UBS maintains Victoria’s Secret stock rating amid turnaround efforts

UBS maintained its Neutral rating and $24.00 price target on Victoria’s Secret (NYSE: VSCO) Thursday, falling within the broader analyst target range of $15-31. Currently trading at a P/E ratio of 10.7, InvestingPro analysis suggests the stock is fairly valued. The investment firm acknowledged signs that management initiatives to revitalize growth are showing early results.

UBS analyst Mauricio Serna noted that Victoria’s Secret "remains a potential turnaround stock" with its first-quarter report demonstrating progress in stabilizing market share in core North America intimates and expanding into adjacent categories. The stock has experienced significant volatility, with a sharp 55% decline over the past six months, though it maintains profitability with a gross margin of 37%.

The firm expressed caution regarding the company’s fiscal year 2025 earnings guidance reduction and weak second-quarter outlook, which UBS believes confirms that tariffs will likely slow the retailer’s turnaround efforts. For deeper insights into VSCO’s financial health and growth prospects, InvestingPro subscribers can access exclusive analysis and additional ProTips.

UBS forecasts a modest 4% six-year earnings per share compound annual growth rate for Victoria’s Secret, justifying what it considers a low price-to-earnings ratio for the stock.

While UBS sees "decent upside" to its $24 price target, the firm indicated this potential gain isn’t sufficient to warrant a more positive rating on Victoria’s Secret shares at this time.

In other recent news, Victoria’s Secret reported a strong financial performance for the first quarter of 2025, surpassing earnings expectations with an earnings per share (EPS) of $0.09, well above the forecasted $0.0217. The company’s revenue reached $1.35 billion, slightly exceeding the anticipated $1.32 billion. Despite these positive results, BofA Securities downgraded Victoria’s Secret’s stock price target from $20 to $18, maintaining an Underperform rating due to concerns about the company’s ability to sustain consistent sales growth and margin expansion. Victoria’s Secret has maintained its full-year sales guidance of $6.2 to $6.3 billion but revised its EPS forecast to a range of $1.80 to $2.20 from the previous $2.00 to $2.45. The company experienced flat sales in the first quarter, with international sales growing by 9%, particularly in China, highlighting strong global expansion. However, gross margin faced a decline of 170 basis points, influenced by elevated air freight rates and tariff-related challenges. Victoria’s Secret plans to focus on marketing optimization and product innovation, with new launches expected in the beauty and swim categories. BofA also reduced its fiscal 2025 and 2026 EPS estimates for the company by 17% and 12%, respectively, due to ongoing margin pressures from tariffs.

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