Victoria’s Secret refers to Ukraine struggle and inflation because it provides dismal first-quarter outlook

Victoria’s Secret seesawed in after-hours buying and selling Wednesday after the lingerie retailer issued a downbeat outlook for the approaching quarter, cautioning that it nonetheless sees challenges forward — together with inflation and “world unrest,” a reference to Russia’s struggle on Ukraine.

It reported fiscal fourth-quarter income and gross sales that barely outpaced analysts’ expectations, after it reaffirmed a forecast in December for its vacation efficiency.

Its efficiency within the close to future, although, might show to be clouded by world headwinds. Victoria’s Secret stated the primary half of this yr could also be harder to function in, given ongoing provide chain points, however that it ought to return to working earnings progress within the again half. Victoria’s Secret referred to as the third quarter an anticipated inflection level.

Here is how Victoria’s Secret did in its fiscal fourth quarter in contrast with what Wall Avenue was anticipating, based mostly on a survey of analysts by Refinitiv:

• Earnings per share: $2.70 vs. $2.63 anticipated
• Income: $2.18 billion vs. $2.14 billion anticipated

Web earnings for the three-month interval ended Jan. 29 fell to $246 million from $282 million a yr earlier. Income grew about 4% to $2.18 billion from $2.1 billion a yr earlier.

The corporate stated its magnificence merchandise helped to drive prospects on-line and into its brick-and-mortar shops, whereas its worldwide enterprise reported outsize progress in contrast with North American operations. Victoria’s Secret additionally stated it has been happy with the current launch of a brand new assortment referred to as Love Cloud that’s centered round consolation and inclusivity.

To make sure, within the coming months, Victoria’s Secret sees a difficult retail atmosphere with rising inflation and “the potential for shopper uncertainty with the current world unrest.”

The corporate expects to incur incremental provide chain prices and bills associated to inflation within the first half of the yr of about $140 million, roughly just like what it reported within the again half of 2021. Oil costs have surged throughout Russia’s invasion of Ukraine, stoking fears that already-high inflation will persist and rise by even hotter charges.

The retailer sees first-quarter gross sales in a spread of $1.43 billion to $1.5 billion, which might symbolize a lower of 4% to eight% from the prior yr. That is additionally wanting analysts’ estimates for $1.52 billion.

It sees first-quarter earnings per share in a spread of 70 cents to 95 cents. Analysts had been searching for $1.32 a share, based on Refinitiv.

The retailer stated in ready remarks that it expects to face ongoing provide chain value pressures, and it is also lapping stimulus advantages of roughly $50 million within the first quarter of 2021.

It anticipates 2022 income to be flat to up low-single digits in contrast with 2021 ranges. Analysts had been projecting a 2.9% improve yr over yr.

Victoria’s Secret stated it continues to judge the scale of its actual property footprint, because it assessments an off-mall idea and remodels current retailers to make them lighter and extra inviting for consumers. It anticipates closing anyplace between 10 and 30 retailers in 2022.

“We proceed to see constructive response to newness and with the ability to maintain a decrease stage of promotional exercise,” administration stated in ready remarks.

Victoria’s Secret shares are down about 2% this yr, as of Wednesday’s market shut. That brings the retailer’s market cap to $4.8 billion.

Learn the complete earnings launch from Victoria’s Secret right here. The corporate is about to carry a dwell convention name with analysts on Thursday morning.