Victoria’s Secret Shares Fell 29.7%, Despite Posting Better-Than-Expected Profit

On Wall Street, it’s not what have you done for me lately, but what are you doing next.

The answer for Victoria’s Secret & Co. appears to be not enough.

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Shares of the intimates brand fell 29.7 percent to $18 on Thursday after the company turned in both better-than-expected fourth-quarter earnings and an outlook for 2024 that missed the mark.

That cut the company’s market capitalization by nearly $590 million to $1.4 billion as investors weigh the company’s future.

Victoria’s Secret expects sales to fall to about $6 billion this year from $6.2 billion in 2023.

That came as a letdown for investors when analysts had sales pegged at $6.2 billion for the year ahead.

The brand has been working a tricky turnaround — changing its messaging from that of the bombshell beauty to a more modern sexy-on-her terms approach — but the overall market for intimates isn’t making things any easier.

“From a market perspective, sales for the intimate market in North America as a whole decreased mid-single digits in the [fourth] quarter compared to last year, which was the fourth consecutive quarterly year-over-year decline,” said Martin Waters, chief executive officer, on a conference call with analysts.

“We remain the leader in market share for the intimates category, including both bras and panties,” he said. “Our share in the intimates category remains at about 20 percent, with our digital share up slightly and our store share down slightly.”

Neil Saunders, managing director of GlobalData, said in an analysis that the brand is still “midway through its journey of reinvention” and needs more time.

“Management has spoken broadly about its ambitions for the brand, but we believe there is still a general lack of clarity over what Victoria’s Secret is or what it stands for,” Saunders said. “While there have been some positive steps in the reinvention, including more inclusivity, there is a lot of chopping and changing in the brand strategy. In our view, Victoria’s Secret is like a shy teenager that is still awkwardly experimenting with their image as they try to establish their place in the world.”

For now at least, that world is still shrinking.

Waters said a tougher macro environment is continuing to pressure the consumer.

“We are planning the business conservatively in the near term and maintaining open-to-buy to capitalize on any changes in trend,” the CEO said. “At the same time, we remain focused on delivering on multiple initiatives to drive growth in our business over the longer term.”

Tim Johnson, chief financial and administrative officer, predicted the domestic intimates market would be down through the spring and then “start to stabilize, not grow, but stabilize as we move into the back half of the year. We’ve tried to align our forecast with that. We’ve tried to align our inventory and cost structure with that in mind.”

Victoria’s Secret is looking to accelerate its core business and ignite growth. That has included new marketing, giving stores a new look and reaching out to customers on different platforms, including Amazon. But investors aren’t taking promises and are instead waiting for proof that the company’s turnaround efforts are taking hold.

Mauricio Serna, a stock analyst at UBS, said in a research note that: “Management mentioned it is planning the business conservatively following four consecutive quarters of declines in the broader North America intimates market. While some may consider this partially justifies a soft 2024 revenue guide, we think many bears will see this as a sign Victoria’s Secret continues losing market share.”

Cleary, the bears are now winning, making fourth-quarter improvements at the company little consolation.

Net income ticked up 4.7 percent to $181.1 million from $173 million. And adjusted earnings per share of $2.58 came in 12 cents ahead of the $2.46 analysts expected, according to FactSet.

Sales for the three months ended Feb. 3 rose 3 percent to $2.1 billion and were boosted by an extra week in the most recent quarter.

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