienne Yih, Analyst

Thank you very much. Hillary, could you talk to us about customer reactivations? I'm particularly interested in your observation about attracting younger customers, especially from Gen-Z. This seems crucial for consumer trends today. I'm curious about how you are reactivating existing customers and where you are sourcing your new customers. TJ, could you clarify your comment regarding the discount rate? It seems there is a significant difference between the normalized levels and when promotions are high. Does this include clearance sales, or are you specifically referring to the percentage difference between regular and promotional pricing? Thank you.

Hillary Super, CEO

Hi, Adrienne, customer reactivations are probably primarily through newer customers. Gen-Z represents a new demographic for us. The recent fashion show sparked interest from a new generation of buyers that we weren’t attracting before. Young women are showing interest in what we offer, especially larger glam styles. For me, it’s primarily new customer acquisition spurred by the strong connection we create through our marketing and branding. As we look at the reactivation of existing customers, this tends to align more with millennials or Gen-X folk. We remain focused on converting this new pool of Gen-Z customers into long-term loyal patrons.

Tim Johnson, CFO

Regarding your second part, I would suggest the discount rate reflection includes a general overview. It encapsulates all promotional events in-store, including clearance, semi-annual sales, and more. Basically, we are including all elements of promotional strategy within the number provided while taking care to evaluate how key components may be adjusted moving forward.

Adrienne Yih, Analyst

Fantastic. And then, Hillary, one last one. Historically, back in the day, Victoria's Secret was known for systematic Bra launches, almost a seasonal cadence to that. Can you talk about what you've learned and how you'd execute that going forward? Thank you.

Hillary Super, CEO

Yes, I'm glad you asked about that. Innovation was core to our previous success, though it’s taken a backseat in recent years. We’re focused on a renewed commitment to differentiating ourselves in the market, emphasizing our bra launches as critical in the years to come. While our approach adapts to the current dynamics of the market, there's much potential through partnerships, co-creation strategies, and efforts to position our products ahead of market trends.

Adrienne Yih, Analyst

Okay. Thank you, congratulations.

Operator, Operator

Thank you. Our next question comes from Jonna Kim with TD Cowen. Your line is open.

Jonna Kim, Analyst

Hi, thank you for taking my question. Just wanted to get more thoughts around the beauty business, how large is beauty now and where do you think that business could evolve over time? And also would love any comments on Adore Me, how that has performed and where you see that particular brand going forward? Thank you so much.

Hillary Super, CEO

Sure. Our beauty division is currently the strongest segment of our business, achieving record results over the last quarter in Q3. Primarily driven by the Victoria's Secret brand, there’s enormous potential for expansion in this sector. I am continuously amazed by how customers engage with beauty products, noting their reactions during Black Friday. Beyond our current state, PINK is relatively new in the beauty segment, and there's vast opportunity to introduce novel concepts, particularly through social channels and e-commerce.

Tim Johnson, CFO

As for Adore Me, we did see mid-to-high single-digit growth in their business during the third quarter. The daily look brand, more focused on home and apparel, outperformed the Adore Me or the Laundry and Intimates brand. This flexibility enables effective utilization of marketing dollars to enjoy whatever performs best. Overall, their performance has been a bright spot as we enter the holiday season.

Jonna Kim, Analyst

Thank you so much.

Operator, Operator

Thank you. Our last question comes from Mauricio Serna with UBS. Your line is open.

Mauricio Serna, Analyst

Good morning and thank you for my question. Congratulations on your results. Can you discuss what you're observing in the sports bra category and the opportunities within that segment? Additionally, what is your overall perspective on the intimate market, which seems to have been declining? Are you anticipating any improvements in the next couple of quarters? Lastly, could you share what you're experiencing in China regarding the macro environment? Thank you.

Hillary Super, CEO

Sure, I'll start and then T.J can finish up. Our sports bra launch this year was very successful. We have picked up market share, but feel we’ve only scratched the surface. Historically, we pulled back on sports bras during a time when the category was gaining momentum; therefore, we have an opportunity to claim back market share. Sports bras are multifunctional now, worn in non-active settings, which is an avenue we intend to explore. The intimates market is somewhat soft, and the way women engage with bras has evolved. We've heard from younger generations that they're selective about their choices and are often gravitating towards sports bras. Thus, we're committed to creating emotional, must-have products and stories to capture their interests. We’re set up well for that.

Tim Johnson, CFO

Regarding China, we remain optimistic about opportunities. We believe we have the right team and an excellent partner in Regina Miracle. We experienced growth in China during Q3, primarily in digital but also observed encouraging trends in store sales. The major Singles Day event mostly tuned into Q3, which benefited us. However, the macro market remains challenging. Nevertheless, I’m confident we’re addressing the right issues with our partner to improve our position.

Mauricio Serna, Analyst

Got it. Best of luck. Thank you.

Hillary Super, CEO

Thanks, Mauricio. That concludes our call this morning. Thank you for your continued interest and time in VS. Have a great day. Thanks, everyone.

Operator, Operator

Thank you for participating in the Victoria's Secret & Company's third quarter 2024 earnings conference call. That concludes today's conference. Please disconnect at this time and enjoy the rest of your day.