What happened
It wasn't much of a secret why Victoria's Secret (VSCO -5.87%) stock was unpopular this week. A recommendation downgrade from a prominent bank gave investors pause to think about the stock's viability. As a result, data compiled by S&P Global Market Intelligence reveal the intimate apparel purveyor's share price was down by almost 11% week to date as of mid-afternoon Friday.
So what
The downgrading party was ever-influential JPMorgan Chase. The bank's Adrienne Yih dropped her recommendation down one peg to equalweight (hold, in other words) from her previous overweight (buy). She also took a pair of scissors to her price target, reducing it to $35 per share; previously, she had pegged its fair value at $38. Prior to that, she was quite bullish on the stock's prospects, flagging it with a $51 price target.
In a new research note, Yih cited data indicating that Victoria's Secret's promotional activity was similar in the first quarter to that of the preceding frame. She concludes that consumers are reining in spending on discretionary items such as frilly underclothes, no matter their income bracket.
While macroeconomic worries have dissipated somewhat as inflation growth has slowed, some consumers remain fearful about the looming future. As discretionary spending covers non-essential items, this is often the first type of shopping to be curbed when storm clouds hover over an economy.
Now what
That being said, Victoria's Secret hasn't been doing badly of late. In its most recently reported quarter, the company was well in the black on the bottom line, netting a $203 million non-GAAP (adjusted) profit on more than $2 billion in revenue. Both results beat the average analyst estimates.
