Activist Pressure Can’t Keep Victoria Secret Stock (VSCO) Down

Victoria’s Secret (VSCO) is facing increased activist pressure as a new hedge fund, Barington Capital Group LP, disclosed a stake in the bra maker.

The news was first reported by the Wall Street Journal. Sources state that the fund led by James A. Mitarotonda is pushing for a complete board overhaul and wants the management to refocus on its original bras business. Despite the increased activist pressure, VSCO stock is rising up 2.5% in pre-market trading, at the time of writing.

Victoria’s Secret is already facing pressure from an existing investor, Australian billionaire Brett Blundy’s investment firm, BBRC International, which has a massive 12.9% stake in the company. In May, Victoria’s Secret adopted a “poison pill” to prevent BBRC from acquiring any additional shares. VSCO stock has lost 56% of its value so far this year.

Board Changes?

Barington’s exact stake in VSCO remains unknown at the moment, but sources say that it has built a stake of over 1% and intends to buy more shares. Sources also indicate that the activist investor hopes to replace a majority of the board members by nominating new independent directors. Moreover, the hedge fund is reportedly unhappy with newly appointed CEO Hillary Super‘s management expertise and style, as she has so far been unsuccessful in bringing about a notable turnaround at the company.

Barington is known for acquiring and successfully turning around companies in the consumer and industrial sectors. The firm is also an investor in Macy’s (M) and Hanesbrands (HBI). The hedge fund has solid conviction in Victoria’s Secret’s original lingerie business, which it aims to strengthen further.

Additionally, the investor hopes to focus on the company’s beauty business, believing it can command a higher market share and premium valuation. Barington also seeks to eliminate the shareholder’s rights plan (poison pill) adopted earlier by the company, which protects it from hostile takeover attempts.

Enhancing Shareholder Value

Barington has not yet officially communicated with Victoria’s Secret about its stake or its proposed changes, which it hopes will enhance shareholder value. However, a spokesperson for the company stated, “We are confident that executing our strategy under the new and experienced leadership team will continue to unlock value for our shareholders.”

On June 11, Victoria’s Secret reported better-than-expected sales and operating earnings for the first quarter of fiscal 2025 and provided guidance above Q2 sales estimates. Moreover, the company reaffirmed its full year Fiscal 2025 sales outlook to be between $6.2 billion and $6.3 billion. However, it lowered its FY25 operating income guidance to between $270 million and $320 million due to an updated estimated net tariff impact of roughly $50 million.

Is VSCO Stock a Buy?

On TipRanks, VSCO stock has a Hold consensus rating based on three Buys, five Holds, and three Sell ratings. Also, the average Victoria’s Secret price target of $22 implies nearly 21% upside potential from current levels.

See more VSCO analyst ratings