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Earnings Results: Victoria’s Secret shows lower sales in first earnings report after spin-off

Shares of Victoria’s Secret & Co. fell more than 8% in after-hours trading Wednesday after the retailer reported quarterly sales that fell short of expectations, while shares of its former parent company rose following better-than-forecast results.

In its first financial report as a standalone company, Victoria’s Secret
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said it earned $151.1 million, or $1.71 a share, in the second quarter, contrasting with a loss of $199.5 million, or $2.26 a share, in the year-ago period.

Net sales rose to $1.61 billion, from $1.07 billion a year ago. Second-quarter 2021 sales were down 10% from sales of $1.79 billion in the second quarter of 2019 and reflect a net closure of 240 company-operated stores since the second quarter of 2019, the company said.

Analysts polled by FactSet expected Victoria’s Secret to report EPS of $1.59 a share on sales of $1.69 billion.

With tighter inventories, Victoria’s Secret ran fewer promotions, resulting in rising margins, Chief Executive Martin Waters said in a statement. The company had its “most profitable spring season in five years,” he said.

“Our vital signs are strong and, with our exceptional leadership and associate teams, I continue to be confident in our long-term growth in all channels,” Waters said.

Online sales for the second quarter fell 24% compared with same period in 2020 and rose 26% compared to 2019.

Shares of Victoria’s Secret have soared since the company’s stock began trading in early August. The separation from then parent L Brands, long in the works, was completed earlier this month.

Later Wednesday, Bath & Body Works Inc.
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the company formerly known as L Brands, also reported second-quarter earnings and saw its stock rise in the after-hours session.

Bath & Body Works earned $374 million, or $1.34 a share, in the quarter, contrasting with a loss of $49.6 million, or 18 cents a share, in the year-ago period. Sales rose to $3.32 billion, from $2.32 billion for the year-ago quarter.

The FactSet consensus called for EPS of $1.05 on sales of $1.70 billion. Bath & Body Works guided for third-quarter EPS between 55 cents and 60 cents, excluding one-time costs related to the Victoria’s Secret’s spin-off.

Victoria’s Secret joined the S&P 400 Midcap Index
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in early August.

Victoria’s Secret guided for third-quarter 2021 sales to increase by mid- to high-single digits versus last year’s third-quarter sales of $1.35 billion and EPS in a range between 60 cents and 70 cents. The company said that due to “continued uncertainty” it is not providing financial guidance for the fourth quarter.

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