Victoria’s Secret’s (NYSE: VSCO) CFO, Tim Johnson, demonstrated confidence in the company’s future as securities filings unveiled his purchase of over $300,000 worth of VSCO stock in September. Since then, Johnson and VSCO investors have enjoyed an extraordinary rally, with the stock soaring approximately 54% over the past two and a half months.
Today, on December 1, we explore the key factors propelling this remarkable surge that made VSCO one of the best-performing stocks in November.
Why has VSCO been trending upward lately
Johnson’s big insider trade caught the attention of many when it was revealed, particularly because it preceded a big rally in the lingerie retailer’s shares.
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However, the stock price increase did not occur without cause.
First, VSCO caught investors’ eye when it made a significant strategic shift in October, moving away from its wokeness strategy to return to its core business principles. During that same period, the company also announced an improved Q3 outlook, guiding for a narrower operating loss and net loss per share.
Finally, the retailer unveiled its anticipated third-quarter report on November 30, and remarkably, it largely missed Wall Street’s expectations. Despite a poor earnings performance, VSCO jumped over 14% on the day.
What caused VSCO’s surge despite poor Q3 earnings?
Victoria’s Secret’s Q3 results matched analysts’ expectations for sales, however, its earnings missed the mark.
Its adjusted earnings per share (EPS) were reported at $0.86, below expectations, while its non-adjusted earnings performed even worse at $0.92. Although this figure was within the company’s guidance range, it was closer to the lower end.
In spite of this, VSCO spiked 14.29% to $26.95, resulting in the best daily close since May 2023.
The retailer’s earnings came in softer than expected but it was the company’s guidance that likely retained investors’ trust and fueled the latest stock price increase.
Notably, Victoria’s Secret’s CEO Martin Waters said during the earnings call that sales in North America “continued to improve … each month throughout the third quarter with October being our strongest month.”
Going into Q4, Waters said that November sales and margin result accounted for its “best monthly performance in nearly two years.” Further, Victoria’s Secret also has solid momentum in other markets, particularly China, he said.
As a result, the company expects its sales to reverse their decline in Q4 and climb between 2% and 4% to about $2.08 billion, meeting Wall Street’s projections.
On the other hand, though, its guidance for adjusted earnings of $2.20 to $2.60 for the quarter is a bit softer at the midpoint ($2.40 per share) compared to analysts’ estimates of $2.43.
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