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Victoria Secret’s (VSCO) sales up despite by shipping backlogs

17:08, 18 November 2021

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Victoria's Secret store in urban mall
Victoria Secret store in urban mall – Photo: Shutterstock
Our teams around the world are working diligently to mitigate the potential effect of these challenges by repositioning deliveries, expediting deliveries and in certain situations, canceling deliveries.
by Victoria's Secret CEO Martin Waters

Intimate apparel and clothing retailer Victoria’s Secret & Co. (NYSE: VSCO) gave investors an early Christmas present in strong third quarter financial results, but warned much of its fall season and holiday inventory is snagged in supply chain disruptions.

The Ohio-based company revealed during a Q3 conference call Thursday that nearly 45% of its fall season inventory is facing delays including products stuck on about 100 ships that are unable to dock and unload at jammed ports.

Despite the news, VSCO stock prices rose about 16% to $58.63 by midday trading Thursday.

Christmas inventory stuck in backlog

The retailer, known for its sexy lingerie ads and celebrity endorsements, said total revenues for the three-month period ended 30 October, were about $1.4bn (£1.1bn), up 6.5% compared to $1.35bn the same period last year. Revenues were down 8.6% compared to the same period two years ago.

North American store sales jumped to almost 22% in Q3 to $920m from $755m. Net profits for the quarter were $75m. Victoria Secret split with L Brands (NYSE: LB), which operates Bath & Bodyworks, in August.

Shifting to air to bypass ports

About 90 million of the company’s order of 210 million units of merchandise for Christmas shoppers are still backlogged, CEO Martin Waters told investors Thursday. Mounting freight costs and other delays will cost the company $150m during Q3 and Q4, he said, forcing some cancellations of orders that won’t arrive by Christmas or bypassing ports by shipping them by air.

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“Our teams around the world are working diligently to mitigate the potential effect of these challenges by repositioning deliveries, expediting deliveries and in certain situations, cancelling deliveries,” Waters said, noting air transport that used to take two days now takes nine.

“In addition to higher costs, we know these challenges will minimise our flexibility to chase winners and deliver increased sales versus our forecast, which in turn may inhibit our ability to accelerate sales growth year-over-year beyond what we are forecasting for the quarter.”

Customer impacts felt

Waters conceded the product shortfall is “clearly bad for business”, noting the company has just 30% of its ladies top-selling pyjama sets in stock. "And so, it impacts the customer. She doesn't see the array of newness that she's used to seeing at this time of year."

Net income for the third quarter ended 30 October, hovered at $75.2m, or diluted earnings per share of $0.81, compared to an anticipated $0.60 to $0.70 per diluted share. Net income in the prior year quarter was $143.4m, or $1.62 per share.

The world’s largest specialty retailer of intimate wear said it is forecasting fourth quarter 2021 sales to be flat to up 3% versus last year’s fourth quarter sales of $2.1bn and diluted earnings per share to be in the range of $2.35–$2.65 per share. Victoria’s Secret has nearly 1,400 stores worldwide.

Read more: Macy's (M) gains 18% on earnings bear, revised guidance

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