Victoria's Secret Beats Q2 Earnings & Revenue Estimates

Victoria's Secret & Co. VSCO posted decent second-quarter fiscal 2024 results, with the top and the bottom line surpassing the Zacks Consensus Estimate. Earnings beat the consensus estimate for the third straight quarter.

Victoria's Secret posted positive business trends in North America in the third quarter, with encouraging early feedback on fall assortments for Victoria's Secret and PINK brands. The beauty segment performed well, driving customer traffic to stores. Going forward, the company emphasized key events including a major VSX sport launch and the return of the Victoria's Secret Fashion Show to drive growth.

While optimistic about the positive signs, the company acknowledges that the broader consumer environment remains challenging. Despite the hurdles, VSCO remains focused on controlling what it can — leveraging its market position in the intimates category and executing multiple growth initiatives to drive long-term growth.

Q2 in Detail

Net sales dropped 0.7% year over year to $1.42 billion. However, the metric beat the Zacks Consensus Estimate of $1.41 billion. The company's comparable sales declined 3% on a year-over-year basis.

VSCO's net sales from the Stores — North America channel came in at $0.8 billion, down 2.1% year over year. Direct channel's net sales declined 0.9% year over year to $430.2 million. Net sales from the International channel rose 6.4% year over year to $187 million.

Margin & Costs

The gross profit increased 3% year over year to $501.3 million. The gross margin expanded 130 basis points to 35.4% in the quarter under review. Cost of sales came in at $915.8 million, down 2.6% year over year.

General, administrative and store operating expenses declined 4.7% year over year to $439 million. It incurred interest expenses of $43.1 million, lower than $46.5 million in the prior-year quarter.

Outlook

For the third quarter of fiscal 2024, management expects net sales to increase in the low single-digit range. It registered net sales of $1.27 billion in the prior-year quarter. Adjusted operating loss for third-quarter 2024 is forecast to fall in the range of $40-$60 million. It anticipates adjusted net loss in the band of 60-80 cents per share.

The company projects net sales for the fiscal 2024 to decline 1% year over year compared with a previous projection of a low-single-digit decrease. Adjusted operating income for the fiscal 2024 is estimated between to be $275 million to $300 million compared with the previous projection of $250 million and $275 million.

Zacks Rank & Other Key Picks

VSCO sports a Zacks Rank #1 (Strong Buy).

Some other top-ranked stocks in the Zacks Consumer Discretionary sector are as follows:

Royal Caribbean Cruises Ltd. RCL currently sports a Zacks Rank of 1. RCL has a trailing four-quarter earnings surprise of 18.5%, on average. The stock has rallied 68.7% in the past year.

The Zacks Consensus Estimate for RCL's 2024 sales and earnings per share calls for growth of 18.1% and 69.9%, respectively, from the year-ago levels.

DoubleDown Interactive Co., Ltd. DDI currently flaunts a Zacks Rank of 1. DDI has a trailing four-quarter earnings surprise of 22.1%, on average. The stock has surged 42.1% in the past year.

The Zacks Consensus Estimate for DDI's 2024 sales and EPS indicates an increase of 12.6% and 15.8%, respectively, from the year-ago levels.

Monarch Casino & Resort, Inc. MCRI carries a Zacks Rank #2 (Buy). MCRI has a trailing four-quarter negative earnings surprise of 3.5%, on average. The stock has increased 11.4% in the past year.

The Zacks Consensus Estimate for MCRI's 2024 sales and EPS indicates an increase of 2.3% and 10%, respectively, from the year-ago levels.

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