Victoria's Secret (VSXY) Q2 FY27 earnings call: guidance and Q&A

Can you provide color on promotion usage at PINK, especially for apparel, and insights into the quality of new customer cohorts regarding AUR, repeat purchases, and cross-category buying?

Promotions at PINK, including apparel, are being pulled back, with growth driven by regular price selling. New customer cohorts are not 'one and done'; they are returning faster and spending more, driven by strategic use of owned and paid digital channels and a rich data set for targeting.

“Yes, we're very happy with our customer file this past quarter. It was the fourth straight quarter of customer growth and the fourth straight customer of new customer acquisition that outpaced. The key thing we're doing right now is we're really using our core network of own channels and paid channels. That would include paid search, paid social, push and email to make sure that we're keeping that customer engaged within the brand. As a result of these efforts, we're actually bringing those customers back to us, more of them back to us, they're coming back faster, and they're actually spending more when they do come back.”

asked by Michael Vu · answered by Unknown Speaker

How do you think about product introductions and pricing in the bra category for VS vs. PINK? Are there opportunities for more PINK standalone stores? What is the sustainable marketing investment level for this year and next?

Bra innovation is in full gear, with new products like Flex Factor Balconette and Marshmallow driving incremental growth. The Soho PINK store is a successful laboratory, and selective global and North American expansion of PINK standalones is an opportunity. Marketing spend is currently low 7% of sales, with a target to reach high single digits in the next couple of years, driven by optimized mix and strong returns on digital-first, social-centric approaches.

“Over time, we believe that we could take the marketing investment from currently just over 7% annually up to high single digits.”

asked by Dana Telsey · answered by Unknown Speaker

Can you elaborate on the cadence of Q2, particularly July exit trends, August momentum, and the embedded growth drivers for the back half across North America and International?

July was very strong, driven by bra innovation, and momentum accelerated into August, with beauty showing particular strength due to new innovation, archive drops, and enhanced digital channels. North America's strong performance continues. International growth is expected to moderate slightly in the back half due to tougher comps, but full-year international net sales are still forecast to be up approximately 20%.

“So July was incredibly strong for us, and we accelerated in August. So July, very much grounded in bra innovation across both brands. Very, very pleased with our performance in July. And as we entered August, I would say that in VS and PINK, the business was largely consistent, and we saw beauty really accelerate.”

asked by Matthew Boss · answered by Hillary Super

What is driving the expected positive operating profit and earnings in Q3, historically a loss-making quarter? Can you provide more color on how new customers are performing post-acquisition and their long-term value?

Q3 profitability is driven by continued strong sell-through of regular price core products, leading to higher AURs and accelerating unit growth. New customers are not 'one and done'; they are returning at a higher rate and spending more, thanks to a strategic ecosystem leveraging digital platforms and a large follower base for efficient targeting and remarketing.

“So I'll take that mix any time. And as we go forward into Q3, we really see units on 14 Q3 accelerating and going to be up in the mid to high single digit. And so that strong flow through is what's enabling us to turn profitable in Q3, despite investing even more into marketing to support Fashion Show, Angels Among Us, and just driving that new customer growth. So it speaks to the health of the P&L.”

asked by Corey Tarlowe · answered by Scott Sekella

How will the Semi-Annual Sale strategy evolve, focusing more on profitability? What are the main buckets of marketing investment, and when do you expect to see sales upside? Can you elaborate on the deceleration in international growth and the performance in China?

The Semi-Annual Sale will continue to clear units but will be less of a revenue driver, with higher AURs due to reduced promotions and increased newness. Marketing investment is broad-based, including the Fashion Show and customer growth initiatives, expected to impact both the second half and next year. International growth deceleration was primarily due to a shift in low-margin franchise partner sales. China remains the #1 international growth area, driven by digital social selling and accelerating retail comps.

“I mean, yeah, we are confident that we're investing in the right ways to reach a new audience. We have a lot more runway ahead of us. We know that at our peak we had many more customers than we do now. But here are the things that are giving us confidence that we will continue to invest and that will prove fruitful for us. 1, our evolving marketing is already working for us. Customers up, brand health metrics are up, and traffic is up both in stores and online.”

asked by Mauricio Serna · answered by Unknown Speaker

Where are new customers coming from, and how do you manage customer acquisition for Victoria's Secret from PINK customers, given the distinct brand identities?

New customers are primarily acquired through digital channels, with Paid Social being the best-performing channel. The company sees growth across all three brands (VS, PINK, Beauty) for both total and new customer counts. While there is some cross-shopping, many customers come specifically for a single brand, contributing to overall file growth. Market share gains are coming from mass-market competitors, driven by brand promise and emotional connection.

“Paid Social was our best performing channel this past quarter in terms of bringing in more customers. We see that continuing. And it's really about leveraging that network, leveraging our existing footprint or network to its maximum ability.”

asked by Simeon Siegel · answered by Unknown Speaker

Can you detail the gross margin drivers for Q3 and Q4, including tariffs, merchandise margin, and occupancy? What is the full-year gross margin outlook, and where do you see the medium-term gross margin heading?

Q3 gross margin is expected to expand by 150 bps, with a 60 bps net tariff benefit, promo favorability around 70 bps, and B&O leverage, partially offset by transportation costs. Q4 gross margin will also expand but less than prior quarters due to promos being less of a tailwind. The company sees medium-term gross margin starting with a '4' (i.e., 40% or higher), driven by regular price selling and higher-margin core products.

“Yes, so gross margin on Q3, we're calling it up about 150 basis points. Gross tariff in the quarter is going to be flat when you think about the tariff rates now at 10% and 12.5% respectively. Factor in some of the mitigation efforts, there's going to be about a 60 basis points sort of benefit. Promos will be favorable a little bit less than prior quarters because that Black Friday shifted in to Q3. So that just causes the promo favorability to be probably in the 70 basis points range or so. And then we'll leverage on B&O and then have a headwind on transportation costs probably around 30 basis points or so for the full year.”

asked by Irwin Boruchow · answered by Scott Sekella