Victoria’s Secret & Co. (VSCO), the iconic retailer of women’s apparel, has seen its stock surge roughly 40% in the past month on the news of the appointment of new CEO, Hillary Super. Coupled with this, the company’s Q2 financials surpassed expectations with top-and-bottom-line beats. This has prompted the company to raise its full-year outlook for 2024. Victoria’s Secret faces a turnaround journey, reflected in its discount to industry peers. Investors willing to bear the risk may find this a compelling inflection point and contrarian value opportunity.
Victoria’s Secret Changes Leadership
Victoria’s Secret & Co. is a fashion brand with over 1,370 retail stores worldwide. The company’s product portfolio includes signature bras, panties, lingerie, casual sleepwear, athleisure, swimwear, fragrances, and body care.
Significant changes have occurred in the company’s leadership. Victoria’s Secret recently announced Hillary Super as the successor to Martin Waters for the position of CEO. Waters will officially hand over the role to Super on September 9, 2024. Super carries a wealth of experience spanning nearly three decades from her tenures as CEO of Savage X Fenty and the Global CEO of Anthropologie Group, an Urban Outfitters (URBN) business.
Recent Financial Results & Outlook for Victoria’s Secret
The company recently reported its Q2 financials. Revenue was $1.42 billion, a slight decrease of 0.7% compared to last year’s period, but still managed to exceed analysts’ estimates by $10 million. Also, this performance marked the first quarterly operating income growth since 2021 with $62 million, a significant improvement over $26 million in Q2 2023. Net income was $31 million, translating to an earnings per share (EPS) of $0.40, surpassing consensus projections of $0.38.
Following the positive quarterly results, VSCO’s management has increased its outlook for 2024, projecting a decrease in net sales of 1%, compared to the previously expected low-single-digit decrease. Adjusted operating income is anticipated to be between $275 million to $300 million, an increase from the previous range of $250 million to $275 million.
What Is the Price Target for VSCO Stock?
The stock has been on a multi-year downward trend, shedding roughly 65% over the past three years. With the recent rebound, it trades toward the upper end of its 52-week price range of $13.62 – $30.80 and shows positive price momentum, trading above its 20-day (18.31) and 50-day (18.98) moving averages. The stock P/E ratio of 13.64x sits well below the Apparel Retail industry average of 26.18x.
Analysts following the company have taken a cautiously optimistic stance on the stock. For instance, Morgan Stanley (MS) analyst Alexandra Straton recently raised the price target from $20 to $23 while maintaining an Equal Weight rating on the shares, noting the recent above-expectations results and guidance raise.
Victoria’s Secret is rated a Hold based on the recommendations and price targets nine analysts recently issued. The average price target for VSCO stock is $25.56, representing an 8.95% change from current levels.
Final Analysis on VSCO
Victoria’s Secret is at a pivotal crossroads as it navigates a potential with new leadership and robust financial projections. Currently trading at a discount compared to industry peers, VSCO offers investors a potential value opportunity. However, this comes with a potential turnaround journey’s risks and uncertainties.
