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Victoria’s Secret Raises Q4 Guidance

Victoria’s Secret & Co. is doing better than it even expected just two week earlier.

The lingerie giant expects fourth quarter earnings per share in the range of $2.25 to $2.35 a diluted share, higher than its guidance range of $2.05 to $2.25 on Jan. 11, it said Tuesday. In addition, the net sales decline in now expected in the 7 percent to 8 percent range, better than its prior “high-single digit range” estimate. The company posted net sales of nearly $2.18 billion in the fourth quarter. It guided operating income to between $265 million to $275 million, or 13 percent to 14 percent of sales. That’s above its earlier forecast of $245 million to $265 million, or 12 percent to 13 percent of sales.

The updated guidance excludes the financial impact of its AdoreMe Inc. acquisition, a $400 million deal completed at the end of last year.

“Our sales performance was at the better end of our guidance with margins solidly in line with our expectations despite our response to a very promotional environment during the holiday season,” CEO Martin Waters said, adding that the company will end the year with inventory levels “down low double digits.”

Looking ahead to 2023, Waters said 2023 results could look similar to 2022, given the economic climate. “However, we are evolving and innovating our business and have organic growth strategies and new customer experiences well identified and ready to launch during 2023,” he said.

Adore Me, a recently certified B Corp, should grow by the double digits, while Victoria’s Secret’s international business also is growing by “double digits,” thanks to operating partners’ plans for new stores and new countries over the next two years.

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It isn’t clear which direction the economy is headed, although consumers aren’t feeling great about the next six months. The Consumer Confidence Index fell in January to 107.1 from 109.0, following upward revision in December, The Conference Board said Tuesday. The Present Situation component increased to 150.9 from 147.4 in December. The Expectations portion fell to 77.8 from 83.4, and at below 80 is now clearly in recession-level territory. Consumers polled last month were feeling blue about their short-term jobs outlook.

Victoria’s Secret also has an accelerated share repurchase agreement allowing Goldman Sachs to repurchase $125 million of the company’s common stock, part of the previously announced plan to repurchase up to $250 million in this form of equity.