Inflation Hits Victoria's Secret Q2 Performance, Sees Bleak Q3 Outlook

Inflation Hits Victoria's Secret Q2 Performance, Sees Bleak Q3 Outlook
  • Victoria's Secret & Co VSCO reported a second-quarter sales decline of 5.7% year-over-year to $1.52 billion, missing the consensus of $1.56 billion.
  • Total comparable sales decreased 8% compared to 2Q21.
  • The gross margin contracted by 630 bps to 35.2%. The operating income fell by 51.9% Y/Y to $97.51 million, and the margin was 6.4%, down 615 bps.
  • Adjusted EPS was $1.09, beating the consensus of $0.95.
  • The company invested $62 million during the quarter to repurchase 1.7 million shares.
  • Chief Executive Officer Martin Waters commented, "We expect customers will continue to be challenged by inflationary and other financial pressures for the balance of 2022, and we have adjusted our inventory position and cost structure accordingly while allowing for continued investment in growth initiatives,"
  • 3Q22 Outlook: VSCO expects net sales to decrease in the high single-digit range compared to 3Q21. It sees an operating income of $10 million to $40 million.
  • The company expects EPS of $0.00 to $0.25, vs. a consensus of $0.79.
  • FY22 Outlook: Victoria's Secret expects net sales to decrease in the mid to high single-digit range compared to FY21. It sees an adjusted operating income of $525 million to $575 million, or ~8% to 9% of sales.
  • Price Action: VSCO shares are trading lower by 7.38% at $35.50 during the post-market session on Wednesday.
  • Photo via Wikimedia Commons

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