Victoria’s Secret Sales Up 3%

Key Points

• Victoria’s Secret & Co. (NYSE:VSCO) exceeded its revenue and adjusted operating income guidance.

• Comparable sales returned to growth, but profitability and digital channel sales declined compared to the prior year.

• Full-year revenue guidance was raised, but adjusted operating income guidance was maintained due to an increased projected impact from tariffs.

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Victoria’s Secret & Co. (NYSE:VSCO), the women’s intimates, apparel, and beauty company behind the Victoria’s Secret and PINK brands, reported its second quarter fiscal 2025 results on August 28, 2025. The main headlines from the release were better-than-expected revenue—$1.46 billion (GAAP), which topped both the prior-year period and company guidance—and a return to positive comparable sales. Profitability declined, with net income (GAAP) halving from a year ago, and digital sales continued to weaken. Revenue (GAAP) beat the expected guidance midpoint of $1.395 billion by 4.6%. Operating income and adjusted earnings per share also outpaced company forecasts. Management described the quarter as showing solid top-line momentum, while tariffs are now expected to cost $100 million for FY2025, $50 million more than previously estimated.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.

Company Overview and Business Focus

Victoria’s Secret & Co. runs a large retail and e-commerce operation specializing in women’s lingerie, loungewear, and beauty products. Signature brands Victoria’s Secret and PINK lead its offerings, with beauty products (fragrance, body care, lotions) representing a significant part of the business. In recent years, the company added Adore Me, a digital-first intimates brand, to its portfolio.

The company’s current strategy centers on strengthening its core brands, expanding international operations, and driving digital growth. Key factors for its success include brand reputation and innovation in product lines, effective inventory management, and optimizing its store footprint. Leadership focuses on supply chain efficiency and adapting to customer preferences to navigate an intensely competitive retail landscape.

Financial and Operational Highlights in the Quarter

Revenue (GAAP) of $1.46 billion exceeded both the prior-year’s $1.42 billion and company guidance. Comparable sales—a core retail metric that measures performance at stores and digital operations open at least a year—grew 4%, marking a sharp improvement from a 3% decline in the prior year.

Sales performance varied widely across channels. North American stores saw sales rise by 3.1%, with international operations delivering robust 21.8% sales growth, reaching $227.8 million. This international strength contrasted with the Direct (online and digital) channel, which posted a 5.5% year-on-year sales decline. Management attributed store and international performance to “disciplined execution, the power of the evolving Victoria’s Secret and PINK brands, and early progress on our Path to Potential strategy.”

Profitability continued to face pressure. Adjusted operating income, though higher than company guidance, dropped 11.5% from last year. Net income (GAAP) was $16 million, half of what it was last year. Gross profit (GAAP) rose slightly. The company noted that gross margin rate expansion was achieved through inventory discipline and evolving promotional tactics, but increasing tariffs offset these gains and have weighed on profits.

The quarter also saw notable activity in physical stores and international expansion. Victoria’s Secret & Co. continues to rationalize its North American store fleet, closing 25 stores and opening 6 for a net reduction of 19. Adore Me shrank by one unit. Management also emphasized expansion in the beauty category, which accounts for about 25% of the business and is driven in part by strong international demand.

Business Drivers, Strategic Moves, and Product Context

Brand momentum and product innovation remain core themes for Victoria’s Secret & Co. The company credits “newness and evolved storytelling”—efforts to refresh marketing and product design—for recent increases in customer engagement. The Beauty product segment (fragrance, body care, and related personal care items) also continues to be a growth focus, with particular strength internationally.

International expansion is a bright spot. Sales outside North America jumped, and the number of stores run by overseas partners and joint ventures rose. Meanwhile, rationalizing the North American store fleet continued, with the domestic footprint shrinking.

Digital channel results were a challenge. Direct (digital and online) sales continued to contract, falling for the second straight quarter, impacted by competitive pressure and changing consumer behavior. This remains an important area for management, as digital represented about a third of overall revenue in FY2024. Adore Me’s footprint also shrank modestly during the period.

Cost pressures shaped results throughout the period. General, administrative, and store operating expenses (GAAP) increased from the prior year. The company highlighted that the financial impact of tariffs on imported goods grew, revising its expected annual tariff expense to approximately $100 million for FY2025. Despite these costs, Victoria’s Secret & Co. highlighted gross margin rate expansion, driven by inventory management and more strategic promotional activity.

Looking Forward: Guidance and Areas to Watch

Victoria’s Secret & Co. raised its full-year revenue guidance, now expecting net sales between $6.33 billion and $6.41 billion, up from the previous range of $6.2 billion to $6.3 billion. The company held its profit guidance steady, projecting adjusted operating income of $270 million to $320 million for FY2025. Profit projections were capped due to higher-than-expected tariffs, now forecast to impact results by $100 million for FY2025—double the earlier estimate.

For the third quarter, management projects revenue (GAAP) will be between $1.39 billion and $1.42 billion—up from $1.347 billion in the prior-year period—but expects an adjusted operating loss in the $35 million to $55 million range and a per-share net loss of $0.55 to $0.75. Store optimization, continued product innovation, and improving trends in international and beauty remain focus areas. However, the company faces ongoing risks from digital channel contraction, margin pressures due to higher tariffs, and shareholder activism, which could influence future strategy and operations. VSCO does not currently pay a dividend.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

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