Victoria’s Secret falls on slowing pace of sales growth

A couple walk past the Victoria’s Secret building on Stanley Street in Montreal on March 28, 2021. Photo by Dave Sidaway / Montreal Gazette

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Victoria’s Secret & Co. tumbled in morning trading on Thursday after the company boosted guidance but showed a slower pace of growth.

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Comparable sales, which measure revenue at stores open at least a year, rose nine per cent in the second quarter, in line with analyst estimates compiled by Bloomberg. However, a 57 per cent year-to-date increase in the company’s stock has raised the bar for investors.

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Shares fell 9.2 per cent at 9:33 a.m. in New York trading.

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The company boosted its guidance for the current fiscal year, now seeing sales in a range of US$7.1 billion to US$7.18 billion, compared with a previous range that was as high as US$7.13 billion.

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Chief executive Hillary Super has worked toward revitalizing Victoria’s Secret by focusing on bras and its pink brand. In the latest quarter, that strategy paid off.

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“What stood out was bras and Pink,” Super said in an interview. The executive highlighted the Marshmallow bra at Pink, which it markets as a comfortable everyday option, and Envy push-up bras.

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Victoria’s Secret is poised to report its highest annual sales in seven years. Super has improved the company’s bra designs and marketing while adding new products to the young adult-focused Pink brand, such as denim and NFL-themed apparel. 

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“The fact that growth is broad-based, with success across channels and regions, demonstrates that there is genuine traction behind the numbers,” GlobalData analyst Neil Saunders wrote in a note Thursday. “And, from our data, this is underpinned by the fact that Victoria’s Secret isn’t just expanding spend among existing shoppers, but it’s also now attracting new ones – which reverses a long period of continuous erosion of the customer file.”

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Victoria’s Secret has been able to attract more customers, reporting four straight quarters of growth, Super said on a call with analysts. The growth was across all age and income groups. Shoppers are also spending more and going back to stores at a higher rate, Super said.

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Super’s success has helped the company to reverse a prolonged slump and withstand pressure from investors, including billionaire Brett Blundy’s investment firm BBRC International Pte.

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Victoria’s Secret expects sales in the third quarter to be as high as $1.6 billion, above analyst estimates. The company said it received more than $140 million of tariff refunds last quarter.

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