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Victoria’s Secret (VSCO) reports Q4 2021 earnings; issues weak outlook; cites Ukraine

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A group of shoppers is seen at a Bethesda shopping center on February 17, 2022.

Mandel Ngan | AFP | Getty Images

Victoria’s Secret seesawed in after-hour hours trading Wednesday after the lingerie retailer issued a downbeat outlook for the coming quarter, cautioning that it still sees challenges ahead – including inflation and “global unrest,” a reference to Russia’s war on Ukraine.

The company reported sales and profits for the fourth quarter that were slightly higher than analysts expected. reaffirmed a forecast in DecemberFor its holiday performance.

However, global headwinds could affect its performance. Victoria’s Secret stated that the first half this year will be harder to manage due to ongoing supply chain problems, but it expects to return to growth in operating income in the second half. Victoria’s Secret indicated that the third quarter was an anticipated inflection.

Based on an analysis of Wall Street analysts, here’s what Victoria’s Secret did during its fourth quarter.

  • Earnings per shareExpected: $2.70
  • Revenue2:18 billion, vs. expected at $2.14 billion

The net income of the three months ended January 29 was $246 million, down from $282 millions a year ago. From $2.1 billion, revenue grew by 4% to $2.18billion.

According to the company, its beauty products helped drive people online and into brick-and mortar stores. Meanwhile, its international operations saw a significant increase in sales compared to North American ones. Victoria’s Secret said that it was pleased by the launch of Love Cloud, a brand new line. that is centered around comfort and inclusivity.

Victoria’s Secret expects to face a difficult retail environment in the next months with increasing inflation and the “potential for consumer uncertainty” resulting from the current global turmoil. In the first half, the company anticipates that it will incur additional supply chain costs and inflation-related expenses of approximately $140 million. This is roughly the same as what it reported back in 2021. Fears that inflation, already at an all-time high due to Russia’s invasion in Ukraine, will rise further have fueled oil prices.

First-quarter sales are expected to be in the range $1.43 billion – $1.5 billion. That would indicate a drop of 4 % – 8% from last year. This is also below analysts’ expectations for $1.52 Billion.

First quarter earnings per shares range between 70 cents and 95 cents. Refinitiv reports that analysts were expecting $1.32 per share.

In prepared remarks, the retailer stated that it expected to continue facing supply chain cost pressures and is also claiming stimulus benefits in excess of $50 million for its first quarter 2021.

The company expects that 2022 revenues will be stable to increase in the low single digits, compared to 2021 levels. Analysts expected a 2.9% year-over year increase.

Victoria’s Secret stated that it is still evaluating the real estate footprint and testing off-mall concepts. It also remodels its existing shops in order to make them more welcoming and lighter for customers. The company anticipates that it will close between 10 to 30 shops by 2022.

Management stated in prepared remarks that they continue to receive positive responses to novelty and are able to maintain a lower level promotional activity.

Victoria’s Secret shares have fallen by around 2% since Wednesday’s closing of the market. The market cap of this retailer is now $4.8 billion.

Victoria’s Secret has released the complete earnings release here. A conference call will be held with analysts by the company on Thursday morning.

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