Investing.com -- JPMorgan analysts added Victoria’s Secret shares to their Positive Catalyst Watch, citing strong performance during the holiday season and potential upside in the company's Q4 earnings and future growth.
The firm maintained its $45 price target on the stock and overall Neutral rating.
JPMorgan (NYSE:JPM) raised its Q4 EPS estimate for VSCO to $2.30, above the Street consensus of $2.25. Analysts see potential incremental upside driven by same-store-sales growth of +4.4%, exceeding the Street’s forecast of +3.7%, and gross margins at 39.5%, also above the Street’s 39.2%.
Management’s guidance for +2-4% comparable revenue growth was described as “prudent,” embedding conservative assumptions for seasonal demand trends and inventory levels.
Fieldwork by JPMorgan, however, suggests that demand was “consistent” throughout the holiday season, with a strong customer response during peak periods like Black Friday and Christmas Week.
Analysts also noted an improvement in inventory management and markdown rates, with end-of-season discounts held at 60%, compared to 70% last year.
Looking ahead, JPMorgan highlighted a multi-year opportunity for gross profit growth at VSCO. Analysts forecast mid-single-digit comp growth in 2025, supported by an inflection in product following leadership changes in merchandising. They expect gross margins to improve steadily, projecting a rate of 37.9% by 2026, above the Street’s 37.4%.
JPMorgan pointed to reduced promotional activity and sustained topline momentum as key drivers for future growth, estimating that recapturing promotional headwinds could add up to $1.90 in EPS power over the next two years.