What Happened?
Shares of intimatewear and beauty retailer Victoria’s Secret (NYSE: VSCO) jumped 12.3% in the afternoon session after the company reported third-quarter financial results that beat Wall Street's expectations and provided an encouraging forecast.
The intimatewear retailer announced that its sales grew 9.2% year-on-year to $1.47 billion, surpassing analysts' estimates. The company's adjusted loss per share of $0.27 was also significantly better than the forecasted loss of $0.59. A key performance indicator for retailers, same-store sales, which measures growth at established locations, rose 8%. Looking ahead, the company issued revenue guidance for the fourth quarter that was above expectations. Furthermore, its full-year adjusted earnings per share guidance of $2.53 at the midpoint also topped consensus estimates, signaling confidence in its performance for the remainder of the year.
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What Is The Market Telling Us
Victoria's Secret’s shares are extremely volatile and have had 44 moves greater than 5% over the last year. But moves this big are rare even for Victoria's Secret and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was 14 days ago when the stock gained 8.4% on the news that comments from a key Federal Reserve official boosted investor optimism for a potential interest rate cut.
New York Federal Reserve President John Williams, a voting member of the rate-setting committee, suggested he sees room for "further policy easing," which sent a strong signal to the markets. Following his remarks, the probability of a December rate cut, as measured by the CME FedWatch Tool, surged from 39% to 71%. Lower interest rates can stimulate the economy by making borrowing cheaper for both consumers and businesses, which often translates to increased consumer spending. This prospect is outweighing recent reports of lower consumer confidence, as investors bet that a more accommodative Fed policy will support retailers through the holiday season.
Victoria's Secret is up 17% since the beginning of the year, and at $47.28 per share, it is trading close to its 52-week high of $48.71 from December 2024. Investors who bought $1,000 worth of Victoria's Secret’s shares at the IPO in July 2021 would now be looking at an investment worth $1,112.
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