Victoria’s Secret’s Weak Sales Guidance Sparks Investor Concern, Shares Fall 30%: Time to Sell?

Victoria’s Secret (VSCO) is down more than 30% so far Thursday after issuing a sales guidance that fell short of analyst expectations. The company is now forecasting net sales in 2024 of $6 billion. Meanwhile, the expectation on Wall Street was at least $6.19 billion. 

This cautious forecast is being attributed to a drop in demand across the apparel industry here in North America. CEO Martin Waters added more context, saying that the company has seen four consecutive quarters of downward pressure on the market.

Looking at the near term, Victoria’s Secret is expecting to deliver modest growth in Q1, up a few percentage points from the $1.407 billion in sales this time last year. The analyst outlook is for just $1.39 billion.

All of this comes after the lingerie retailer posted Q4 earnings of $2.58, outpacing the $2.46 that analysts were expecting. Revenue grew 3% for the holiday quarter to $2.08 billion, which fell right in light with the analyst’s expectations. 

Another key takeaway from the earnings report was a 6% dip in performance across same-store sales. This was marginally better than what analysts were expecting, though – the consensus called for a 6.3% drop.

Victoria’s Secret says that its performance in Q4 was supported by three areas of focus: giftable merchandise assortments, better experiences for customers, and marketing enhancements.

In an effort to boost earnings and upside potential for shareholders, the company is also initiating a $250 common stock buyback program. 

That being said, VSCO is now down nearly 38% in the past week, and there is fear it could be headed towards its all-time low of around $13.62, set last October. 

So, is it time to sell this stock? We’ve taken a look through the VectorVest stock software and found 3 things you need to see if you’re currently invested in VSCO…

Despite its Fair Upside Potential, VSCO Has Poor Safety and Very Poor Timing

VectorVest is a proprietary stock rating system that has outperformed the S&P 500 index by 10x over the past 20 years and counting. The best part? It’s done this while saving investors time and stress.

It’s all based on 3 simple ratings: relative value (RV), relative safety (RS), and relative timing (RT). Each sits on a scale of 0.00-2.00 with 1.00 being the average. This makes interpretation quick and easy.

It gets even better, though. You’re given a clear buy, sell, or hold recommendation for any given stock at any given time based on its overall VST rating. Here’s what we found for VSCO:

• Fair Upside Potential: The RV rating compares a stock’s long-term price appreciation potential to AAA corporate bond rates and risk. It offers much better insight than a simple comparison of price to value alone. The RV rating of 0.95 is fair for VSCO. Further to that point, the stock appears to be undervalued, with a current value of $22.73/share.
• Poor Safety: The RS rating is a risk indicator calculated from a detailed analysis. It looks at the company’s financial consistency & predictability, debt-to-equity ratio, business longevity, sales volume, price volatility, and other factors. The RS rating of 0.61 is poor for VSCO. 
• Very Poor Timing: The RT rating is based on the direction, dynamics, and magnitude of the stock’s price movement. It’s taken day over day, week over week, quarter over quarter, and year over year. As you can derive from the stock’s performance, it has a very poor RT rating of 0.31.

The overall VST rating of 0.64 is poor for VSCO, and it’s accompanied by a SELL recommendation. Learn more about this situation ASAP with a free stock analysis today.

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VectorVest advocates buying safe, undervalued stocks, rising in price. VSCO performed well in Q4, but is forecasting turbulence ahead with a cautious sales guidance for 2024. The stock is down 30% on the news. It has fair upside potential, but its safety is poor and its timing is very poor.

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