Victoria's Secret Shares Dip On Below Expectations Q2 Earnings & Dismal Outlook

Victoria's Secret & Co VSCO are trading lower after the company reported Q2 FY23 results below the consensus.

Revenue declined 6.2% Y/Y to $1.43 billion, missing the consensus of $1.44 billion.

By segment, revenues in Stores – North America tumbled 15.6% Y/Y while growing 4.9% Y/Y to $433.9 million in Direct and 26.5% Y/Y to $175.8 million in International businesses. 

Comparable sales fell 11% Y/Y in Stores and Direct platform and 14% Y/Y in Stores Only platform.

Adjusted operating income declined to $48.7 million from $126.9 million a year ago. 

Adjusted EPS of $0.24 came below the street view of $0.26. 

As of July 29, the company had 1,350 stores globally. In Q2, VSCO completed the previously disclosed accelerated share repurchase agreement and received an additional share worth approximately 1.3 million. 

"We entered the third quarter with relatively lean inventory levels, and I am encouraged by August sales trends which were better than July, second quarter and the entirety of the spring season. The teams have been working tirelessly on multiple growth initiatives designed to change our sales trends in the third quarter and the all-important holiday season. Initiatives such as our new multi-tender loyalty program, a reimagined merchandise strategy for our PINK brand, new technology to enhance the customer experience, the launch of our Victoria's Secret ICON bra, and coming in September the Victoria's Secret World Tour '23 which will be our largest marketing investment in the last five years," said Martin Waters, CEO. 

Outlook: For Q3, the company expects net sales to decrease in the low- to mid-single digit range and adjusted EPS loss of $(0.70) to $(1.00) vs. consensus of $(0.14).

For FY23, VSCO revised the FY23 outlook for revenue to decrease in the low-single digit range (from flat to down low-single digits earlier) and reiterated the adjusted operating margin outlook at 5%-6%.

Also Read: Consumer Shift To Value Hits Premium Brands: Analyst On Victoria Secret's Sales Decline And Market Position

Price Action: VSCO shares are trading down by 5.34% at $16.99 premarket on the last check Thursday.