Barington Capital's Play for Victoria's Secret: A High-Stakes Activist Gamble on Turnaround Potential

Victoria's Secret & Co. (VSCO) has been a cautionary tale of brand mismanagement since its 2021 spin-off from L Brands. Its stock price has collapsed 75% from a post-IPO high of $76 to around $18.83 in 2025, erasing $2.4 billion in shareholder value. Now, activist investor Barington Capital—famed for its role in L Brands' turnaround—has seized the opportunity to push for sweeping changes. The question is: Can this high-stakes intervention revive the struggling retailer, or is it another chapter in a long-running failure?

The Current Crisis at Victoria's Secret

Victoria's Secret's decline is multifaceted. Quarterly results for Q1 2025 revealed a 1% drop in comparable sales, a 170 basis-point contraction in gross margins, and a $50 million drag from tariffs. Meanwhile, cybersecurity failures disrupted e-commerce operations, and inventory levels remain bloated. CEO Hillary Super, appointed in September 2024, faces skepticism over her lack of chief executive experience and the brand's missteps in refocusing on its core lingerie business. Barington Capital, holding over 1% of shares, has seized the moment to demand accountability.

Barington's Playbook: Governance Overhaul and Strategic Refocusing

Barington's campaign centers on three pillars:
1. Board Revamp: Replace most of the nine-member board with directors experienced in brand revitalization, global expansion, and shareholder value creation. Six current directors have held their positions since the 2021 spin-off—a period of relentless underperformance.
2. Leadership Evaluation: Subject Super to scrutiny, citing her limited experience and the board's failure to address operational chaos, including high executive turnover and poor risk management.
3. Strategic Focus: Redirect resources to the core Victoria's Secret brand—particularly bras and beauty—while discontinuing underperforming ventures like Pink and athleticwear. Accelerate digital and international growth, especially in China, where sales rose 9% in Q1 but remain below potential.

The activist also opposes VSCO's recent “poison pill” shareholder rights plan, arguing it entrenches ineffective leadership and deters constructive engagement. This stance contrasts with Barington's preference for negotiated settlements over proxy fights—a strategy that succeeded in L Brands, where its advisory role boosted the stock 221.5%.

The Data Behind the Decline and the Opportunity

Backtest the performance of Victoria's Secret & Co. (VSCO) when 'buy condition' is triggered by positive quarterly earnings surprises, and 'hold for 30 trading days' after announcement, from 2020 to 2025.
The chart underscores the disconnect between VSCO's performance and broader markets. Meanwhile, Barington's track record is compelling: its 38 activist campaigns since 2000 averaged a 38.18% return, outperforming the Russell 2000's 14.74% average. This credibility could pressure the board to negotiate rather than resist.

Risks and Hurdles

Resistance is likely. Chair Donna James, a holdover from Barington's 2019 engagement, may resist wholesale changes. The board's recent cybersecurity lapses and poor financial controls also raise red flags about execution capacity. Competing activist Brett Blundy's 13% stake adds complexity, though Barington's constructive approach and retail expertise position it as a more credible partner.

The Investment Case: High Risk, High Reward

Victoria's Secret trades at a deep discount to its intrinsic value. GuruFocus estimates a GF Value of $26.71, implying a 46.84% upside from current levels. Analysts project an average target of $22.68, suggesting cautious optimism. The stock's $1.45 billion market cap reflects extreme pessimism, but success hinges on Barington's ability to:
- Replace board members with turnaround experts.
- Refocus on the core lingerie business and capitalize on Beauty's seven-quarter growth streak.
- Streamline operations to reduce inventory costs and improve margins.

Final Take: A Gamble Worth Watching

Barington's intervention is a classic activist play: forcing governance changes to unlock value in a brand with a storied legacy but poor execution. While execution risks are high, the stock's valuation leaves room for upside if the board concedes to reform. Investors should consider a small speculative position, but wait for tangible progress—like board changes or a CEO shift—before scaling up. This is a high-risk, high-reward opportunity, emblematic of activist investing's potential to turn around troubled giants.