The Company Stays Positive as Results beat Forecasts but Stock Price Falls
Victoria’s Secret & Co. saw its sales drop by 4 percent in early trading on Thursday, decreasing to $23.98. The loss came despite the company surpassing Wall Street predictions with strong performances in both the top and bottom lines during its second quarter results.
The net sales for the quarter reached $1.41 billion, a 1 percent decrease compared to the $1.3 billion generated the previous year. The adjusted net income stood at $31 million or 40 cents per diluted share.
Tim Johnson, the interim CEO and CFO, said during a Thursday call with analysts, “Second-quarter results exceeded or met our expectations for the quarter on all key financial metrics and we delivered year-over-year quarterly operating income growth for the first time since 2021.”
He continued by mentioning that the company is heartened by the sequential improvement shown in quarterly sales results in North American for the fourth time in a row. Sales have improved in both the company’s stores and its digital channels.
The beauty category saw the most success during this period, with Victoria’s Secret and Pink holding onto a combined 20 percent market share.
The company has revised its previous guidance predicting a low-single-digit sales dip, to now expecting a 1 percent decline in sales for the fiscal year.
According to Neil Saunders, the managing director of GlobalData,
The good news from Victoria’s Secret is that for the first time since 2021 the company has delivered growth in operating income. On the sales lines, things do not look quite so rosy, even though some progress has been made.…This stands in marked contrast to the whole intimates market in the U.S., where spending has increased by 18.7 percent over the same period.”
Per a UBS note from analyst Mauricio Serna, “Second-quarter sales came slightly better than the higher end of [Victoria’s Secret & Co.’s] updated outlook and beat the Street’s forecast. Third-quarter sales guide implies further acceleration and return to positive year-over-year growth for the first time since the fourth quarter 2021.”
Despite positive predictions for third-quarter sales, Serna mentions the misses present in gross margins, and projected inventory levels for the third quarter could limit stock price upside despite a more bullish sales outlook.