To The Moon

Outlook ‘appropriately conservative in the near term,’ CEO says

Victoria’s Secret said sales trends during the fourth quarter were “volatile.”

Shares of Victoria's Secret & Co. plummeted after hours on Wednesday after the intimate-wear maker forecast full-year sales that were below expectations, saying it was staying "conservative in the near term" amid a drop in demand in North America.

Victoria's Secret said it forecast sales of $6 billion for the year ahead, below Wall Street's estimates for $6.19 billion.

Shares tumbled 25.2% in extended trading.

"As we look into the new year, we recognize the broader intimates market in North America has been down for four consecutive quarters and we are planning the business appropriately conservative in the near term," Chief Executive Martin Waters said in a statement.

Demand for clothing more broadly has suffered under two years of inflation, as shoppers prioritize groceries and essential household items.

The company reported fourth-quarter net income of $181 million, or $2.29 a share, compared with $173 million, or $2.10 a share, in the prior-year quarter. Adjusted for acquisition-related items and amortization, Victoria's Secret (VSCO) earned $2.58 a share.

Revenue rose 3% to $2.08 billion, while same-store sales fell 6%.

Analysts polled by FactSet expected the company to report fourth-quarter adjusted earnings per share of $2.46, on revenue of $2.08 billion and a same-store sales drop of 6.3%.

For the first quarter, the company said it expected sales "to decrease mid-single digits" from the period a year ago.

For the first quarter, Wall Street expected adjusted earnings per share of 31 cents, with revenue of $1.39 billion and a 2.9% same-store sales decrease. For the full year, analysts expected adjusted earnings per share of $2.50, sales of $6.19 billion and a 0.5% dip in same-store sales.

"Sales trends during the quarter were volatile by week, but we were encouraged by the improving quarterly sales trend in North America," Waters said.

"We were particularly pleased with our early holiday sales in November and during the peak days and weekends leading up to Christmas, both in our stores and through digital channels, led by strong response to our giftable merchandise assortment, improved customer experiences and marketing messages."

In November, when Victoria's Secret reported third-quarter results, shares jumped after the company reported improving sales trends and said it was encouraged by holiday-season demand.