UBS remains Neutral on Victoria's Secret, not bullish on turnaround plans

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By Sam Boughedda

UBS analysts told investors in a note Tuesday that the firm is not bullish on Victoria's Secret & Co.'s (NYSE:VSCO) turnaround potential and remains Neutral on the stock, with a $43 price target.

The analysts explained that with the market wondering if VSCO's turnaround strategy will be successful, there are some opportunities and some issues.

"We spoke with an expert who has deep insight into Victoria's Secret's strengths, weaknesses, opportunities, and threats. Our main takeaway is Victoria's Secret has made good progress is some areas and has further opportunities in other areas. Yet, there are also important ways the company needs to improve. This keeps us from getting bullish on the stock," they wrote.

The analysts said that the expert they spoke to highlighted three ways VSCO has improved, which are that the company has been increasing the size range of the products it offers, the fact it has introduced maternity bras into its product assortment, and its investment in a new store format and the move towards a more omnichannel model.

"The expert also highlighted 3 opportunities which could become growth drivers: 1) Leverage the brand's high global brand name recognition and huge social media presence. 2) Expand the beauty business. 3) Leverage data the brand has on its credit card customers and do more around loyalty," added the analysts.

However, the experts told UBS that one area the company needs to improve is its marketing approach.

"The marketing VSCO has done since the turnaround began feels subtle, in the expert's view, and may not be enough to change brand perceptions. VSCO also could be clearer about what the brand stands for today. We agree with the expert's view. We don't believe Victoria's Secret is on a path to establish a clear, differentiated, and relevant brand positioning that will enable it to achieve durable EPS growth," the analysts continued.

VSCO shares are down 6.5% at the time of writing on Tuesday.