Habib Ur Rehman
2 min read
TD Cowen lowered its price target on Victoria’s Secret (NYSE:VSCO) from $25 to $22 a few days earlier, holding its Neutral stance as the lingerie retailer continues to struggle with margin pressure and weak core category performance. The stock is currently trading near $19, down more than 52% year-to-date, with a market cap of $1.58 billion.
The downgrade follows a rough first quarter, where gross margins came in below expectations. While the company benefited from lower SG&A, thanks to a shift in marketing spend from Q1 into Q2, Cowen pointed to the growing reliance on “gift with purchase” promotions, which undercut pricing and dragged on margins. Unit sales during the semiannual sale also saw double-digit declines, raising further questions about consumer demand.
Still, there were a few positives. The PINK apparel line, beauty segment, and VSX activewear all delivered solid results. But analysts made it clear that the company’s core intimates business, the foundation of the brand, “needs more work.”
TD Cowen also warned that the second half of the year could bring difficult comps, particularly given the major lift Victoria’s Secret (NYSE:VSCO) saw from its fashion show last year. The updated $22 price target is based on a 9x multiple of projected 2027 earnings. It suggests marginal near-term upside without a turnaround in fundamentals.
The company remains profitable, with $586 million in EBITDA over the past 12 months, but momentum is shaky, and the stock continues to show that uncertainty. Last month we talked about VSCO's new poison pill.
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Disclosure: None.
