Skip to content
    VSXY
    Earnings call· Jul 2026(Q2 FY27)

    Victoria's Secret & Q2 FY27 earnings call VSXY

    Sep 3, 2026 Source

    Executive summary

    Victoria's Secret Q2 FY27 — Strong Growth Across Brands and Channels, Raised Full-Year Outlook

    Victoria's Secret delivered another strong quarter, driven by broad-based growth across its brands and channels, fueled by product innovation and effective marketing. The company is successfully executing its "Path to Potential" strategy, leading to consistent customer file expansion and improved regular price selling. Management remains confident in continued momentum and is reinvesting outperformance into strategic initiatives to accelerate future growth, despite some near-term margin pressures from increased investments and transportation costs.

    Highlights

    5

    • Net sales increased 10% year-over-year to $1.611 billion, near the high end of guidance.

    • Adjusted operating income increased 125% to $124 million, exceeding the high end of guidance by $24 million.

    • Adjusted EPS increased almost threefold to $0.95, exceeding the high end of guidance of $0.75.

    • Customer file grew mid-single digits, marking the fourth consecutive quarter of growth, with new customer acquisition up high single digits.

    • Bra business grew in the mid-teens, driving significant growth for both Victoria's Secret and PINK.

    Concerns

    3

    • Lower inventory during the Semi-Annual Sale pressured June top line, though July returned to double-digit growth.

    • Q3 SG&A rate is expected to increase by 100 basis points year-over-year to approximately 37.5% due to marketing investments and higher incentive compensation.

    • Rising transportation costs are partially offsetting gross margin tailwinds in Q3.

    Guidance & targets

    20
    CategoryTargetConfidence
    Full-year FY26 Net Sales
    $7.10 billion to $7.18 billion
    high materiality
    High
    Full-year FY26 Net Sales Growth
    8% to 10%
    high materiality
    High
    Full-year FY26 Adjusted Operating Income
    $560 million to $590 million
    high materiality
    High
    Full-year FY26 Adjusted Net Income per Diluted Share
    $4.45 to $4.70
    high materiality
    High
    Full-year FY26 Weighted Average Diluted Shares Outstanding
    approximately 85 million
    medium materiality
    High
    Full-year FY26 Capital Expenditures
    $220 million to $240 million
    medium materiality
    High
    Full-year FY26 North America Store Count
    flat to slightly up
    medium materiality
    High
    Full-year FY26 International Net Sales Growth
    approximately 20%
    medium materiality
    High
    Q3 FY26 Net Sales
    $1.57 billion to $1.60 billion
    high materiality
    High
    Q3 FY26 Net Sales Growth
    approximately 7% to 9%
    high materiality
    High
    Q3 FY26 Net Sales Growth (2-year basis)
    up 16% to 18%
    high materiality
    High
    Q3 FY26 Operating Income
    $10 million to $20 million
    high materiality
    High
    Q3 FY26 Gross Margin Rate
    about 38%
    high materiality
    High
    Q3 FY26 SG&A Rate
    approximately 37.5%
    high materiality
    High
    Q3 FY26 Non-Operating Expense
    approximately $13 million
    medium materiality
    High
    Q3 FY26 Income Taxes
    insignificant
    low materiality
    High
    Q3 FY26 Net Income per Diluted Share
    loss of 9 cents to income of 1 cent
    high materiality
    High
    Q3 FY26 Inventories
    up high single digits
    medium materiality
    High
    Marketing Spend as % of Sales
    high single digits
    medium materiality
    Medium
    Medium-term Gross Margin
    starting with a 4
    high materiality
    High

    Segment performance

    5
    SegmentRevenueYoYQoQMargin
    Victoria's Secret
    Retail sales grew mid-teens, primarily driven by the bra business. Strong performance across core franchises and new innovation. Momentum in bras created a halo effect for panties and sleep.
    Bra business growth: mid-teensBra business contribution to VS growth: >50%Panties growth: high teensSleep growth: mid-teens
    		—mid-teens——
    PINK
    Retail sales grew high single digits, or mid-teens excluding the PINK Friday event timing shift. This marks the fifth consecutive quarter of growth, with strength in bras, panties, and apparel. Apparel remains a significant customer growth vehicle.
    Retail sales growth (adjusted for PINK Friday shift): mid-teensApparel consecutive quarters of growth: 8
    		—high single digits——
    Beauty
    Sales grew mid-single digits, maintaining strong growth quality with high single-digit regular price selling. Growth was driven by fine fragrance and mist, supported by consistent innovation and strategic integration into brand campaigns.
    Consecutive quarters of sales growth: 12Regular price selling growth: high single digits
    		—mid-single digits——
    North America
    Continued strength, with VS Intimates accelerating from Q1. PINK Intimates growth reflected a headwind from the PINK Friday event timing shift.
    VS Intimates growth: mid-teensPINK Intimates growth: high single digits
    		————
    International
    Reported net sales growth of 20%, led by outstanding performance in China (digital and stores) and European digital business. Growth was partially offset by fewer merchandise sourcing sales to franchise partners due to order and shipment timing. Full-year net sales expected to be up approximately 20%.
    Retail comp sales growth: low teensGrowth adjusted for European digital sales shift: 10%
    		—20%——

    Operational metrics

    33
    Net sales
    $1.611 billion+10% YoY
    Q2 FY27

    Near the high end of guidance.

