Victoria's Secret Reports Unexpected Loss and Decline in Sales

Victoria's Secret, the renowned Ohio-based retailer known for its lingerie, has surprised the industry by reporting a loss for the second quarter of this year. The company's financials fell short of both management and analyst expectations. Here are the key details:

Losses

Victoria's Secret recorded a loss of $1.4 million, or 2 cents per share, for the quarter ended July 31. This is in stark contrast to the profit of $69.9 million, or 83 cents per share, for the same period last year. Analysts polled by FactSet had predicted earnings per share of 23 cents. On May 31, the company had forecasted second-quarter earnings per share to be between 10 cents and 40 cents.

Sales Decline

The retailer reported a decline in sales of 6.2% to $1.43 billion, falling short of analysts' expectations of $1.44 billion as per FactSet. Three months ago, Victoria's Secret had already anticipated a decrease in sales within the mid-to-single digit range.

Reasons for Decline

Chief Executive Martin Waters attributed the challenging sales performance to unfavorable macro-environment conditions affecting the Victoria's Secret customer base and its core intimates categories. The overall stores and digital intimates market in North America were particularly affected, impacting both the Victoria's Secret and PINK businesses in the quarter.

International Business Growth

In contrast to the domestic decline, Victoria's Secret experienced impressive sales growth of over 25% in its international business during the quarter.

Outlook and Guidance Change

Despite the current struggles, Victoria's Secret expects to witness improving sales trends throughout the fall season. CEO Martin Waters expressed optimism based on better-than-expected August sales compared to July and the previous quarters. The company entered the third quarter with lean inventory levels, further supporting its positive outlook. However, the retailer has revised its guidance and now expects sales to decline in the low- to mid-single digit range, instead of being flat or down by low-single digits as previously anticipated. For the third quarter, adjusted losses per share are projected to be between 70 cents and $1.

Victoria's Secret's unexpected loss and decline in sales are a cause for concern, but the company remains hopeful for a rebound in the coming months.