Victoria’s Secret (VSXY) stock charged higher on June 2 after the specialty retailer posted blowout Q1 earnings and raised its full-year sales guidance.
The company reported $0.60 a share of earnings (adjusted), nearly double the $0.32 consensus, while net sales came in up 15% on a year-over-year basis to $1.56 billion, also beating expectations
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In Q1, VSXY swung to net income from a loss of $1.66 million a year ago, underscoring dramatic improvement in profitability under CEO Hillary Super’s leadership.
Including post-earnings gains, Victoria’s Secret stock is up nearly 50% versus the start of this year.
www.barchart.comWhat Drove the Strength in Q1?
VSXY shares rallied on Tuesday because comparable sales came in up some 13% for Q1, marking the fourth consecutive period of positive comps and a sharp reversal from the negative 1% comp recorded in the same quarter last year.
Growth was broad-based, with double-digit sales increases across the Victoria’s Secret, PINK, and Beauty brands, as well as strength in stores, direct channels, and international markets, where sales surged nearly 45% to $287.4 million.
Victoria’s Secret also reported double-digit growth in new customer acquisition, with particularly meaningful market share gains among the 18-to-24 age demographic.
Should You Invest in Victoria’s Secret Today?
Victoria’s Secret shares appear compelling for long-term ownership at current levels also because management raised its full-year guidance to at least $7.03 billion, handily exceeding $6.96 billion that analysts had called for.
The outlook for adjusted operating income was increased even more dramatically, to $550 million at least from the previous $430 million.
VSXY’s turnaround is being driven by Super’s strategic “refocusing” on bras as the emotional and commercial anchor of the brand, with bra sales posting low double-digit comparable growth during the quarter.
The company has moved away from heavy promotional activity toward full-price selling, a shift she described in the earnings release as a “promo-detox” that is building a healthier, more brand-led business.
In Q1, the strongest customer growth came from a diverse set of households: those earning under $50,000 and those earning over $200,000 annually, signaling the brand’s appeal is now broadening across income segments even in a challenging consumer environment.
Victoria’s Secret Changed Ticker Symbol on Tuesday
Victoria’s Secret changed its ticker symbol from “VSCO” to “VSXY” on June 2 as part of its brand repositioning.
Roughly 19% of the company’s tradeable shares were shorted heading into the report, a level that likely amplified the upward move as short sellers scrambled to cover.
In the earnings release, VSXY also disclosed that it repurchased 2.2 million shares for $100 million during the quarter, reflecting management’s confidence in the trajectory.
With shares now up roughly 285% over the past 12 months, the results validate Hillary Super’s turnaround strategy and effectively rebut activist investor BBRC International’s criticism of the firm’s leadership, even as the shareholder vote on board composition looms just nine days away.
How Wall Street Recommends Playing VSXY Shares
Heading into the earnings release, Wall Street had a consensus “Strong Buy” rating on VSXY stock with targets going as high as $81.
However, upward revisions may follow after the company’s solid Q1 results and impressive future guidance on Tuesday.
www.barchart.comDisclaimer: This article was created with the support of automated content tools from our partners at Sigma.AI. Together, our financial data and AI solutions help us to deliver more informed market headline analysis to readers faster than ever.
On the date of publication, Wajeeh Khan did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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