Victoria’s Secret & Co. (VSCO) delivered a solid performance in the second quarter of fiscal 2024, exceeding expectations and reporting both top and bottom line growth. The company reported adjusted earnings of 40 cents per share, beating the Zacks Consensus Estimate of 38 cents. This marks the third consecutive quarter where earnings surpassed expectations.
While net sales dipped slightly by 0.7% year-over-year to $1.42 billion, they still outperformed the Zacks Consensus Estimate of $1.41 billion. Despite a challenging consumer environment, Victoria’s Secret saw positive business trends in North America, with encouraging feedback on fall assortments for both the Victoria’s Secret and PINK brands. The beauty segment also performed well, driving increased customer traffic to stores.
Looking ahead, VSCO is focused on key events like the launch of a major VSX sport line and the return of the Victoria’s Secret Fashion Show to drive growth. The company acknowledges that the broader consumer environment remains challenging, but it remains optimistic about the future and emphasizes its commitment to controlling what it can. This includes leveraging its market position in the intimates category and executing multiple growth initiatives to achieve long-term success.
VSCO’s gross profit increased by 3% year-over-year to $501.3 million, with a corresponding 130 basis point expansion in the gross margin to 35.4%. Cost of sales decreased by 2.6%, while general, administrative, and store operating expenses declined by 4.7%. Interest expenses also saw a reduction from $46.5 million in the previous year to $43.1 million.
For the third quarter of fiscal 2024, management anticipates net sales growth in the low single-digit range. They project an adjusted operating loss between $40 and $60 million, resulting in an estimated adjusted net loss of 60-80 cents per share. For the entire fiscal year 2024, the company anticipates a 1% decline in net sales, with adjusted operating income expected to fall between $275 million and $300 million.
Victoria’s Secret & Co. currently holds a Zacks Rank #1 (Strong Buy) and is considered a top-ranked stock in the Zacks Consumer Discretionary sector. The company’s strong performance and positive outlook demonstrate its ability to navigate a challenging market and position itself for continued growth.