Victoria’s Secret Plans to Buy Back $250M in Stock; Reaffirms Guidance – WWD

Victoria’s Secret’s latest comeback strategy includes $250 million in common stock. 

The lingerie and beauty retailer revealed Wednesday that it had entered into an accelerated share repurchase agreement with Goldman Sachs to buy back $250 million in common stock. Shares of Victoria’s Secret & Co. shot up nearly 12 percent at the start of Wednesday’s session as a result. 

“Over the past few months, we have stabilized our business and created a platform for future growth while generating significant cash flow,” Martin Waters, chief executive officer of Victoria’s Secret Lingerie, said in a statement. “Our financial stability and cash flow potential are pillars of strength and competitive advantages. With the unanimous support of our board of directors, we are announcing our first-ever share repurchase. We believe this share repurchase reflects our confidence in the company and is another step on our journey to create long-term, sustainable value for our shareholders.”

Under the terms of the agreement, the company will make an initial payment of $250 million to Goldman Sachs, receiving about 4.1 million shares in return on Dec. 31. The exact number of shares will be based on the “volume-weighted average price of the company’s common stock during the term of the [accelerated share repurchase agreement] less a discount,” the firm said. The deal is expected to close in 2022’s first quarter. 

Also on Wednesday, the retailer reaffirmed its previous fourth-quarter guidance, which anticipates revenues flat to an increase of up to 3 percent, compared with last year’s fourth-quarter sales of $2.1 billion. In addition, Victoria’s Secret expects operating income to be in the range of $295 million to $335 million, and diluted earnings-per-share to be between $2.35 and $2.65 apiece. 

“I am very pleased with our fourth-quarter performance to date and believe we have solid plans in place for the balance of this holiday selling season,” Waters said. “I was particularly encouraged by our sales growth during the peak shopping days over the Thanksgiving weekend and the large rush of business as we approached Dec. 25. Our stores are in a good inventory position as we begin our semiannual sale and anniversary the positive stimulus impact on sales in January of last year. Performance has been broad-based across all of our businesses and our stores channel has been a position of strength for our results. The teams have executed well and focused on what we can control in this challenging supply chain environment and I could not be more proud of our efforts.”

The company generated $1.4 billion in total revenues in its most recent quarter, helping it log $75 million in net profits and increase its full fiscal-year 2021 revenues guidance by 25 percent, compared with 2020’s full-year sales results, to be in the range of $6.7 billion to $6.8 billion, despite an expected $100 million in additional supply chain expenses. 

“This is a clear positive event on one of the cheapest names under coverage,” Ike Boruchow, senior retail analyst at Wells Fargo, wrote in a note. “The fact that the company called out encouraging trends in the business (particularly in stores) over key holiday periods indeed suggests their confidence headed into 2022 in lapping stimulus compares (starting in January), as well as in navigating supply chain disruption. VSCO has showed us the brand momentum remains on track and increasingly shareholder-friendly actions are yet another reason to remain positive. We don’t see anything today that changes our bullish stance on the company at current levels.”

His firm rated Victoria’s Secret’s stock as “overweight” and set a price target of $85.

Victoria’s Secret also unveiled its first VS Store of the Future in Chicago in November, the first of three set to open in coming months. (The other two will be in Houston and Birmingham, Ala.) The updated space included a selection of gender-neutral products, a beauty bar, an open floor plan, soft lighting, enhanced fitting-room technology and lots of mirrors, so shoppers could see themselves in the products while in stores. 

In addition the innerwear and beauty company continues to update its assortment, increase its size range and add new members to its VS Collective — an initiative that includes women from diverse backgrounds who share their stories by way of partnerships and collaborations. Last month Victoria’s Secret told WWD exclusively that tennis star Naomi Osaka had joined the VS Collective.

“Our job is to just make the best out of the assortment that we’ve got and that’s what we’re doing on a day-to-day basis,” Waters said at the time.

Shares of Victoria’s Secret & Co. are down about 9.1 percent, year-to-date, or since the firm’s Aug. 3 debut on the public market.