Victoria's Secret Set to Report Q3 Earnings: Buy, Sell or Hold Stock?

Core Viewpoint - Victoria's Secret & Co. is expected to report its third-quarter 2024 results on December 5, with a consensus estimate indicating a narrowed adjusted loss per share and a slight revenue growth year-over-year [1][5]. Financial Performance - In the last reported quarter, the company's earnings exceeded the Zacks Consensus Estimate by 5.3%, with an average earnings beat of 2.9% over the last four quarters [3]. - The adjusted loss per share estimate for Q3 has improved to 64 cents from 68 cents, compared to an adjusted loss of 86 cents in the same quarter last year [5]. - Revenue consensus for Q3 is projected at $1.29 billion, reflecting a 1.9% increase year-over-year [5]. Earnings Prediction - The company has a positive Earnings ESP of +4.69%, indicating a likelihood of an earnings beat [6]. - Currently, Victoria's Secret holds a Zacks Rank of 3 (Hold) [7]. Sales Performance Factors - The third-quarter performance is expected to benefit from continued sales growth in North America, driven by strong customer response to new product lines such as the Dream bra collection and Featherweight Max sports bra [9]. - Growth in the beauty segment and strong sales in the sports bra and PINK apparel categories are also anticipated to contribute positively [10]. Margin Pressures - Increased discounting in key categories like beauty and panties may pressure margins despite higher sales volumes [11]. - Rising transportation costs, which previously acted as tailwinds, are now expected to create headwinds for gross margins in the third quarter and beyond [11]. Stock Performance and Valuation - VSCO stock has increased by 65.8% over the past three months, outperforming industry peers and the broader market [12]. - The company's forward 12-month price-to-sales ratio is 0.5, which is lower than the industry average and the S&P 500's 5.25, indicating a valuation discount [15]. Investment Outlook - Victoria's Secret shows signs of improvement with sales growth and strong performances in key product categories, supported by its customer loyalty program and digital initiatives [17]. - However, rising transportation costs and increased discounting may weigh on margins, suggesting that new investments should be approached cautiously until market conditions stabilize [18].