Stock Story -
Intimatewear and beauty retailer Victoria’s Secret (NYSE:VSCO) reported results in line with analysts' expectations in Q4 FY2023, with revenue up 3% year on year to $2.08 billion. On the other hand, the company's full-year revenue guidance of $6 billion at the midpoint came in 3.2% below analysts' estimates. It made a non-GAAP profit of $2.58 per share, improving from its profit of $2.47 per share in the same quarter last year.
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Victoria's Secret (NYSE:VSCO) Q4 FY2023 Highlights:
- Revenue: $2.08 billion vs analyst estimates of $2.08 billion (small miss)
- EPS (non-GAAP): $2.58 vs analyst estimates of $2.46 (4.7% beat)
- Management's revenue guidance for the upcoming financial year 2024 is $6 billion at the midpoint, missing analyst estimates by 3.2% and implying -2.9% growth (vs -3.1% in FY2023) (operating income guidance for the year also missed)
- Gross Margin (GAAP): 39.7%, down from 61.1% in the same quarter last year
- Same-Store Sales were down 6% year on year (miss vs. expectations of down 3.7% year on year)
- Store Locations: 1,370 at quarter end, increasing by 12 over the last 12 months
- Market Capitalization: $2.06 billion
Spun off from L Brands (NYSE:BBWI) in 2020, Victoria’s Secret (NYSE:VSCO) is an intimate clothing and beauty retailer that sells its own brands of lingerie, undergarments, and personal fragrances.
Apparel RetailerApparel sales are not driven so much by personal needs but by seasons, trends, and innovation, and over the last few decades, the category has shifted meaningfully online. Retailers that once only had brick-and-mortar stores are responding with omnichannel presences. The online shopping experience continues to improve and retail foot traffic in places like shopping malls continues to stall, so the evolution of clothing sellers marches on.
Sales GrowthVictoria's Secret is larger than most consumer retail companies and benefits from economies of scale, giving it an edge over its competitors.
As you can see below, the company's revenue has declined over the last four years, dropping 4.7% annually as its store count and sales at existing, established stores have both shrunk.
This quarter, Victoria's Secret's revenue grew 3% year on year to $2.08 billion, falling short of Wall Street's estimates. Looking ahead, Wall Street expects sales to grow 1.1% over the next 12 months, a deceleration from this quarter.
Same-Store Sales Victoria's Secret's demand has been shrinking over the last eight quarters, and on average, its same-store sales have declined by 8.5% year on year. The company has been reducing its store count as fewer locations sometimes lead to higher same-store sales, but that hasn't been the case here.
In the latest quarter, Victoria's Secret's same-store sales fell 6% year on year. This performance was more or less in line with the same quarter last year.
Key Takeaways from Victoria's Secret's Q4 ResultsWhile same store sales and revenue missed, gross margin outperformed and led to a narrow EPS beat vs Wall Street's estimates. On the other hand, its full-year revenue and operating income guidance missed analysts' expectations, with the latter quite a large amount below expectations. Overall, this was a mixed quarter for Victoria's Secret with the guidance surely dragging shares down. The company is down 15.3% on the results and currently trades at $21.68 per share.
