What Happened:
Shares of intimatewear and beauty retailer Victoria’s Secret (NYSE:VSCO) fell 32.1% in the pre-market session after the company reported fourth-quarter results with same-store sales and revenue missing expectations. In addition, its full-year revenue and operating income guidance missed analysts' expectations, with the latter quite a large amount below expectations.
On the other hand, gross margin outperformed and led to a narrow EPS beat vs Wall Street's estimates. Overall, this was a pretty poor quarter for Victoria's Secret with the guidance surely dragging shares down.
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What is the market telling us:
Victoria's Secret's shares are quite volatile and over the last year have had 40 moves greater than 5%. But moves this big are very rare even for Victoria's Secret and that is indicating to us that this news had a significant impact on the market's perception of the business.
The biggest move we wrote about over the last year was 3 months ago, when the stock gained 15.4% on the news that the company reported third quarter results with same-store sales exceeding Wall Street's expectations, though revenue was roughly in line. Management provided some insights into the improved business momentum, noting that in North America, both in-stores and online, the November sales and margin result recorded the best monthly performance in nearly two years.
Looking ahead, the company anticipated a 2% to 4% increase in fourth-quarter sales compared to the previous year. As of Cyber Monday (27th November 2023), the business estimated that around one-third of fourth-quarter sales had already been generated, with expectations of significant activity in December. Overall, it was a strong quarter for the company, with encouraging guidance.
Victoria's Secret is down 34% since the beginning of the year, and at $17.85 per share it is trading 48.6% below its 52-week high of $34.71 from March 2023. Investors who bought $1,000 worth of Victoria's Secret's shares at the IPO in July 2021 would now be looking at an investment worth $421.18.
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