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Victoria's Secret & Co. (VSCO - Free Report) recently lowered full year guidance as North America sales slowed. This Zacks Rank #5 (Strong Sell) is expected to see earnings fall 50% this year.
Victoria's Secret ia a specialty retailer of signature bras, panties, lingerie, casual sleepwear, athleisure and swim as well as fragrances and body care. It's brands include Victoria's Secret and PINK as well as Adore Me, a digital-first innovative intimates brand serving women of all sizes and budgets.
Victoria's Secret has approximately 1,350 retail stores in about 70 countries.
First Ever Earnings Miss in Q1 2023
On May 31, 2023, Victoria's Secret reported its first quarter 2023 results and missed on the Zacks Consensus for the first time since it went public in 2021.
It reported earnings of just $0.28 versus the consensus of $0.54. That's an earnings miss of $0.26.
What went wrong in the quarter? Sales were in-line with the original expectations but Victoria's Secret was more promotional than planned.
Sales were particularly challenging in the core categories where there was significant decline in the overall stores and digital intimates market in North America.
The good news was that inventory levels in Victoria's Secret and PINK divisions ended the quarter down low-double digits compared to the prior year. Excess inventory has been a big issue for many retailers over the last year.
Additionally, international business continued to see stellar growth with China as a bright spot.
Adore Me, which was recently acquired, also met the company's expectations in the quarter.
Full Year 2023 Forecast Lowered
Given the results of Q1 and the recent trends, Victoria's Secret updated its forecast and now sees full year 2023 net sales in the range of flat to down low-single digits compared to last year's net sales of $6.344 billion.
The analysts are bearish on earnings as well. 5 estimates have been lowered in the last 30 days, pushing the Zacks Consensus Estimate down to $2.45 from $4.90.
That's an earnings decline of 50.5% as the company made $4.95 last year.
Shares Near All-Time Lows
Victoria's Secret went public in 2021 when L Brands split into two companies: Victoria's Secret and Bath & Body Works. Shares of Victoria's Secret have fallen this year, losing 48.9%. It is trading near all-time lows.
Image Source: Zacks Investment Research
But even with the cuts to earnings estimates, it's still cheap with a forward P/E of just 7.7.
It also has a PEG ratio of 0.8. A PEG under 1.0 usually indicates a company has both value and growth.
But Victoria's Secret itself even sees a challenging environment for the rest of 2023. Investors might want to stay on the sidelines until earnings turn around.
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Bear of the Day: Victoria's Secret (VSCO)
Victoria's Secret & Co. (VSCO - Free Report) recently lowered full year guidance as North America sales slowed. This Zacks Rank #5 (Strong Sell) is expected to see earnings fall 50% this year.
Victoria's Secret ia a specialty retailer of signature bras, panties, lingerie, casual sleepwear, athleisure and swim as well as fragrances and body care. It's brands include Victoria's Secret and PINK as well as Adore Me, a digital-first innovative intimates brand serving women of all sizes and budgets.
Victoria's Secret has approximately 1,350 retail stores in about 70 countries.
First Ever Earnings Miss in Q1 2023
On May 31, 2023, Victoria's Secret reported its first quarter 2023 results and missed on the Zacks Consensus for the first time since it went public in 2021.
It reported earnings of just $0.28 versus the consensus of $0.54. That's an earnings miss of $0.26.
What went wrong in the quarter? Sales were in-line with the original expectations but Victoria's Secret was more promotional than planned.
Sales were particularly challenging in the core categories where there was significant decline in the overall stores and digital intimates market in North America.
The good news was that inventory levels in Victoria's Secret and PINK divisions ended the quarter down low-double digits compared to the prior year. Excess inventory has been a big issue for many retailers over the last year.
Additionally, international business continued to see stellar growth with China as a bright spot.
Adore Me, which was recently acquired, also met the company's expectations in the quarter.
Full Year 2023 Forecast Lowered
Given the results of Q1 and the recent trends, Victoria's Secret updated its forecast and now sees full year 2023 net sales in the range of flat to down low-single digits compared to last year's net sales of $6.344 billion.
The analysts are bearish on earnings as well. 5 estimates have been lowered in the last 30 days, pushing the Zacks Consensus Estimate down to $2.45 from $4.90.
That's an earnings decline of 50.5% as the company made $4.95 last year.
Shares Near All-Time Lows
Victoria's Secret went public in 2021 when L Brands split into two companies: Victoria's Secret and Bath & Body Works. Shares of Victoria's Secret have fallen this year, losing 48.9%. It is trading near all-time lows.
Image Source: Zacks Investment Research
But even with the cuts to earnings estimates, it's still cheap with a forward P/E of just 7.7.
It also has a PEG ratio of 0.8. A PEG under 1.0 usually indicates a company has both value and growth.
But Victoria's Secret itself even sees a challenging environment for the rest of 2023. Investors might want to stay on the sidelines until earnings turn around.