    Comp sales
    9%
    Q2 FY27

    Consistent with Q1 trend.

    Adjusted operating income
    $124 million+125% YoY
    Q2 FY27

    Well above the high end of guidance.

    Adjusted net income per diluted share
    $0.95almost threefold increase YoY
    Q2 FY27

    Above the high end of guidance.

    Customer file growth
    mid-single digitsYoY
    Q2 FY27

    Growth spanned both brands and channels, as well as all age and income groups.

    New customer acquisition growth
    high single digitsYoY
    Q2 FY27

    Outpacing total file growth, particularly strong among 18 to 24 year olds.

    Regular price selling increase
    low double digits
    Q2 FY27

    Accompanied by strong unit and AUR growth.

    AUR acceleration
    high single digitsYoY
    Q2 FY27

    Accelerated compared to Q1, reflecting reduced promotional activity.

    Total units growth
    low single digits
    Q2 FY27

    Includes regular price units up high single digits.

    Regular price units growth
    high single digits
    Q2 FY27

    Part of total units growth.

    IEEPA tariff refunds
    over $140 million
    Q2 FY27

    Excluded from non-GAAP results.

    Adjusted gross margin dollars
    $626 million+20% YoY
    Q2 FY27

    Strong increase over last year.

    Gross tariff headwind
    approximately $10 millionincremental YoY
    Q2 FY27

    Slightly better than expectation.

    Net tariff benefit
    approximately $20 million
    Q2 FY27

    Factoring in mitigation, consistent with guidance.

    Adjusted SG&A dollars
    $502 million
    Q2 FY27

    SG&A dollars continue to grow slower than net sales.

    Adjusted non-operating expenses
    $13 millionfavorable YoY
    Q2 FY27

    Consistent with guidance, principally interest expense.

    Adjusted tax rate
    22.9%
    Q2 FY27

    In line with guidance.

    Adjusted net income
    $80 million
    Q2 FY27

    Strong increase over last year.

    Share repurchase authorization
    $250 million
    March 2024

    Approved in March 2024.

    Shares repurchased year-to-date
    2.2 million shares
    YTD Q2 FY27

    No shares repurchased in Q2 FY27.

    Remaining share repurchase authorization
    $150 million
    Q2 FY27

    Remaining under current authorization.

    Weighted average diluted shares outstanding
    84 million
    Q2 FY27

    In line with guidance.

    Cash balance
    $522 million+$334 million YoY
    Q2 FY27

    Increased above last year.

    ABL borrowings
    $0
    Q2 FY27

    No outstanding borrowings on ABL.

    Store of the Future design penetration
    45%
    FY26

    Target for end of FY26.

    PINK Friday shift growth tailwind
    approximately 1%
    Q3 FY26

    Represents a growth tailwind for Q3 net sales due to event timing shift from Q2 last year.

    Q3 FY26 Gross Tariff Headwind
    —similar to last year
    Q3 FY26

    Assumes current tariff rates of 10% and 12.5% for respective sourcing countries.

    Q3 FY26 Net Tariff Benefit
    approximately 60YoY
    Q3 FY26

    Factoring in mitigation efforts.

    Q3 FY26 Transportation Costs
    —incremental pressure
    Q3 FY26

    Partially offsetting gross margin tailwinds.

    Marketing spend as % of sales
    low 7%
    current

    Current level, with a target to increase to high single digits over the next couple of years.

    App growth
    30%YoY
    last quarter

    On top of double-digit growth from last year.

    Q3 AUR
    low single digitsup
    Q3 FY26

    Expected deceleration from Q2.

    Q3 Units
    mid to high single digitsup
    Q3 FY26

    Expected acceleration.

    Industry KPIs

    9
    MetricValueDetails
    Sg a OPEX ratio31.1%%
    Comparable sales9%%
    Store count growthflat to slightly upunits
    Gross margin drivers38.8%%
    Active customers nspacmid-single digits%
    Share buyback capital return$100 millionUSD
    Inventory position markdown risk8%%
    Same sku like for like inflation10%%
    Distribution supply chain cost economics—

    Product announcements

    7
    ProductTypeDetails
    Very Sexy Envy bralaunch
    Flex Factor Balconette bralaunch
    Marshmallow bra pillarlaunch
    Strawberry Bisou fragrancelaunch
    Shimmer expansion within Bombshellexpansion
    Original PINK square bottle scentslaunch
    Angels Among Us docu-serieslaunch

    Deals & partnerships

    3
    JansportCollaboration

    Collaboration to expand brand heat and reach new customers for PINK.

