Retailer specializing in women’s intimate apparel Victoria’s Secret (NYSE: VSCO) shares have plummeted (-44%) in this year’s price bear market. The company was spun off from Limited Brands in 2021 with 1,400 retail locations under the Victoria’s Secret and PINK brands. The company far exceeded its FY2021 EPS estimates in managing headwinds, including inflationary pressures, supply chain disruptions, weather and market volatilityand up Logistics costs However, revenues fell (-4.5%) largely due to the reversal of stimulus check spending. Inventory levels ended the quarter up 37% due to increased transit time and strategic assortment decisions to drive future growth. Only 10% was carryover inventory. The Company has improved its distribution with the launch of VS&Co. Lab and hope to be a second half growth story with new product launches, especially in the bra and beauty lines. Cautious investors who have been waiting for exposure in this iconic underwear retailer you can watch opportunistic pullbacks in Victoria’s Secret stock.
FY2022 First Quarter Results Release
On May 31, 2022, Victoria’s Secret released its fiscal first quarter 2022 results for the quarter ending April 2022. The company reported earnings per share (EPS) of $1.11, excluding non-recurring items, vs. Analyst consensus estimates for a profit of $0.84, an improvement of $0.27 per share. Revenue fell (-4.5%) year over year (YoY) to $1.48 billion, beating analyst consensus estimates of $1.47 billion. The Company returned $110 million to shareholders through its capital allocation program. Victoria’s Secret CEO Martin Waters stated, “As a result of our deliberate actions, we have stabilized the business and generated over $1 billion in EBITDA for the last twelve month period. Looking ahead, I believe that we have the focused, resilient, savvy strategy, talent and customer connection we need to maintain and grow our dominant position as the market leader in the intimates category We are well-prepared to continue to address macro challenges through product and marketing that delights our customers, new business initiatives designed to expand our customer base and increase sales, and disciplined financial management.”
Victoria’s Secret issued online guidance for the second fiscal quarter of 2022 for EPS between $0.95 and $1.17 vs. consensus analyst estimates of $1.17. Revenue is expected to grow from low single digits to low single digits. Analyst consensus estimates for revenue are for a (-1%) year-over-year decline.
Conclusions of the conference call
Chief Executive Officer Waters stated that the company generated more than $1 billion in EBITDA over the last 12 months. The sales decline (-4.5%) was adjusted for a $75 million stimulus to keep sales flat through last year. A boost was seen in the bra and beauty business as International recovered from previous COVID-related restrictions. Adjusted operating income exceeded the range of $80 million to $110 million previously expected by $116 million. He expects the rest of the year to continue to be challenging with volatility attributed to macroeconomic conditions. The Company expects fiscal 2022 second quarter operating income to be between $125 million and $155 million. For the full year 2022, the Company expects sales to remain flat or in the low single digits. CEO Waters sees a number of opportunities in the latter part of the year, including new bras for the PINK and Victoria’s Secret brands. In Beauty, the Company expanded distribution with the launch of VS&Co. Lab as your loyalty program. He feels that the business has stabilized now. He feels the company can keep operating income in the low double-digit percentage of sales to achieve its goal if the operating income rate is in the mid-teens.
VSCO Opportunistic Pullback Price Tiers
Wearing the rifle tables on weekly and daily time frames provides an accurate view of the landscape for VSCO stock. The weekly rifle chart triggered an inverse pup breakout after rejecting $46.78 Fibonacci level (fib). The weekly rifle chart bear trend has a descending 5-period moving average (MA) at $38.86 followed by the 15-period MA at $45.62 and the lower weekly Bollinger Bands (BB) at $29.55. The weekly stochastic inverse mini puppy leaned through the 10 band. the weekly low market structure (MSL) buy triggers on a break above $52.77. The daily rifle chart also has an inverse puppy breakout with the 5-period MA descending at $33.62 followed by the 15-period MA at $38.96 and daily BB lower at $29.04. The daily stochastic is stuck near band 5. The 50-period daily MA stands at $44.88 and the 200-period daily MA stands at $51.97. Opportunistic retracement levels are located at $29.29 fib, $27.61, $25.50, $23.78 fib, $22.75 fib, $20.54 and the $19.53 level. The bullish trajectories are from the $39.99 fib level to the $49.38 fib level.