Shares of Victoria's Secret(NYSE: VSCO) were falling on Thursday, down as much as 9.6% in early trading before recovering to a 3.4% decline as of 2:37 p.m. ET.
While the apparel giant delivered revenue and earnings above expectations for the second quarter last night, the company is still seeing declines across most of its business. And with the stock having popped earlier this month on news of the appointment a new CEO, shares gave back some of those near-term gains today.
A beat, but an unenthusiastic one
In the quarter, Victoria's Secret's revenue fell 0.7% to $1.42 billion, with adjusted (non-GAAP) earnings per share of $0.40. Both figures beat analyst expectations, with the bottom-line figure up handily from the year prior, thanks to the company's cost-cutting initiatives.
Still, the stock didn't react favorably. Retail is a tough business, and it appears Victoria's Secret's brand may be losing some luster compared to new up-and-coming players such as Fenty.
Victoria's Secret is seeing same-store sales declines across not only its physical stores, which fell 5%, but also its online direct-to-consumer channels, which fell a more modest 3%. One might think that online sales would be taking away from physical stores these days, but it looks like both channels are actually declining. While last night's results were an improvement over the prior year's 14% and 11% respective same-store sales declines, slowing declines apparently didn't impress investors.
Victoria's new CEO has her work cut out
On Aug. 14, Victoria's Secret appointed Hilary Super as its new CEO. Super actually comes from Victoria's Secret rival Savage X Fenty and was CEO of retailer Anthropologie prior to that. So, if anyone knows how to counteract new competitors in today's more body-positive era, it's her.
Still, Super may have her work cut out for her, as Victoria's Secret has to navigate a brand transformation or adaptation. So while Victoria's Secret stock trades at an undemanding 13.7 times earnings, investors may still want to stay on the sidelines and hear more of her turnaround plan -- and see if those measures make a financial difference -- before betting on this company.
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