Victoria’s Secret Beats Q3 Earnings; Shares Up

World’s largest intimate specialty retailer Victoria’s Secret & Co. (VSCO) delivered better-than-expected third-quarter earnings, reflecting strong growth across all categories amidst the ongoing supply chain issues. Following the news, shares jumped 11.7% during the extended trading session on November 17.

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Quarterly Results

The company reported adjusted earnings of $0.81 per share, down a modest 1.2% year-over-year, but 10 cents higher than analysts’ estimates of $0.71 per share.

Meanwhile, net sales rose 7% year-over-year to $1.44 billion, yet marginally lower than analysts’ estimates of $1.46 billion. Compared to the year-ago period, total North American store sales grew 21.9%, Direct sales fell 13.5%, and International sales declined 10.4%.

Management Comments

VSCO CEO, Martin Waters, said, “Our work to transform our brand, deepen our customer connections and improve our operational fundamentals is gaining positive traction. We continue to improve our merchandise assortment and expand our already strong customer file.”

Waters concluded, “We continue to monitor global supply chain issues and believe our close partnerships with our vendors and our work to get ahead of the curve will help mitigate those challenges. Looking ahead, the leadership team and I believe we have the right strategy and a dedicated team focused on driving long-term growth and creating value for our shareholders.”

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Guidance

Based on the current economic scenario and business momentum, VSCO forecasts fourth-quarter sales to grow by flat to up 3% against Q4FY20 sales of $2.10 billion.

Additionally, Q4 earnings are expected to be between $2.35 per share and $2.65 per share, lower than the consensus of $2.80 per share.

Target Price

The Wall Street community has a Strong Buy consensus rating on the VSCO stock with 7 Buys and 2 Holds. The average Victoria’s Secret price target of $89.22 implies 76.64% upside potential to current levels. Shares have gained 18.8% since its listing in July 2021.

Smart Score

According to TipRanks’ Smart Score rating system, Victoria’s Secret scores a 9 of 10, indicating that the stock has strong potential to outperform market expectations.