Victoria's Secret has gotten torched over the last six months - since November 2024, its stock price has dropped 37.1% to $23 per share. This may have investors wondering how to approach the situation.
Is now the time to buy Victoria's Secret, or should you be careful about including it in your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.
Why Is Victoria's Secret Not Exciting?
Despite the more favorable entry price, we're swiping left on Victoria's Secret for now. Here are three reasons why there are better opportunities than VSCO and a stock we'd rather own.
1. Shrinking Same-Store Sales Indicate Waning Demand
Same-store sales is an industry measure of whether revenue is growing at existing stores, and it is driven by customer visits (often called traffic) and the average spending per customer (ticket).
Victoria's Secret’s demand has been shrinking over the last two years as its same-store sales have averaged 4.4% annual declines.
2. Projected Revenue Growth Shows Limited Upside
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect Victoria's Secret’s revenue to stall. Although this projection implies its newer products will spur better top-line performance, it is still below average for the sector.
3. Weak Operating Margin Could Cause Trouble
Operating margin is an important measure of profitability for retailers as it accounts for all expenses necessary to run a store, including wages, inventory, rent, advertising, and other administrative costs.
Victoria's Secret was profitable over the last two years but held back by its large cost base. Its average operating margin of 4.5% was weak for a consumer retail business. This result is surprising given its high gross margin as a starting point.
Final Judgment
Victoria's Secret’s business quality ultimately falls short of our standards. Following the recent decline, the stock trades at 8.3× forward P/E (or $23 per share). While this valuation is optically cheap, the potential downside is big given its shaky fundamentals. We're fairly confident there are better stocks to buy right now. Let us point you toward a fast-growing restaurant franchise with an A+ ranch dressing sauce.
Stocks We Would Buy Instead of Victoria's Secret
Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 176% over the last five years.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.
