Victoria's Secret last week said it's on track to deliver on the Q4 guidance it gave in November, for sales to be flat or rise as much as 3% above 2020's $2.1 billion and for operating income to land between $295 million and $335 million.
The lingerie retailer enjoyed encouraging sales growth during the peak Thanksgiving shopping weekend and a "large rush of business as we approached December 25th," CEO Martin Waters said in a statement.
The newly independent company, which separated from L Brands sibling Bath & Body Works last year, also announced an accelerated share repurchase agreement to buy back $250 million of its common stock, starting with about 4.1 million shares on New Year's Eve.
Victoria's Secret is starting out the new year with the confidence of a successful comeback.
The lingerie brand never lost its place as the world's dominant retailer in the segment, holding onto 20% market share in the U.S. (down from 26% in 2015), according to Wells Fargo analysts, citing The NPD Group. Declines continued in recent years as the brand stubbornly hung onto a once-successful marketing scheme that had fallen out of favor. The downfall was exacerbated by merchandising missteps — though it all changed dramatically last year as the brand owned up to its mistakes, let go of its iconic angels and turned to a team of powerful women to help reshape its messaging.
The image makeover and merchandising overhaul, which Wells Fargo called "long overdue," have helped fuel a financial comeback, despite lingering supply chain issues that deprived stores of nearly half the planned goods for fall last year.
"Over the past few months, we have stabilized our business and created a platform for future growth while generating significant cash flow," Waters said. "Our financial stability and cash flow potential are pillars of strength and competitive advantages."
Analysts viewed the announcements as signs of confidence. Beyond any impact on Wall Street, the guidance also "showcases management's execution in a highly challenging environment," MKM Partners Managing Director Roxanne Meyer said in comments emailed Monday.
Victoria's Secret, a mainstay of the traditional American mall, is likely to continue to leave that format, as it has locations at 150 vulnerable malls, according to the Wells Fargo team led by Ike Boruchow. That, plus the company's fresh attention to digital sales, bode well, they said.
"While the outcome of those 150 malls is likely to be determined in the next ~3 years, we're encouraged that the brand will be testing more of an off-mall approach (10 off-mall openings slated for 2022)," Wells Fargo said. "This is in addition to a focus on in-store experiences, with updates recently done across the majority of the fleet towards the updated brand imagery and away from the dark/boudoir/fashion show heavy imagery of years past."