BofA Securities double downgraded Victoria’s Secret (NYSE:VSCO) to Underperform from Buy and slashed its price target by more than half to $15 as the “steep” slowdown in sales, secular slowdown in the core lingerie market, and higher expenses leave the company in a much more “problematic” position.
The bank also lowered its 2024/2025 profit expectations by 35% and 45%, respectively, to $1.64 and $1.82 given the challenged sales trends and higher-than-expected SG&A expenses.
While international is a “bright spot” that continues to grow by more than 20%, the category is too small to compensate for declines in the North American business. There is also additional downside risk to sales should the broader lingerie market continue its shift to less structured, more casual and multi-function bras.
“We were previously bullish on the initiatives such as sport market shares reclamation and synergies with Adore Me’s technology platform to drive sales in 2024, but now expect benefits to take longer to materialize,” BofA analysts said in Friday’s research note.
On Wednesday, Victoria’s Secret (VSCO) shares took a beating after the company warned that the continued challenges in its intimates category could contribute to a loss next quarter.
The company forecasted 2024 sales to be down by low-single digits to $6B, missing expectations by about $200M, and for Q1 EPS to be ($0.15) to $0.10, driving shares down by as much as 25% in after-hours trade.
VSCO is lower by another 5% on Friday to a 5-month low, the 7th time in 8 days the stock has traded in the red.