What Happened?
Shares of intimatewear and beauty retailer Victoria’s Secret (NYSE: VSCO) jumped 1.6% in the morning session after the company reported second-quarter financial results that surpassed Wall Street expectations and raised its full-year sales guidance.
The lingerie retailer posted adjusted earnings of $0.33 per share, significantly beating the consensus estimate of $0.13 per share. Revenue for the quarter also exceeded forecasts, coming in at $1.46 billion compared to an expected $1.40 billion, marking a 3% increase from the previous year. A key driver of this performance was a 4% rise in total comparable sales, a critical metric indicating the health of a retailer's existing stores and online channels. Bolstering investor confidence, Victoria's Secret raised its full-year 2025 sales forecast to a range of $6.33 billion to $6.41 billion, ahead of the prior analyst consensus.
After the initial pop the shares cooled down to $21.99, down 3.4% from previous close.
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What Is The Market Telling Us
Victoria's Secret’s shares are extremely volatile and have had 39 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 7 days ago when the stock dropped 3% on the news that the company received a lower price target from analysts at UBS, adding to existing concerns about its financial health.
The investment bank cut its price target to $21 from $24, although it maintained a "Neutral" rating on the shares. This move adds to a cautious sentiment on Wall Street, where the average analyst price target has recently decreased. The concerns appear rooted in the company's financial performance, which has shown signs of weakness.
Recent financial data indicates challenges with revenue growth, which saw a decline, and profitability, as the company's net margin is in negative territory. Furthermore, Victoria's Secret's debt-to-equity ratio is high compared to industry norms, suggesting potential financial risk. Compounding these company-specific issues is a broader moderation in the consumer discretionary sector, with reports pointing to muted demand conditions that could create headwinds for the retailer.
Victoria's Secret is down 45.6% since the beginning of the year, and at $21.99 per share, it is trading 54.9% below its 52-week high of $48.71 from December 2024. 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 $517.41.
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