    HydrojugCollaboration

    Collaboration to expand brand heat and reach new customers for PINK.

    NFLCollaboration

    Collaboration to expand brand heat and reach new customers for PINK.

    Risks & headwinds

    4
    June top line pressure from Semi-Annual Sale inventoryJune Q2 FY27

    Lower inventory pressured June top line

    Mitigation: Adjusting strategy for next year's Semi-Annual Sale to bring more newness, innovation, and seasonal fashion into the month, while still clearing seasonal inventory.

    Increased SG&A expensesQ3 FY26

    Q3 FY26 SG&A rate expected to be approximately 37.5% (100 bps increase YoY)

    Mitigation: These are thoughtful investments in customer-facing initiatives, including marketing (Angels Among Us, Fashion Show) and in-store experience, and higher assumed incentive compensation on improved forecasted results.

    Rising transportation costsQ3 FY26

    Incremental pressure

    Mitigation: Partially offsetting gross margin tailwinds, but overall operating model strength and disciplined promotional strategy are expected to drive gross margin expansion.

    Challenging macro environment

    Despite a challenging macro environment

    Mitigation: Company is firmly in growth mode, with a larger and healthier customer file, gaining market share, and strong product relevance.

    What to watch in Q3 FY27

    5

    Semi-Annual Sale strategy effectiveness

    next year's Semi-Annual Sale (Q2 FY28)
    CurrentLower inventory pressured June top line in Q2 FY27
    TargetImproved top line performance in June, with successful integration of newness and innovation

    Why it matters

    The Semi-Annual Sale is a key promotional event, and optimizing its strategy is crucial for balancing sales and profitability.

    June has historically been a sale-heavy month, but we increasingly see it as buy-now, wear-now fashion window. We'll continue to use semi-annual sale to clear seasonal inventory while bringing more newness, innovation, and seasonal fashion into the month.

    Q&A highlights

    7

    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

    3 min read6 chapters

    Detailed Narrative

    01

    Path to Potential Strategy Execution

    Victoria's Secret is making tangible progress against its "Path to Potential" strategy, aiming to build Victoria's Secret and PINK into distinct world-class growth brands, supported by a powerhouse beauty business. This strategy is translating into customer growth, market share gains in Intimates, and strengthening the value proposition across brands. The company is focused on supercharging bra authority, recommitting to PINK, fueling growth in beauty, and evolving brand projection and go-to-market strategy.

    02

    Bra Business Re-establishment and Innovation

    The bra category has been firmly re-established as the #1 growth driver, with the bra business growing in the mid-teens. This strength is broad-based, attracting new and existing customers, particularly 18-24 year olds, and spans both wardrobe staples and fashion-driven styles. A consistent cadence of innovation, including the Flex Factor Balconette and the Very Sexy Envy bra, is driving growth in core franchises and creating a halo effect across the broader business, including high teens growth in panties and mid-teens growth in sleep.

    03

    PINK's Renewed Resonance and Lifestyle Expansion

    PINK delivered its fifth consecutive quarter of high single-digit growth, with increasing strength from bras, panties, and apparel. The brand's identity is sharpening, focusing on comfortable, expressive product. The new Marshmallow bra pillar, the first in two years, was 100% incremental. Apparel, including denim, linen, and sleep, has seen eight consecutive quarters of growth, building PINK as a lifestyle brand. The Soho store serves as a laboratory for new merchandising and experience concepts, with learnings considered for broader fleet application.

    04

    Beauty's Consistent Growth and Strategic Integration

    Beauty continued its strong performance with mid-single-digit growth, marking its 12th consecutive quarter of sales growth, driven by fine fragrance and mist. The quality of growth is strong, with regular price selling up high single digits. The company introduced six incremental scents and is integrating beauty more fully into brand campaigns, such as Mother's Day. Tapping into nostalgia with archive drops, like the PINK square bottle scents that sold out digitally in less than one day, reinforces deep emotional connections with customers.

    05

    Enhanced Customer Engagement and Marketing Strategy

    Victoria's Secret achieved its fourth consecutive quarter of overall customer growth, with gains across new, active, and reactivated customers, and all income/age cohorts. New customer acquisition grew high single digits, outpacing total file growth. The company has strategically rebalanced marketing investments towards a digital-first, social-centric approach, leveraging influencers, TikTok Live, and its app. The Fashion Show is evolving into an ongoing franchise, with the "Angels Among Us" docu-series premiering on September 27th, aiming to deepen emotional connection and drive customer acquisition.

    06

    International Business Momentum

    The international business continued its strong growth in Q2, led by outstanding performance in China across both digital and in-store channels, and robust European digital sales. Reported international net sales grew 20%, with retail comp sales up low teens. Adjusting for a reporting shift of European digital sales, international sales grew 10%. Despite a mix shift with fewer merchandise sourcing sales to franchise partners, the company forecasts full-year international net sales to be up approximately 20%, indicating significant runway for global expansion.

    AI-generated summary of the company’s earnings call. Not investment advice.