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Victoria's Secret (VSCO) Q3 Earnings Lag Estimates, Down Y/Y

Victoria’s Secret & Co. VSCO posted third-quarter fiscal 2023 results, wherein the top line surpassed the Zacks Consensus Estimate, while the bottom line missed the same. Both metrics declined on a year-over-year basis. The company’s sales trend in North America improved throughout the fiscal third quarter, with October being the most robust month.

The company remains optimistic on the strong sales trend in North America. Also, it emphasizes the multi-tender loyalty program, a reimagined merchandise strategy (for the PINK brand) and remains focused on boosting its beauty business in the upcoming periods.

Q3 in Detail

The company reported an adjusted loss of 86 cents per share in the fiscal third quarter, wider than the Zacks Consensus Estimate of a loss of 80 cents. The figure declined from the adjusted earnings of 29 cents reported in the year-ago quarter.

Net sales declined 4% year over year to $1,265.1 million in the quarter. However, the metric beat the Zacks Consensus Estimate of $1,260 million. The company’s comparable sales declined 7% on a year-over-year basis.

VSCO’s net sales from the Stores – North America channel came in at $723 million, down 11% year over year. Direct channel’s net sales increased by 11.9% to $382.5 million. Net sales from the International channel declined 2.4% to $159.6 million.

Victoria's Secret & Co. Price, Consensus and EPS Surprise

Victoria's Secret & Co. Price, Consensus and EPS Surprise
Victoria's Secret & Co. Price, Consensus and EPS Surprise

Victoria's Secret & Co. price-consensus-eps-surprise-chart | Victoria's Secret & Co. Quote

Margin & Costs

The gross profit decreased by 6.6% year over year to $427.4 million. Meanwhile, the gross margin decreased by 90 basis points (“bps”) to 33.8% in the quarter under review. In the quarter, the company’s cost of sales came in at $837.7 million, down 2.7% year over year. Cost of sales, as a percentage of net sales, increased 90 bps to 66.2% in the quarter.

General, administrative and store operating expenses increased 19.2% to $494.5 million. The metric as a percentage of net sales increased by 760 bps to 39.1% in the reported quarter.

The company reported a net loss of $70.7 million in third-quarter fiscal 2023 compared with a net income of $22.2 million in the year-ago quarter. In the quarter, it incurred interest expenses of $26.3 million, higher than $15.3 million in the prior-year quarter.

Outlook

For the fourth quarter of fiscal 2023, the company expects its net sales to grow in the band of 2% to 4%. For the quarter, adjusted operating income is envisioned in the range of $245-$285 million. It anticipates adjusted net income in the band of $2.20-$2.60 per share.

For fiscal 2023, management expects net sales to decline by 2-3% on a year-over-year basis. For the fiscal year, adjusted operating income is envisioned in the range of $290-$330 million. Adjusted net income is projected to be in the range of $1.85 to $2.25 per share.

Shares of this Zacks Rank #3 (Hold) company have increased 31.4% in the past three months compared with the industry’s decline of 12.3%.

3 Red-Hot Stocks

Some better-ranked stocks are MINISO Group Holding Limited MNSO, Deckers Outdoor Corporation DECK and MarineMax HZO. While MINISO Group sports a Zacks Rank #1 (Strong Buy), Deckers Outdoor and MarineMax, each carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

MINISO Group operates as a retailer and wholesaler of lifestyle products. The Zacks Consensus Estimate for MNSO’s current financial-year earnings per share and sales suggests growth of 43.6% and 29.9%, respectively, from the corresponding year-ago reported figures.

Deckers Outdoor is a leading producer and brand manager of innovative, niche footwear and accessories. The Zacks Consensus Estimate for Deckers’ current fiscal-year earnings and sales indicates growth of 20.9% and 11.4%, respectively, from the previous year’s reported figures. DECK has a trailing four-quarter average earnings surprise of 26.3%.

MarineMax is a recreational boat and yacht retailer and a superyacht services company. MarineMax has a trailing four-quarter negative earnings surprise of 10.1% on average. The Zacks Consensus Estimate for HZO’s current financial year sales suggests growth of 3.1% from the year-ago period’s figures.

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