Changes are afoot at the company, and at least a few analysts are impressed by them.
A fresh change in leadership, unexpectedly strong preliminary results, and a set of bullish new analyst notes were the main factors pushing Victoria’s Secret (VSCO 9.78%) stock higher in recent sessions. The share price gain was well in the double-digit percentages; according to data compiled by S&P Global Market Intelligence, the stock was up more than 23% as of Friday before market open.
New leadership, new second-quarter forecasts
The major event during the period was the management change. Wednesday morning, Victoria’s Secret announced that Hillary Super would be its new CEO, formally replacing current leader Martin Waters on Sept. 9. Super is a veteran clothing retail executive, having served as chief executive of Savage X Fenty, the lingerie brand founded by pop star Rihanna. Among other positions, Super also served as global CEO of Anthropologie, the popular retail brand owned by Urban Outfitters.
That announcement coincided with Victoria’s Secret’s release of its preliminary second-quarter earnings. The company expects that its net sales for the period will decline by 1% to 2%, a range slightly narrower than its prior guidance calling for a 1% to 3% dip.
A more drastic contrast was in profitability — the preliminary figures count on non-GAAP (adjusted) operating income coming in at $57 million to $62 million, against the preceding expectation of only $30 million to $45 million. The new forecast for adjusted earnings per share (EPS) is $0.34 to $0.39, quite the improvement over the company’s former estimate of $0.05 to $0.20.
Analyst price target raises and an upgrade
Several analysts were convinced that Victoria’s Secret is heading for better times on the back of these developments. A clutch of prognosticators tracking the stock raised their price targets on the shares, with one even upgrading her recommendation. This was Morgan Stanley‘s Kimberly Greenberger, who now feels the company rates an equal weight (hold), one notch up from her previous underweight (sell). The pundit also significantly raised her price target to $20 per share from her previous $14.
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
