Victoria's Secret Turnaround In Progress But Challenges Remain: Analyst Lowers Forecast

Victorias Secret & Co. VSCO shares are trading lower on Thursday after the company issued first-quarter and FY25 sales guidance below estimates.

Revenue rose 1% year over year to $2.11 billion, beating the consensus of $2.09 billion, and adjusted EPS of $2.60 beat the consensus of $2.30.

The company expects net sales of $1.30 billion – $1.33 billion vs. consensus of $1.39 billion for the first quarter and $6.2 billion – $6.3 billion vs. consensus of $6.34 billion for FY25.

J.P. Morgan analyst Matthew R. Boss lowered the price forecast from $43.00 to $35.00, with a Neutral rating.

The analyst writes that for the balance of the year, management’s full-year guidance implies that the second quarter-fourth quarter revenues will accelerate to +1% growth on average (> first quarter’s -4% to -2% guidance range).

Boss notes that second quarter-fourth quarter same-store-sales comparisons on a 1-year basis are sequentially harder versus first quarter by 670bps.

The analyst writes that after recent leadership changes in the C-Suite and merchandising/product functions, VSCO is starting to see topline growth across both the VS and PINK brands.

Although the turnaround is still in the early stages, there is a multi-year opportunity to drive higher full-price selling, expand gross margins, and leverage SG&A on sustained revenue growth, ultimately improving operating margins, says the analyst.

The analyst cut the FY25 EPS estimates to $2.30 from $2.74 (vs. Street $2.80) and expects FY26 EPS of $2.40 (vs. Street $3.14).

Other analyst’s price forecast revisions include:

• Wells Fargo analyst Ike Boruchow cut the price forecast from $40 to $25, while keeping an Equal-Weight rating.
• BMO Capital analyst Simeon Siegel reiterated an Outperform rating and lowered the price forecast from $46 to $31.
• Telsey Advisory Group analyst Dana Telsey kept a Market Perform rating and slashed the price forecast from $40 to $24.

Price Action: VSCO shares are down 2.96% at $21.55 at the last check Thursday.

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