Dive Brief:
- Victoria’s Secret’s decision to shift from air freight to ocean shipping is leading the company to take ownership of inventory earlier in the year, contributing to a projected mid-teens percent increase in total inventory for the fiscal fourth quarter.
- Other factors contributing to the higher inventory included business trends and tariff impacts, Chief Financial and Operating Officer Scott Sekella said in a Dec. 5 earnings call.
- In August, Sekella told investors that tariff mitigation efforts for fiscal 2025 were largely locked in, but that in fiscal 2026 the company would rely on less air cargo and more ocean freight to help offset levies.
Dive Insight:
Victoria's Secret expects a net tariff impact of $90 million for fiscal year 2025, which concludes at the end of January, with $65 million affecting the fourth quarter.
The lingerie company's mitigation efforts have included optimizing vendor costs, diversifying sourcing, raising prices and ensuring a more efficient air versus ocean freight mix, Sekella said in the December call.
"Tariffs will be a headwind through the first half [of next year] as they continue to come on," the executive told investors.
Victoria's Secret has moved shipments away from air to ocean transport before to help lower costs. In 2022, the company made the modal shift after supply chain costs rose by $300 million during the 2021 holiday season, due in part to its reliance on air freight.
In addition to adjusting shipping, Victoria's Secret is raising prices and diversifying its sourcing to offset tariffs, according to Sekella. However, in August, Sekella said sourcing changes would not happen quickly.
"We are actively looking at re-sourcing out of different countries to further mitigate in 2026, but, as you know, that takes time," the executive told investors at the time.
Victoria’s Secret sources goods from Vietnam, Sri Lanka, Mexico, Indonesia, India, Egypt, China, Cambodia and Bangladesh, per a company report.
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