Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Victoria’s Secret trades up on ASR agreement and 4Q update

Published 01/31/2023, 02:03 PM
Updated 01/31/2023, 02:16 PM
© Reuters.  Victoria’s Secret (VCSO) trades up on ASR agreement and 4Q update

© Reuters. Victoria’s Secret (VCSO) trades up on ASR agreement and 4Q update

By Michael Elkins

Shares of Victoria's Secret & Co (NYSE:VSCO) are up 7.38% in mid-day trading on Tuesday after announcing that the company plans to enter into an accelerated share repurchase agreement (ASR) with Goldman Sachs & Co. LLC to repurchase $125 million of the company’s common stock.

Under the terms of the ASR, the company will make an initial payment of $125M to Goldman Sachs and will receive an initial delivery of approximately 2.5M shares of the company’s common stock on February 3, 2023. The deal is included as a component of VSCO’s $250M share repurchase authorization announced earlier this month.

Concurrent with the announcement of the planned ASR, the company is increasing its fourth-quarter 2022 sales, operating income, and earnings per share guidance.

Wells Fargo reiterated an Overweight rating and $55.00 price target on VSCO after the retail company raised their 4Q outlook to include sales down 7-8% (vs the Street at -7.7%), EBIT of $265-$275M (Street $263M), and EPS of $2.25-$2.35 (Street $2.24).

CEO Martin Waters commented, “Our teams executed our strategies very well against a challenging economic environment for our customers during the holiday quarter. Our sales performance was at the better end of our guidance with margins solidly in line with our expectations despite our response to a very promotional environment during the holiday season. With diligent focus, we accomplished this outcome and will end the year with inventory levels down low double digits when accounting for modal mix shifts, and expect an expense outcome at the better end of our range. Our teams are clearly controlling what we can control and I am proud of their efforts during these difficult times.”

Martin continued, “As we turn the page to the new year, we recognize the economic environment is not ideal and may cause 2023 results to look similar to the year we just finished. However, we are evolving and innovating our business and have organic growth strategies and new customer experiences well identified and ready to launch during 2023. We have a recently acquired business in Adore Me with double digit growth plans and with technologies we plan to leverage in our core Victoria’s Secret and Victoria’s Secret PINK brands. We have an International business also growing double digits with partner plans for new stores and new countries planned out through the next two years. And most importantly, we are a market leader in the intimates category and are positioned for future growth, both in our core and with Adore Me now in the family. I could not be more proud of this team and what we have accomplished together in the last 18 months during unprecedented times, and I firmly believe we are positioned for success for many years to come.”

Wells Fargo analysts wrote in a note, “In addition to brand repositioning work, the company has a renewed focus on bra launches (previously launched two new bras/year prior to volatility starting in 2016), as well as other category opportunities across swim, expanded sizes, maternity, shapewear (again, a far cry from the prior positioning), bridal, among others. Additionally, the PINK brand appears to have rounded the corner, reaching $2B in TTM sales (vs. prior $3B+ peak) with a healthy 40% digital penetration and market-leading store productivity. The brand has reached 95% brand awareness as a result of its values-driven strategy that connects and engages with its core Gen-Z demographic through digital channels.”

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.