Victoria’s Secret In Trouble

By Douglas A. McIntyre Published Sep 20, 10:49AM EDT

Key Points

Victoria’s Secret Has Not Posted Strong Growth
The Market For Small Retailers Is Difficult
The analyst who called NVIDIA in 2010 just named his top 10 stocks and Victoria's Secret wasn't one of them. Get them here FREE.

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Victoria’s Secret In Trouble — © wdstock / iStock Editorial via Getty Images

The market does not think much of women’s apparel company Victoria’s Secret (NYSE: VSCO). Its stock has constantly underperformed the market. It is not hard to see why. Recently, investment bank UBS raised its price target from $21 to $25. The stock trades at $26. UBS rates the stock as “neutral.” Among the reasons is that same-store sales are barely above flat, and tariffs may affect margins.

Earnings tell most of the story of Victoria’s Secret hurdles. EPS fell by half to $.20. Revenue barely inched up to $1.459 billion. Same-store sales also barely rose by 3%. With worry about an overall drop in U.S. retail sales and the question of whether companies or their customers take on the burden of tariff-driven prices, the chances that the stock will rise are unlikely.

Admittedly, Victoria’s Secret raised guidance when it announced its most recent quarter results. The increase was not enough to attract investor attention.

Although some of Victoria’s Secret products are exciting, the company itself is not. Its stock sits in the middle of its 52-week range. Net profit margins have been choppy and below 3% recently.

Victoria’s Secret’s challenges are the same as those of many niche retailers. It is the “Foot Locker” problem. Too few locations, and products similar to its merchandise are available at companies with larger store footprints.

In short, the problem with the company is that there is nothing wrong with the company. However, there is nothing right.

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About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.