Victoria’s Secret & Co. VSXY raised its fiscal 2026 sales, adjusted operating income and adjusted earnings outlook after the second quarter, marked by stronger full-price selling and broad-based brand growth.
Second-quarter net sales rose 10.4% to $1.611 billion. Adjusted earnings of 95 cents per share increased 187.9% year over year and beat the Zacks Consensus Estimate of 78 cents by 21.8%. Management also raised fiscal 2026 adjusted earnings guidance to $4.45-$4.70 per share from $4.35-$4.60, alongside adjusted operating-income guidance of $560-$590 million.
Victoria’s Secret & Co. Price, Consensus and EPS Surprise
Victoria’s Secret & Co. price-consensus-eps-surprise-chart | Victoria’s Secret & Co. Quote
VSXY Lifts Sales and Profit Expectations
Victoria’s Secret now expects fiscal 2026 net sales of $7.10-$7.18 billion, up from its prior range of $7.03-$7.13 billion. The new outlook implies growth of 8%-10% from fiscal 2025 sales of $6.553 billion.
Adjusted operating-income guidance increased to $560-$590 million from $550-$580 million. Management also raised adjusted earnings guidance to $4.45-$4.70 per share from $4.35-$4.60. The second quarter provided support for that increase, with adjusted earnings of 95 cents per share versus 33 cents a year earlier.
Victoria’s Secret Margin Gains Improve Earnings Quality
Adjusted gross margin expanded 320 basis points year over year to 38.8% in the second quarter. Roughly two-thirds of the improvement came from higher merchandise margin as stronger regular-price selling and lower promotional activity improved the sales mix.
Buying and occupancy leverage on higher sales accounted for the balance of the gross-margin improvement. Adjusted operating income rose 125% to $124 million, while the adjusted selling, general and administrative expense rate improved 70 basis points to 31.1%.
VSXY Brand Momentum Broadens Across Key Categories
Bras remained the primary growth engine, rising in the mid-teens and driving about half of Victoria’s Secret brand growth. PINK increased in the high single digits, while Beauty posted mid-single-digit growth and extended its sales-growth streak to 12 consecutive quarters.
Customer trends also broadened the recovery. The customer file increased in the mid-single digits and new-customer acquisition rose in the high single digits. Competitive momentum remains active across specialty retail. American Eagle Outfitters, Inc. AEO reported 19% comparable-sales growth at Aerie in its fiscal second quarter, while Abercrombie & Fitch Co. ANF marked its 15th consecutive quarter of net sales growth and raised its full-year sales outlook.
Victoria’s Secret Reinvests in Marketing for Growth
Management is reinvesting part of its earnings outperformance into marketing and customer-facing initiatives to support acquisition and brand engagement. The spending includes a broader fashion-show presence, the Angels Among Us docuseries and other campaigns across Victoria’s Secret and PINK.
That investment comes with a near-term profitability trade-off. The company expects its third-quarter adjusted selling, general and administrative expense rate to rise to about 37.5% from 36.5% a year earlier, reflecting higher marketing spending and incentive compensation. Rising transportation costs and tariff uncertainty add further pressure to the near-term margin outlook.
VSXY’s Strong Scores Support the Improved Outlook
The guidance increase and operating gains improve the fundamental picture, but valuation leaves less room for execution slips. VSXY trades at 14.13X forward 12-month earnings, above the industry‘s 12.18X multiple and its five-year median of 9.14X. Sustained sales and EPS growth will be important to support that premium.
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VSXY currently carries a Zacks Rank #3 (Hold). It also has a VGM Score of A, a Value Score of A and a Growth Score of A, which point to favorable characteristics across those factors. The Momentum Score of F remains the key counterweight, signaling weak recent price momentum. Taken together, the Rank and Style Scores support a patient stance despite the stronger operating outlook. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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This article originally published on Zacks Investment Research (zacks.com).
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