It has been about a month since the last earnings report for Victoria's Secret (VSXY). Shares have lost about 1.6% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Victoria's Secret due for a breakout? Well, first let's take a quick look at the most recent earnings report in order to get a better handle on the recent drivers for Victoria's Secret & Co. before we dive into how investors and analysts have reacted as of late.
Victoria's Secret Q1 Earnings Top Guidance on Double-Digit Sales Growth
Victoria’s Secret delivered a strong first quarter of fiscal 2026, with results coming in well above the company’s prior outlook. Both the top and bottom lines increased year over year.
VSXY’s adjusted earnings were 60 cents per share, increasing significantly from 9 cents in the prior-year period. The reported figure was above the company’s prior range of 20-30 cents.
Net sales rose 15.3% year over year to $1,559.6 million from $1,353 million, topping the previous guided range of $1,490-$1,525 million. Sales growth was supported by a 13% year-over-year comparable sales increase.
Victoria’s Secret Margin & Cost Performance
Margin performance was a notable highlight. The company’s gross profit increased to $586.9 million from $476 million in the prior-year period, driven by higher regular-price selling, reduced promotions and leverage in buying and occupancy expenses, despite tariff headwinds. The adjusted gross margin improved to 37.6% from 35.2% in the prior-year period.
The company’s adjusted general, administrative and store operating expenses increased to $506.9 million from $444.3 million in the prior-year period. However, adjusted general, administrative and store operating expenses, as a percentage of sales, declined 30 basis points to 32.5% from 32.8% in the prior-year period.
Adjusted operating income for the first quarter reached $80 million, substantially above the previously guided range of $32 million to $42 million. The result also represented a significant improvement from the adjusted operating income of $31.7 million reported in the first quarter of 2025, highlighting a stronger-than-expected start to the fiscal year. Adjusted operating margin was 5.1% compared with 2.3% in the previous-year period.
VSXY’s Geographical Performance
North America store sales increased 11.3% year over year to $802.8 million from $721.3 million, while the direct business grew 8.4% year over year to $469.4 million from $433.2 million, reflecting strength in both physical and digital demand.
International delivered the fastest growth, with net sales jumping 44.9% year over year to $287.4 million from $198.4 million. The company noted that its international results include multiple components such as joint venture sales in China, royalties tied to franchise partners, wholesale activity and certain direct sales now reported in the international channel.
Victoria’s Secret’s Store Footprint
Victoria’s Secret ended the first quarter of fiscal 2026 with 1,423 stores globally, up from 1,420 at the beginning of the year. The portfolio includes 791 company-operated stores across the United States and Canada, 64 China joint venture stores, 565 partner-operated stores and three Adore Me stores.
For 2026, the company expects total store count to increase to the range of 1,461-1,494 locations, with partner-operated store count expected to increase to the range of 604-622 locations, and China joint venture store count expected to increase to the range of 66 to 73 locations. While the company-operated store base is anticipated to remain relatively stable between 788 and 796.
Victoria’s Secret’s Financial Position
VSXY also leaned into capital returns during the quarter. The company repurchased 2.2 million shares for $100 million at an average price of $45.27 per share, leaving $150 million remaining under the current authorization as of May 2, 2026.
The company’s cash and cash equivalents were $207.1 million at quarter's end, while long-term debt stood at $986 million. Total shareholders’ equity was $790.2 million, with additional equity represented by noncontrolling interests.
VSXY Lifts Fiscal 2026 View After Strong Start
Following the upside performance, the company raised its 2026 outlook. Net sales are now expected to be in the range of $7.03-$7.13 billion, up from the prior $6.85-$6.95 billion range, while adjusted operating income is forecasted to be in the range of $550-$580 million compared with the earlier guided range of $430-$460 million. Adjusted earnings per share are expected to be in the range of $4.35 to $4.60 compared with the previous guided range of $3.20-$3.45.
Near-term expectations also moved higher. For the second quarter of fiscal 2026, VSXY projected net sales of $1.590-$1.615 billion and operating income of $90-$100 million. On the earnings side, the company guided to earnings per share of approximately 65-75 cents for the second quarter.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.
The consensus estimate has shifted 80.8% due to these changes.
VGM Scores
Currently, Victoria's Secret has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for value investors.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Victoria's Secret has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
Victoria's Secret belongs to the Zacks Retail - Apparel and Shoes industry. Another stock from the same industry, Capri Holdings (CPRI), has gained 0.5% over the past month. More than a month has passed since the company reported results for the quarter ended March 2026.
Capri Holdings reported revenues of $796 million in the last reported quarter, representing a year-over-year change of -23.1%. EPS of $0.22 for the same period compares with -$4.90 a year ago.
Capri Holdings is expected to post earnings of $0.40 per share for the current quarter, representing a year-over-year change of -20%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Capri Holdings. Also, the stock has a VGM Score of A.
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This article originally published on Zacks Investment Research (zacks.com).