Why Shares of Victoria's Secret Were Pulling Back Today
Key Points
Victoria's Secret beat estimates on the top and bottom lines, but margins fell.
The stock has surged over the last year, but investors seem to think it was overbought.
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Shares of Victoria's Secret (NYSE: VSCO) were moving lower today as a better-than-expected earnings report wasn't enough to keep up the earlier momentum in the stock. While revenue growth was strong, the company's margins compressed.
As a result, the stock was down 11.2% as of 11:51 a.m. ET.
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Did expectations outrun Victoria's Secret?
Victoria's Secret's results were strong, but the stock may have been overbought heading into the earnings report as it had more than doubled over the last year.
Still, the results bode well for the company's long-term growth. Comparable sales jumped 8% in the quarter, a strong pace for any retailer, which was an improvement from the first three quarters of the year.
Overall revenue rose 8% to $2.27 billion, ahead of expectations at $2.23 billion, and adjusted operating income was up 5% to $315.8 million, which excluded $119.6 million asset impairment for the Adore Me brand.
On the bottom line, adjusted earnings per share rose from $2.60 to $2.77, beating the consensus at $2.53.
CEO Hilary Super called the fourth-quarter report as "exceptional," and said the company is entering 2026 "from a position of strength."
What's next for Victoria's Secret
Looking ahead, the company sees revenue of $1.49 billion-$1.525 billion, ahead of the consensus at $1.42 billion and an 11% increase from the quarter a year ago.
For the full year, it expects more modest growth, calling for full-year revenue of $6.85 billion-$6.95 billion, which is up 6% and compares to the consensus at $6.77 billion.
Overall, Victoria's Secret appears to be in good shape in spite of the pullback. The women's intimates company now trades at a price-to-earnings ratio of 24, which is expensive for an apparel stock, but it has earned a premium.
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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Victoria's Secret & Co. The Motley Fool has a disclosure policy.
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