Greenlight Capital's David Einhorn Backs Victoria's Secret in Strategic Turnaround Play

Hedge Fund Legend Makes Rare Bullish Call on Retail Transformation

David Einhorn, the renowned hedge fund manager behind Greenlight Capital, has made waves in the investment community with his bullish stance on Victoria's Secret (VSCO), marking a notable shift for an investor better known for his prescient short positions against companies like Lehman Brothers and Allied Capital.

Speaking at the Sohn Investment Conference this month, Einhorn highlighted Victoria's Secret as one of five companies across various sectors experiencing significant business transformations. His endorsement carries particular weight given his track record of identifying major market shifts before they become widely recognized.

Leadership-Driven Transformation Shows Promise

Einhorn's thesis centers on the impact of new management and the brand's efforts to reclaim its cultural relevance. The company has been working to restore elements that previously defined its market position, including plans to revive its annual televised fashion show format.

Since CEO Hillary Super assumed leadership in August 2024, Victoria's Secret has implemented a comprehensive strategic framework called "Path to Potential." This approach focuses on four core areas: strengthening the company's position in the bra category, revitalizing the PINK brand segment, expanding beauty operations, and modernizing customer engagement strategies.

Financial Metrics Reflect Operational Progress

The company's recent financial performance demonstrates measurable improvement across multiple metrics. For fiscal 2025, Victoria's Secret generated net sales of $6.55 billion, representing a 6% increase year-over-year when accounting adjustments are excluded.

Comparable sales growth reached 5% for the full year, with momentum building significantly in the fourth quarter to 8% growth. This strong Q4 performance matched the previous quarter's results, establishing a pattern of sustained growth acceleration.

Operational efficiency improvements are evident in the company's adjusted operating income, which climbed 16% to $403 million. Adjusted earnings per share surged 22% to $3, despite the company absorbing $85 million in net tariff-related costs.

Category-Specific Recovery Gains Traction

Several business segments have shown particular strength during this turnaround period. The bra division returned to annual growth for the first time since 2021, ending a multi-year decline. The PINK brand achieved its strongest growth performance in a decade, while the beauty segment continued its positive trajectory for the third consecutive year.

The company's Bombshell fragrance, which management describes as America's top-selling fragrance, has been a key driver in the beauty category. Additionally, Victoria's Secret expanded its total customer base for the first time in recent years, with notable gains among younger demographics.

Forward-Looking Financial Projections

For fiscal 2026, Victoria's Secret has projected revenue between $6.85 billion and $6.95 billion, indicating approximately 5.5% year-over-year growth. Operating income is expected to range from $430 million to $460 million, suggesting margin expansion of 20 to 50 basis points despite an estimated $40 million in additional tariff costs.

CEO Scott Sekella addressed these headwinds, noting: "We mitigated this headwind with margin expansion driven by our strong operational foundation, which enabled us to scale effectively, resulting in significant leverage on buying and occupancy expenses."

First-quarter 2026 projections call for revenue growth between 10% and 13%, supported by strong Valentine's Day performance. Early indicators for spring merchandise collections appear positive, with leadership describing upcoming floor sets as "vibrant, saturated with color and completely alive."

Market Valuation and Analyst Sentiment

Since Super's appointment announcement in August 2024, VSCO shares have delivered approximately 150% total shareholder returns, significantly outperforming both the S&P 500 Consumer Discretionary Distribution Retail index and the S&P 600.

Wall Street analysts project adjusted earnings growth from $2.69 per share in fiscal 2026 to $5.25 per share by fiscal 2030. Using a 15x forward earnings multiple similar to current valuations, this trajectory could support substantial price appreciation over the next four years.

Among the nine analysts covering VSCO, seven maintain "Buy" ratings while two recommend "Hold." The consensus price target of $67 represents approximately 27% upside potential from current trading levels.

Strategic Implications for Retail Investors

Einhorn's endorsement represents a significant validation for Victoria's Secret's transformation strategy. For an investor whose reputation was built on identifying corporate weaknesses, his bullish position signals confidence in the company's operational improvements and market positioning.

The combination of leadership changes, strategic focus, and measurable financial progress suggests Victoria's Secret may be successfully navigating the challenging retail environment that has impacted many traditional mall-based retailers.

As the company continues executing its turnaround strategy, investors will be monitoring comparable sales trends, margin expansion progress, and the success of customer acquisition efforts, particularly among younger demographics who represent future growth potential.