In Wall Street’s cruel calculations, figuring out why stock prices are going up or down requires two basic pieces of information: how a company is doing and how it compares to investors’ expectations.
If investors see a recovery after repeated disappointments and a continued upward trend, this could result in a significant increase in stock prices.
Victoria’s Secret & Co. was one of the best-performing stocks in the first half, rising 54.1%.
According to the S&P 500, this puts retailers well ahead of the overall market. The market is powered by all things AI and is up 9.6% so far this year.
Victoria’s Secret is rapidly evolving under CEO Hilary Super, who is unapologetically sexy and has changed its stock ticker symbol to “VSXY.” She has also worked to give Pink more of its own identity and strengthen its operations.
“We used to be very transactional and value-oriented, and now we are very emotional. [the customer] “This is a very different tone, a very different positioning, and we’re driving this fun and brand fever through every activation,” Super told WWD after the company reported a 15% increase in first-quarter sales.
Analysts sense a change in mood.
TD Cowen’s Jonah Kim said the company’s “underlying momentum remains compelling.”
“We believe Victoria’s Secret and Pink are capturing share from value-price players and off-price players,” Kim said. “Cultural relevance combined with newness is driving share gains. Beauty remains a bright spot and management expects growth in this area.” [by a percentage in the double digits] I spent a year guided by scent and mist.
“I’m impressed that Victoria’s Secret hasn’t seen any slowdown and continues to be ambitious despite the softening macro environment,” he said.
The company’s growth has been supported by “a strategic shift from promotions to brand-driven storytelling, or ‘promotional detox,’ which has increased average retail unit prices, strengthened full-price sales, and demonstrated healthier brand equity,” Kim said.
Brand assets will sooner or later be converted into stock market assets.
But brand alone isn’t enough to keep the stock price rising.
If investors want a great business to continue to be great, anything less can be disappointing.
Take the example of Hermès International. Constant currency sales growth slowed to 6% in the first quarter, slightly below expectations and slowing from 9.8% growth in the fourth quarter. On the market, this corresponded to a 23.9% drop in Hermès’ share price in the first half.
Investors are keeping a close eye on big luxury brands, wondering whether the wealthy will continue to pay more, and if so, how much. Hermès’ sales growth was driven by higher prices for the brand, which, like other industries, has been hit by turmoil in the Middle East and turmoil in oil prices since the US and Israel began their war against Iran.
No one doubts the power of Hermes. The question seems to be on the expectations side of the equation.
Hermes Men’s Spring 2027
Provided by Hermes
“Hermès’ brand value is second to none,” Bernstein analyst Luca Sorca said in a recent analysis. “While Hermès may be facing a temporary dip in brand momentum, it remains one of the largest luxury brands by sales, despite a significant decline in its social media presence, and its iconic bags consistently command a premium on the resale market.”
Solka described Hermès, which has sales of 16 billion euros, as a “mega brand” with room for growth.
“The focus on costume jewellery, silk and more accessible handbags has opened the brand to a wider audience, reaching an aspirational middle class,” the analyst said.
“Direct competitors like Chanel now seem to have the ability to take care of the top-end consumer,” he says. “Compared to Hermès, Chanel is more expensive in apparel, shoes, and jewelry, and after COVID-19, as expensive as leather handbags. Hermès is further expanding its assortment to better serve wealthy consumers. The company is investing in high jewelry and luxury watches, with price points extending into the hundreds of thousands of dollars. The upcoming couture launch will be another great example.”
The secret for executives at Hermès and Victoria’s Secret is to focus on their brands and their companies and let their stock prices take care of themselves.
The trick for investors is to remember that your expectations are not the be all and end all.
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