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BofA Securities lowered its price target on Victoria’s Secret (NYSE:VSCO) stock to $18.00 from $20.00 on Thursday, while maintaining an Underperform rating on the lingerie retailer. According to InvestingPro data, the stock is currently trading at a P/E ratio of 10.7x and has seen a significant 55% decline over the past six months.
The firm cited concerns about Victoria’s Secret’s ability to achieve consistent sales growth and margin expansion going forward. BofA noted that the company reported first-quarter earnings per share of $0.09, which aligned with its pre-announcement as an SG&A timing shift offset a gross margin miss.
Victoria’s Secret maintained its fiscal year sales guidance of $6.2-6.3 billion despite facing $20 million of pressure from an IT issue, but lowered its earnings per share forecast to $1.80-2.20 from the previous $2.00-2.45 range. The company’s current revenue stands at $6.23 billion for the last twelve months, with a healthy gross profit margin of 36.7%.
BofA reduced its fiscal 2025 and 2026 earnings per share estimates by 17% and 12% respectively, citing margin pressure from tariffs. The new price target of $18 represents 4x fiscal 2026 estimated EV/EBITDA on lower estimates.
The retailer experienced flat sales in the first quarter, with a difficult February but showed improvement in March, April, and into May, according to BofA’s analysis of the company’s performance.
In other recent news, Victoria’s Secret & Co reported strong financial results for Q1 2025, surpassing earnings expectations with an EPS of $0.09, significantly higher than the forecasted $0.0217. The company’s revenue for the quarter reached $1.35 billion, slightly above the anticipated $1.32 billion. Despite these positive results, the company faced a decline in gross margin by 170 basis points. Victoria’s Secret also announced international sales growth of 9%, driven by strong performance in China. The company is maintaining its full-year net sales guidance between $6.2 billion and $6.3 billion. Analysts from firms like Goldman Sachs and Morgan Stanley (NYSE:MS) inquired about the company’s marketing strategies and tariff mitigation efforts, reflecting investor interest in the company’s future plans. Victoria’s Secret’s leadership emphasized their focus on marketing optimization and product innovation, particularly in the beauty and swim categories. The company also addressed a recent security incident that temporarily impacted its e-commerce operations, but all systems are now fully operational.
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