Victoria's Secret & Co. (VSCO) Stock Analysis and Metrics

Sector: Consumer Cyclical Industry: Apparel Retail CIK: 0001856437

Market Cap 4.21 Bn

P/B 6.45

P/E 24.78

P/S 0.66

ROIC (Qtr) 7.22

Div Yield % 0.00

Rev 1y % (Qtr) 9.28

Total Debt (Qtr) 3.19 Bn

Debt/Equity (Qtr) 4.88

About

Victoria's Secret & Co. (VSCO), a well-known name in the retail industry, operates primarily in the women's intimate apparel and beauty products sector. The company conducts its business under the renowned brand names Victoria's Secret, Victoria's Secret PINK, and Adore Me. VSCO boasts a significant global presence, with operations in the United States, Canada, China, and other countries. VSCO's business model is multifaceted, generating revenue through its e-commerce platform, company-operated stores, and franchise, license, and wholesale arrangements....

Victoria's Secret & Co. (VSCO), a well-known name in the retail industry, operates primarily in the women's intimate apparel and beauty products sector. The company conducts its business under the renowned brand names Victoria's Secret, Victoria's Secret PINK, and Adore Me. VSCO boasts a significant global presence, with operations in the United States, Canada, China, and other countries.

VSCO's business model is multifaceted, generating revenue through its e-commerce platform, company-operated stores, and franchise, license, and wholesale arrangements. The company's product portfolio is diverse, encompassing signature bras, panties, lingerie, casual sleepwear, athleisure, and swimwear, as well as prestige fragrances and body care. The customer base is varied, with a primary focus on young women seeking high-quality, fashionable, and affordable products.

The company is structured as a single segment, designed to serve customers worldwide seamlessly through various channels. Victoria's Secret, PINK, and Adore Me are the three main areas of focus for VSCO. Victoria's Secret is a fashion and lifestyle brand, known for its extensive range of products, including bras, panties, lingerie, and sleepwear. PINK is another fashion and lifestyle brand, targeting young women and offering a variety of products, such as bras, panties, loungewear, and accessories. Adore Me is a direct-to-consumer lingerie and apparel brand, focusing on serving women of all sizes and budgets.

VSCO's competitive strengths lie in its two market-leading brands, global brand awareness, and resonance with customers. The company's ability to leverage its scale, agility, and responsive supply chain to deliver high-quality products quickly and efficiently is a significant advantage. Additionally, VSCO's highly talented management team, with deep industry experience, and its focus on product development, innovation, and customer support, set it apart from its competitors.

VSCO's position within the industry is robust, with a significant presence in the global market. The company operates over 900 stores worldwide, including company-operated stores, franchise, license, and wholesale arrangements. Its e-commerce platform is a significant channel for sales, with a strong presence on social media platforms and a mobile-first approach to drive sales.

The company's customer base is diverse, with products marketed and sold through various channels, including stores, e-commerce, and social media platforms. VSCO serves a wide range of women, from young to mature, and across various geographic regions.

In terms of brand names and trade names, Victoria's Secret, PINK, and Adore Me are the most prominent. The Victoria's Secret segment is known for its iconic lingerie products, such as the Victoria's Secret Angel collection. PINK is recognized for its trendy and playful designs, and Adore Me focuses on serving women of all sizes and budgets.

Price action

Investment thesis

Bull case

Operating cash flow of 500M provides exceptional 35.71x coverage of minority interest expenses 14M, showing strong core operations.
Robust free cash flow of 318M exceeds capital expenditure of 182M by 1.75x, indicating strong organic growth funding capability.
Robust tangible asset base of 4.41B provides 9.71x coverage of working capital 454M, indicating strong operational backing.
Cash position of 249M provides exceptional 17.79x coverage of minority interest expenses 14M, indicating strong liquidity.
Tangible assets of 4.41B provide robust 6.71x coverage of other current liabilities 657M, indicating strong asset backing.

Bear case

Operating cash flow of 500M barely covers its investment activities of (183M), with a coverage ratio of -2.73, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
With cash reserves of 249M against inventory of 1.38B, the 0.18 cash-to-inventory ratio suggests potential liquidity risks if inventory turnover slows, particularly concerning given current supply chain volatilities.
Operating earnings of 296M show weak coverage of depreciation charges of 251M, with a 1.18 ratio indicating high capital intensity and potential reinvestment needs.
Free cash flow of 318M represents just -4.61x of debt issuance (69M), suggesting concerning reliance on leverage rather than internal cash generation for growth.
High depreciation of 251M relative to operating cash flow of 500M, which is 0.50x suggests significant maintenance capital requirements affecting free cash flow.

