VSCO

Victoria's Secret ($VSCO) Major Shareholder Acquires 2.16M Shares Over 4 Weeks Following Stock Plunge - Undervaluation Signal or Catching a Falling Knife?

04/04/2025 20:48

Victoria's Secret & Co ($VSCO) has seen significant insider buying activity, with major shareholder BBRC International Pte Ltd accumulating a substantial stake over a three-week period. This buying spree, which occurred immediately following a sharp decline in the stock price in early March, has caught the attention of investors seeking signals amid the company's volatile performance. Victoria's Secret is America's leading lingerie brand, specializing in women's underwear and beauty products. With a market capitalization of approximately $1.45 billion, the company has operated as an independent entity since spinning off from L Brands in 2021. While facing challenges from cheaper alternatives and intensifying online competition, the company has been working to revitalize its brand under new leadership. BBRC International Pte Ltd purchased approximately 2.16 million shares totaling around $37.8 million between March 10 and April 3, 2025. The buying was particularly concentrated during the initial days, with about 1.02 million shares ($17.32 million) acquired on March 10-11 alone, and another significant block of 584,000 shares ($10.79 million) on March 28. These substantial purchases began immediately after the stock plummeted from around $24 to the $16 range in early March. Victoria's Secret stock had shown remarkable strength in the latter half of 2024, rising from about $19 in mid-August to a peak of $48 in early December—a gain of over 150%. However, the stock began declining in 2025 before dropping sharply in early March around its earnings announcement. On March 5, the company reported adjusted earnings per share of $2.60 for the quarter ended January 31, exceeding analyst expectations of $2.30. Revenue increased by 1.1% to $2.11 billion. Despite these positive results, the stock fell dramatically after the company provided a lower-than-expected Q1 sales outlook of $1.30-1.33 billion, below the anticipated $1.39 billion. From a financial perspective, Victoria's Secret appears undervalued with a P/E ratio of 9.45. The company generated $6.23 billion in revenue over the past 12 months, with operating and profit margins of 5.25% and 2.65%, respectively. However, its debt-to-equity ratio stands at 4.06, with total debt of $2.7 billion against just $227 million in cash and short-term investments, suggesting a somewhat vulnerable financial structure. Notably, analyst sentiment has been gradually improving since late 2024. Morgan Stanley upgraded the stock from 'underweight' to 'equal-weight' in August 2024, followed by J.P. Morgan moving from 'underweight' to 'neutral' in December, and Barclays raising its rating from 'equal weight' to 'overweight' in January 2025. Barclays particularly highlighted improvements in full-price selling, sales growth, and inventory management under new CEO Hillary Super's leadership. The company has also undergone significant management changes. In September 2024, Victoria's Secret eliminated the roles of brand president and chief customer officer. In January 2025, CFO Timothy Johnson announced his retirement effective June, with former Joann CFO Scott Sekella named as his successor. These leadership changes appear to be part of an organizational restructuring aimed at brand revitalization under CEO Hillary Super. Large insider purchases typically signal confidence in a company's long-term value. BBRC International's concentrated buying following the stock's plunge suggests a belief that the shares are undervalued. Indeed, Victoria's Secret exceeded performance expectations in its most recent quarter and is pursuing brand revitalization and product lineup improvements under its new management team. While Q1 2025 sales projections fell short of market expectations, the company's annual sales forecast of $6.2-6.3 billion slightly exceeded analyst projections of $6.21 billion. Additionally, the current P/E ratio of 9.45 presents an attractive valuation. Nevertheless, high debt levels and intense competitive pressures remain ongoing risk factors that could affect the company's performance.

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