What Happened?
Shares of intimatewear and beauty retailer Victoria’s Secret (NYSE: VSCO) fell in the morning session after investors took profits as the stock surged in the previous session on a strong earnings report. The decline followed a 17% jump the previous trading day when Victoria's Secret announced third-quarter results that surpassed expectations. The company reported a 9% year-over-year increase in sales to nearly $1.5 billion, with comparable sales growing by 8%. Its adjusted loss of $0.27 per share was significantly smaller than analysts had forecast. Following the strong performance, the company raised its full-year guidance for both sales and earnings. The positive sentiment continued as analysts from BofA Securities, UBS, and Telsey Advisory Group raised their price targets. The stock's drop despite these developments suggested a technical pullback.
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What Is The Market Telling Us
Victoria's Secret’s shares are extremely volatile and have had 44 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 3 days ago when the stock gained 12.3% on the news that the company reported third-quarter financial results that beat Wall Street's expectations and provided an encouraging forecast. The intimatewear retailer announced that its sales grew 9.2% year-on-year to $1.47 billion, surpassing analysts' estimates. The company's adjusted loss per share of $0.27 was also significantly better than the forecasted loss of $0.59. A key performance indicator for retailers, same-store sales, which measures growth at established locations, rose 8%. Looking ahead, the company issued revenue guidance for the fourth quarter that was above expectations. Furthermore, its full-year adjusted earnings per share guidance of $2.53 at the midpoint also topped consensus estimates, signaling confidence in its performance for the remainder of the year.
Victoria's Secret is up 23.1% since the beginning of the year, and at $49.76 per share, has set a new 52-week high. Investors who bought $1,000 worth of Victoria's Secret’s shares at the IPO in July 2021 would now be looking at an investment worth $1,171.
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