Peer comparison

Companies in the Apparel Retail

S.No.	Ticker	Company	Market Cap	P/E	P/S	Total Debt (Qtr)
1	TJX	Tjx Companies Inc /De/	175.80 Bn	34.34	2.98	13.19 Bn
2	ROST	Ross Stores, Inc.	58.85 Bn	28.21	2.67	5.19 Bn
3	LULU	lululemon athletica inc.	25.43 Bn	14.61	2.30	1.76 Bn
4	BURL	Burlington Stores, Inc.	18.26 Bn	32.57	1.63	5.94 Bn
5	GAP	Gap Inc	10.00 Bn	11.75	0.65	5.52 Bn
6	URBN	Urban Outfitters Inc	7.11 Bn	14.53	1.18	1.18 Bn
7	ANF	Abercrombie & Fitch Co /De/	6.17 Bn	11.82	1.19	1.13 Bn
8	BOOT	Boot Barn Holdings, Inc.	5.78 Bn	27.75	2.79	0.67 Bn

Industry comparisons

Current Valuation	Value	Ind Avg
EV to Assets EV to Assets	1.34	1.35
EV to Cash from Ops. EV/CFO	13.80	8.18
EV to Debt EV to Debt	2.17	4.33
EV to EBIT EV/EBIT	23.31	-60.97
EV to EBITDA EV/EBITDA	12.30	6.53
EV to Free Cash Flow [EV/FCF] EV/FCF	21.69	22.99
EV to Market Cap EV to Market Cap	1.64	2.06
EV to Revenue EV/Rev	1.08	1.11
Price to Book Value [P/B] P/B	6.45	3.23
Price to Earnings [P/E] P/E	24.78	195.16

Dividend Metrics	Value	Ind Avg
Dividend Coverage Ratio Dividend Coverage Ratio	0.00	0.88
Dividend Payout Ratio % Div Payout % (Qtr)	0.00	12.58
Dividend per Basic Share Div per Share (Qtr)	0.00	0.36
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr)	0.00	16.33
Interest Coverage Int. cover (Qtr)	4.05	13.58

Growth Metrics	Value	Ind Avg
Capex Growth (1y) % Capex 1y % (Qtr)	-9.64	-5.40
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr)	54.66	89.63
Dividend Growth (1y) % Dividend Growth (1y) %	0.00	1.25
EBIAT Growth (1y) % EBIAT 1y % (Qtr)	1.49	13.95
EBITDA Growth (1y) % EBITDA 1y % (Qtr)	0.18	-16.93
EBIT Growth (1y) % EBIT 1y % (Qtr)	0.34	10.85
EBT Growth (1y) % EBT 1y % (Qtr)	9.85	6.10
EPS Growth (1y) % EPS 1y % (Qtr)	10.05	10.94
FCF Growth (1y) % FCF 1y % (Qtr)	82.76	-129.32
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr)	2.00	-1.75

Liquidity Ratios	Value	Ind Avg
Asset Utilization Ratio Asset Util Ratio (Qtr)	1.24	1.40
Cash Payout Ratio Cash Payout (Qtr)	0.00	0.06
Cash Ratio Cash Ratio (Qtr)	0.17	0.38
Current Ratio Curr Ratio (Qtr)	1.30	1.59
Debt to Equity Ratio Debt/Equity (Qtr)	4.88	1.31
Interest Cover Ratio Int Coverage (Qtr)	4.05	13.58
Times Interest Earned Times Interest Earned (Qtr)	4.05	13.58

Profitability	Value	Ind Avg
EBITDA Margin % EBITDA Margin % (Qtr)	8.60	2.72
EBIT Margin % EBIT Margin % (Qtr)	4.63	-1.70
EBT Margin % EBT Margin % (Qtr)	3.49	-2.76
Gross Margin % Gross Margin % (Qtr)	36.70	40.52
Net Profit Margin % Net Margin % (Qtr)	2.70	-4.02

Victoria's Secret & Co. (NYSE: VSCO)

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