What happened
Week to date, shares of Victoria's Secret (VSCO -3.19%) were up 18% through Thursday's close, according to data provided by S&P Global Market Intelligence.
On Wednesday, the company announced a new share repurchase program of $250 million, consistent with its previous repurchase authorization. Management also updated its guidance for the fourth quarter, which bolstered confidence in the company's turnaround. Could this be the beginning of a rebound for the struggling retail brand?
So what
Last week, UBS analyst Jay Sole downgraded Victoria's Secret to a sell rating, citing higher inflation, interest rates, and weak store traffic, which are pressuring sales and profits.
Coming off the fiscal third quarter, in which sales slumped 9% year over year, management still expects revenue to decline in "the high-single digit range." However, executives narrowed the outlook for operating income, which is now expected to come in around $245 million to $265 million, which compares to previous guidance between $240 million and $290 million.
Overall, the guidance for operating income appears to be a downward adjustment, considering the much lower revision at the high end of the range. On a positive note, management is keeping its sales guidance consistent with its previous outlook, which could be a sign the company is starting to see stable sales after a rough year.
Now what
In the same announcement on Wednesday, CEO Martin Waters noted that Victoria's Secret has gained market share in the lingerie space, which has gotten more crowded with competing direct-to-consumer brands in recent years. Market share gains in this weak environment are another good sign that management's efforts to change the company's brand image are working.
Despite those positives, Victoria's Secret still needs to prove it can sustain sales growth before the stock can deliver meaningful gains to investors.
