Why Victoria's Secret Could Miss Consensus Estimates By 38%: Analyst

Shares of Victoria's Secret & Co VSCO tumbled in early trading on Thursday.

The company’s growth prospects are limited by a challenging macro environment, according to UBS.

The Victoria's Secret Analyst: Jay Sole downgraded the rating for Victoria's Secret from Neutral to Sell, while reducing the price target from $43 to $27.

The Victoria's Secret Thesis: Soaring inflation, interest rate hikes, weaker store traffic in mall-based locations and a competitive retail environment could negatively impact the company’s sales and margins “much more than what the market expects,” Sole said in the downgrade note.

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“We now view VSCO among one of the weakest FY23E growth outlooks,” the analyst wrote. “Our new FY23E EPS forecast is 38% below consensus,” he added.

“While macro has been challenging, we also believe the company's initiatives, particularly along its marketing message, have not moved fast enough to improve the brand's perception,” Sole stated. He further mentioned that the Adore Me acquisition is unlikely to make any significant contribution to Victoria's Secret’s growth.

VSCO Price Action: Shares of Victoria's Secret had declined by 8.16% to $31.41 at the time of publication Thursday.

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