Victoria’s Secret & Co (NYSE:VSCO) witnessed a sharp decline of approximately 27% in its shares on Thursday after the renowned lingerie brand projected weaker annual sales, attributed to sluggish demand and a shift towards more affordable options among North American shoppers.
The company, renowned for its PINK brand of intimates, anticipates fiscal 2024 net sales of $6 billion, signaling a third consecutive annual sales decline, falling below LSEG estimates of $6.14 billion. Notably, the company foresees a challenging first quarter, anticipating a mid-single-digit decline in net sales, contrasting with analysts’ projections of a 2.5% decrease.
While Victoria’s Secret announced a share repurchase program worth up to $250 million, Dana Telsey of Telsey Advisory Group expressed skepticism regarding the company’s ability to achieve operational improvements in the long term.
Despite a 240 basis point increase in fourth-quarter margins attributed to factors such as lower freight costs and merchandising strategies, the company faced challenges due to shifting consumer preferences towards value and competitors like Amazon and sportswear brands like Lululemon, particularly in the sports bra category.
Victoria’s Secret sports bras, priced between $45 and $88, faced competition from Lululemon’s offerings ranging from $29 to $78. In response to evolving market dynamics, the company plans to open approximately 15 new stores in North America in 2024, primarily in off-mall locations. However, it also intends to shutter 35 stores, mainly to consolidate co-located Victoria’s Secret and PINK outlets.
Victoria’s Secret grapples with declining demand, evidenced by a nearly 26% drop in share value last year and a 3.5% decrease year-to-date. Despite efforts to adapt its retail strategy, the brand faces headwinds in a competitive market environment where consumers increasingly prioritize affordability and value.
Featured Image: Unsplash
