Victoria's Secret: A Resurgent Brand Poised for Re-Rating in the Premium Apparel Sector

The premium apparel sector is on the cusp of a re-rating, and Victoria’s Secret (VSCO) is emerging as a standout contender. With a 3% year-over-year revenue increase in Q2 2025 and a revised full-year sales guidance of $6.33–$6.41 billion, the brand is showing signs of a hard-fought recovery [1]. But this isn’t just about numbers—it’s about a strategic overhaul that aligns with the sector’s most powerful trends: digital transformation, sustainability, and inclusivity. Let’s break it down.

Strategic Overhaul: Leadership and Brand Reinvigoration

Victoria’s Secret has undergone a leadership shakeup, appointing brand-specific presidents for its core divisions—Anne Stephenson for Victoria’s Secret, Ali Dillion for PINK, and Amy Kocourek for Beauty—alongside Adam Selman as Executive Creative Director [1]. This “Path to Potential” strategy is laser-focused on modernizing the brand’s identity while expanding into high-growth categories like beauty and sport. The acquisition of Adore Me, a size-inclusive brand, further signals a commitment to broadening its appeal in a market where 70% of consumers demand inclusivity [4].

The results? Q2 2025 saw a 4% rise in comparable sales, driven by North American growth and a 10% annual increase in the Beauty division [1]. While operating income dipped to 2.8% from 4.4% in Q2 2024, the company’s ability to exceed revenue expectations by 3.6% and raise full-year guidance suggests a stabilizing foundation [1].

Sector Re-Rating: Digital and Sustainability as Catalysts

The global premium apparel market is projected to grow at a 3.8% CAGR through 2032, reaching $590.32 billion [2]. Victoria’s Secret is positioning itself at the intersection of two key drivers: digital innovation and sustainability. The company’s “store of the future” concept integrates AI-driven inventory management and virtual fitting rooms, addressing the sector’s shift toward immersive, tech-enabled shopping experiences [3]. Meanwhile, its sustainability initiatives—though still evolving—are critical in a market where 70% of luxury consumers are willing to pay a premium for ethically produced goods [4].

Valuation Metrics: A Bargain in a Premium Sector

At a P/E ratio of 12.66 and an EV/EBITDA of 5.15, VSCO trades at a discount to its peers and historical averages [3]. This undervaluation is striking given its 3% revenue growth and a Beauty division contributing 18% of total revenue [4]. Analysts project 19.41% earnings growth for 2025, with a consensus “Hold” rating and a 12-month price target of $22.80 [1]. While tariffs and cybersecurity costs pose near-term headwinds, the company’s price-to-sales ratio of 0.3x suggests a compelling entry point for patient investors [3].

Risks and Realities

No investment is without risk. Victoria’s Secret faces stiff competition from digitally native brands like Savage X Fenty and Neiwai, which have captured younger demographics [5]. Its reliance on North American markets and a 14% stock decline following Q1 guidance also raise eyebrows [4]. However, the brand’s 4% comparable sales growth in Q2 and a 16.7% monthly stock rebound indicate resilience [1].

Final Verdict: A Buy for the Long Haul

Victoria’s Secret is not a short-term play—it’s a long-term bet on a brand rediscovering its relevance. The company’s strategic alignment with sector trends, undervalued metrics, and improving financials make it a compelling candidate for re-rating. While challenges like tariffs and brand perception linger, the fundamentals are strong enough to justify a “Buy” for investors with a 12–18 month horizon.

Source:
[1] Victoria's Secret & Co. Reports Strong Second Quarter 2025 Results, Raises Full Year Sales Guidance [https://www.quiverquant.com/news/Victoria%27s+Secret+%26+Co.+Reports+Strong+Second+Quarter+2025+Results%2C+Raises+Full+Year+Sales+Guidance]
[2] Premium Apparel Market: Industry Analysis and Forecast [https://www.stellarmr.com/report/Premium-Apparel-Market/1848]
[3] Victoria's Secret & Co (VSCO) PE Ratio [https://www.financecharts.com/stocks/VSCO/value/pe-ratio]
[4] Victoria's Secret Playing Catch-Up Amid Shifting Markets [https://www.ainvest.com/news/victoria-secret-playing-catch-shifting-markets-2505/]
[5] Victoria's Secret: Playing Catch-Up Amid Shifting Markets [https://www.ainvest.com/news/victoria-secret-playing-catch-shifting-markets-2505/]