The GTA VI thesis sounds ridiculous.
Lucia appears to be wearing Victoria’s Secret.
The game has an enormous audience.
The stock could get free exposure every time millions of players see the brand.
Fine.
But here’s the part I think is more interesting.
Victoria’s Secret was already turning around before GTA VI.
Q1 sales jumped 15% to $1.56 billion.
Comparable sales jumped 13%.
Adjusted operating income surged 153% to $80 million.
Adjusted EPS went from $0.09 to $0.60.
International sales were growing even faster, with China helping drive roughly 45% international sales growth.
Management then raised full-year revenue guidance to $7.03–$7.13 billion and adjusted operating income guidance to $550–$580 million.
And the category people are joking about isn’t exactly dead either.
V-string sales are reportedly up 44% year over year.
Panty-segment adjusted EBITDA is up 56%.
So GTA VI isn’t really the turnaround thesis.
It’s potentially free advertising sitting on top of an actual turnaround.
That’s much more interesting.
But here’s where I’d be careful.
The stock has already gone from being a beaten-down retailer to a company investors are willing to pay roughly 15x EV/EBITDA for.
And the market has already noticed the improvement.
So now the question changes.
It’s no longer:
“Can Victoria’s Secret turn around?”
The numbers are starting to answer that.
The question is:
“How much more improvement does the stock already require?”
Because there’s a huge difference between a company going from bad to good and a stock going from cheap to expensive.
GTA VI could put Victoria’s Secret in front of hundreds of millions of eyeballs.
But the company still has to turn those eyeballs into customers.
Customers into sales.
Sales into margins.
Margins into cash flow.
And that is where this gets really interesting.
If the brand keeps gaining younger customers, international sales keep expanding, margins keep improving and GTA VI creates another wave of brand exposure, the current valuation could eventually look cheap.
But if the turnaround simply keeps progressing at a normal pace, while investors start pricing in a GTA-driven explosion in demand, the stock can disappoint even while the company keeps doing well.
That’s the part I like about this trade.
The ridiculous catalyst might actually be real.
But the real test isn’t whether Lucia wears Victoria’s Secret.
It’s whether Victoria’s Secret can turn a viral moment into years of higher sales and higher profits.
h/t chird_
Disclaimer: This is not financial advice and is for educational purposes only. Please conduct your own due diligence.