Key Stats for Victoria’s Secret Stock
- Price change for Victoria’s Secret stock in last 1 month: -17%
- $VSXY Stock Price as of Sep. 3: $74
- 52-Week High: $102
- $VSXY Stock Price Target: $93
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What Happened?
Victoria’s Secret (VSXY) stock had its worst day in over a year, falling more than 13% after the company’s Q3 profit guidance spooked investors.
The drop is a bit surprising at first glance, since the Q2 numbers were strong.
- Q2 revenue came in at $1.61 billion, up 10% year-over-year and just barely below the $1.62 billion Wall Street expected.
- Adjusted earnings per share crushed estimates at $0.95 versus the $0.77 analysts had penciled in.
- Adjusted operating income also beat expectations, coming in at $124 million against a $101 million estimate.
- Comparable sales grew 9%, and results were strong across the board: North America stores revenue rose 9% to $897.9 million, direct sales grew 8.1% to $439.4 million, and international revenue jumped 20% to $273.4 million.
So why did Victoria’s Secret stock sell off so hard?
The problem was guidance for the current quarter. Management guided Q3 operating income to just $10 million to $20 million, well below what Wall Street was hoping for, even though Q3 revenue guidance of $1.57 billion to $1.60 billion was roughly in line with expectations.
Full-year numbers told a mixed story too. The company raised its full-year revenue guidance to $7.10 billion to $7.18 billion, but that’s still below the $7.2 billion analysts projected.
On a brighter note, full-year adjusted operating income guidance rose to $560 million to $590 million, and adjusted EPS guidance was set at $4.45 to $4.70.
Jefferies weighed in, calling the results solid but pointing out that Victoria’s Secret stock had entered the print trading above historical valuation norms, near 15 times earnings.
That matters because when a stock is already priced for good news, there’s little room for any disappointment, even a relatively minor one on margins. Jefferies kept a Hold rating on the stock.
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What the Market Is Telling Us About Victoria’s Secret Stock
Today’s reaction shows how sensitive richly valued retail stocks can be to margin guidance, even when headline sales and earnings numbers look good.
Victoria’s Secret stock had run up heading into earnings, so investors expected near-perfect results across the board.
A soft profit outlook for the next quarter was enough to trigger a sharp selloff, despite the company actually beating on both revenue and earnings for the quarter that just ended.
Investors will likely be watching Q3 execution closely to see whether the weaker margin guidance was overly cautious or a sign of real near-term pressure on profitability.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
