Victoria's Secret Q2 Results: Wells Fargo Raises Price Target to $17

Wells Fargo analyst Ike Boruchow raised Victoria's Secret's price target to $17 from $14 and maintains an Underweight rating. The firm notes Q2 was a positive inflection, with all key categories improving and gross margin showing notable improvement. However, the analyst remains concerned about tariffs/margins in the second half and beyond.

Wells Fargo analyst Ike Boruchow has raised Victoria's Secret's (VSCO) price target to $17 from $14, maintaining an Underweight rating. This decision follows the company's positive Q2 earnings report, which saw all key categories improve and gross margin show notable improvement. However, the analyst remains concerned about potential tariff impacts on margins in the second half of the year and beyond [1].

Victoria's Secret reported net sales of $1.459 billion for the second quarter, representing a 3% year-over-year increase. Comparable sales grew by 4%, indicating strong momentum across both the Victoria's Secret and PINK brands. Gross margin improved by 20 basis points year-over-year, driven by reduced reliance on promotions and increased regular price selling. International sales grew by 22%, highlighting the company's global strength [2].

Despite the positive Q2 performance, Victoria's Secret faces challenges. The company faced a digital outage in May, which negatively impacted net sales by approximately $20 million. Additionally, North America bra sales were down by low single digits, indicating ongoing challenges in this category. The company is also facing increased tariff pressures, with a projected net tariff impact of approximately $100 million for fiscal year 2025. The company anticipates a third-quarter adjusted operating loss, reflecting ongoing challenges and macroeconomic uncertainties [2].

The analyst's concerns are echoed in the company's outlook. Victoria's Secret expects tariff headwinds to pick up "materially" in Q4 and beyond, making consistent margin expansion difficult. While the company increased its FY25 EPS view by 2% due to the Q2 beat, it reduced its FY26 estimate by 11% to reflect higher tariff pressures [1].

Victoria's Secret's CEO Hillary Super emphasized a focus on both fashion and technical innovation, particularly in bras and sports. The company is adopting a more frequent release schedule to address customer needs and maintain excitement. This approach will continue into 2026, with a focus on cultural connections and collaborations in the PINK brand. The company is also reducing traditional promotions and focusing on regular price sales to mitigate tariff impacts [2].

References:
[1] https://www.tipranks.com/news/the-fly/victorias-secret-price-target-raised-to-21-from-18-at-bofa-thefly
[2] https://finance.yahoo.com/news/victorias-secret-co-vsco-q2-070643920.html