Victoria’s Secret: Promising Turnaround Amidst Macroeconomic Uncertainty, Hold Rating Maintained

Analyst Alexandra Straton of Morgan Stanley maintained a Hold rating on Victoria’s Secret, retaining the price target of $20.00.

Alexandra Straton’s rating is based on a blend of positive and cautious factors influencing Victoria’s Secret’s current performance and future outlook. The company has shown promising signs of a turnaround, with second-quarter results exceeding expectations in terms of earnings per share, sales, and gross margin. This performance was driven by increased store traffic, improved full-price selling, and a reduction in traditional promotions, which are positive indicators of the company’s strategic initiatives taking effect.
However, despite these positive developments, Alexandra Straton remains cautious due to the uncertain macroeconomic environment and the early stage of the company’s turnaround efforts. The company’s EBIT margin remains below historical levels, and there is limited confidence in a consistent path to earnings per share growth and steady-state profitability. Additionally, the third-quarter guidance was set below market expectations, reflecting potential challenges such as tariff headwinds and increased strategic marketing and labor costs. These factors contribute to maintaining a Hold rating, as the potential for sustained growth and profitability remains uncertain.

In another report released yesterday, TD Cowen also reiterated a Hold rating on the stock with a $22.00 price target.