Victoria’s Secret Unexpectedly Swings to 2Q Loss, Forecasts Drop in FY Sales — Earnings Review

LOSSES: Victoria’s Secret posted a loss for the second quarter ended July 31 of $1.4 million, or 2 cents a share, compared with a profit of $69.9 million, or 83 cents a share, for the same period a year earlier. Analysts polled by FactSet had forecast earnings per share of 23 cents. On May 31, the company predicted second-quarter earnings per share in the range of 10 cents to 40 cents.

SALES: The Ohio-based retailer known for lingerie said sales fell 6.2% to $1.43 billion, coming below analysts expectations of $1.44 billion, according to FactSet. Three months ago, Victoria’s Secret said it anticipated sales to decrease in the mid-to-single digit range.

WHAT WE WATCHED:

–DEMAND: Chief Executive Martin Waters said macro environment conditions continue to put pressure on the Victoria’s Secret customer base and its core intimates categories. In the second quarter, the company’s sales performance “was particularly challenging in the overall stores and digital intimates market in North America,” Martin said. Those trends hit both Victoria’s Secret and PINK businesses in the quarter.

–INTERNATIONAL BUSINESS: Victoria’s Secret’s international business experienced sales growth of over 25% in the quarter, it said.

–OUTLOOK: The company expects to see improving sales trends throughout the fall season. “We entered the third quarter with relatively lean inventory levels, and I am encouraged by August sales trends which were better than July, second quarter and the entirety of the spring season,” Waters said.

–GUIDANCE CHANGE: Victoria’s Secret, which three months ago expected net sales to be either flat or down by low-single digits, now expects sales to drop in the low- to mid-single digit range. For the third quarter, it expects in adjusted losses per share of 70 cents to $1.

Write to Sabela Ojea at [email protected]