Victoria's Secret's Turnaround Is Working. Why It Got a Downgrade Anyway. -- Barrons.com

By Mariapaula Gonzalez

Victoria's Secret's turnaround has made Wall Street analysts swoon, but one firm thinks the better-than-expected comeback may be already priced into the stock.

That reasoning was what prompted Bank of America analyst Mary Sport to downgrade Victoria's Secret to Neutral from Buy on Thursday, even while raising her price target to $112 from $95.

While the company's turnaround has been working, Sport noted, the stock has already jumped about 19% over the past month, according to Dow Jones Market Data. Because shares have climbed so much, Bank of America sees the good news as already priced in.

Shares of Victoria's Secret declined 3.7% to $105.80 Thursday. Even with Thursday's pullback, the lingerie giant has been having a standout year, with shares up 94% since January and pacing for their best year on record, according to Dow Jones Market Data.

Strong store visits have shown that new products and brand buzz, including a "halo effect" from its recent fashion show, have converted more shoppers into buyers, Sport wrote.

She expects solid momentum through the holidays and into next year, forecasting same-store sales growth of 9% in the fiscal third quarter and 6% in the fourth quarter.

In short, Sport buys the turnaround story. The stock at this price? Not so much.

While selling products at full price can boost margins in fiscal 2026, Sport warned that higher freight costs and expiring tariff benefits could weigh on profit growth in fiscal 2027. To justify buying the stock now, she thinks Victoria's Secret would need to hit a 12% operating profit margin by 2027, a tall order given that only half of its store remodels will be completed by the end of next year.

It wouldn't be the first time the core business and the stock have moved out of sync. In the fiscal second quarter, net sales rose 10% to $1.61 billion, narrowly missing Wall Street's $1.62 billion estimate. Total same-store sales climbed 9% -- beating the 8.8% consensus -- though slowing from the 14% increase in the fiscal first quarter.

On Sept. 3, the day Victoria's Secret released its fiscal-third-quarter earnings, shares dropped 13%. Jefferies analyst Corey Tarlowe previously attributed the stock reaction as being "shaped more by expectations than reported results."

Since taking the helm, CEO Hillary Super has focused on reviving sales by returning to the brand's signature "sexy" aesthetic. She has also sharpened the company's focus on core intimates and revived the Victoria's Secret Fashion Show. The October spectacle has driven massive buzz: Since its return, shares have rallied every October, jumping nearly 18% in 2024 and roughly 30% in 2025.

Morgan Stanley analyst Alex Straton has remained confident in Victoria's Secret's strategy. Beyond the spectacle, he highlighted a sharp merchandising play: The lingerie retailer made 17 times as many runway items directly available for purchase. These products were priced about 10% higher than the company's usual offerings, Straton noted, a move poised to lift both revenue and margins.

Calling the show fresh proof that the turnaround has been sticking, Straton reiterated his Overweight rating and bumped his price target to $104 from $101 on Oct. 19.

Wall Street, however, remains split on Victoria's Secret stock. Of the 15 analysts polled by FactSet, seven recommend buying shares while seven rate the stock as Hold. One analyst has a Sell rating.

Write to Mariapaula Gonzalez at mariapaula.gonzalez@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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November 12, 2026 13:37 ET (18:37 GMT)