Victoria's Secret (NYSE:VSCO) reported weaker-than-expected numbers for its first quarter to send shares about 10% lower on Thursday.
The company posted a profit of $0.28 on sales of $1.41 billion. Analysts were looking for EPS of $0.54 per share on revenue of $1.42B. Same-store sales fell 14% year-over-year.
“The first quarter continued to be a volatile macro environment for our customer and as the quarter progressed business became more challenging. Sales were in-line with our original expectations; however, we were more promotional than planned and ended the quarter at the lower-end of our adjusted operating income guidance,” Chief Executive Officer Martin Waters said.
For this quarter, VSCO sees EPS of $0.25, a significant miss compared to the consensus at $0.88 per share. Q32 sales are seen falling in the mid-single digit range compared to the year-ago period.
“The Company has updated its full year forecast to reflect first quarter results and recent trends in the business and is now forecasting full year 2023 net sales to be in the range of flat to down low-single digits compared to last year’s net sales of $6.344 billion. At this forecasted level of sales, we expect the adjusted operating income rate for the full year 2023 to be in the range of 5% to 6%,” Victoria’s Secret added.
JPMorgan analysts cut the price target by $12 to $20 per share.
“Our initial model math from our 12/1 Downgrade to Neutral called for a negative high single digit comp on the full-year (& negative LDD% comp decline in 1H23), which now matches management’s expectations today,” the analysts said in a note.
BofA analysts remain Buy-rated but the price target is lowered by $20 to $30 per share.
“The guidance cut was disappointing, but we think the potential to turn PINK apparel, integrate AdoreMe’s capabilities into the brand, maximize a new loyalty program, and benefit from store remodels and increased marketing are all opportunities for 2H sales upside versus the new plan. With the stock trading at 3x EV/EBITDA on our new estimates, we think the shares look particularly attractive for a brand with turnaround potential,” the analysts wrote.