Why Victoria's Secret Stock Jumped Sharply at the Open Today

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© Provided by The Motley Fool Why Victoria’s Secret Stock Jumped Sharply at the Open Today

What happened

Shares of Victoria’s Secret (NYSE: VSCO), the iconic lingerie retailer, were higher by roughly 14% at 10:30 a.m. ET on Thursday. That quick advance was largely a result of the company’s earnings release after the close on Wednesday. There are multiple layers here that need to be examined to understand why investors were so impressed.

So what

Victoria’s Secret earned $0.81 per share in the third quarter, down from $0.82 in the same quarter of 2020, a year that was severely impacted by the pandemic. That doesn’t look like a good comparison until you note that the company itself was expecting earnings between $0.60 and $0.70 per share. So there’s clearly more to understand here, considering that Victoria’s Secret has been working to turn its business around for a number of years in the face of increasing competition and an image that some view as outdated.

© Getty Images. Two people shopping in a store.

Which, in a bit of reverse order, brings the story to the top line, which came in at $1.44 billion. That’s up from $1.35 billion a year ago, but down from $1.58 billion in the third quarter of 2019, before the pandemic.

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But even here, there’s a wrinkle: Victoria’s Secret has been closing stores during its turnaround effort (roughly 260 have been shuttered since the third quarter of 2019). So it’s really not an apples-to-apples comparison to look back to the pre-pandemic results without making some adjustments. When you examine just stores that were open in 2021 and 2019, comparable-store sales increased 4%. Again, good news that suggests the retailer’s turnaround efforts are gaining traction.

Now what

Victoria’s Secret is projecting fourth-quarter sales to come in anywhere from flat to 3% higher, which isn’t bad and isn’t great. And while it beat its own expectations and those of Wall Street, which often leads to strong daily stock gains, the bigger story here is really about the turnaround.

And — yes, Victoria — that appears to be going quite well right now and could mean a good holiday for investors this year and maybe even next if the current trends continue.

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Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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