Why Victoria's Secret Rallied Today

Key Points

• Victoria's Secret delivered a second quarter above expectations.

• Management attributes the change to some new leadership and better execution.

• The stock is still cheap, but the company must continue to fend off new competition and activist investors.

• 10 stocks we like better than Victoria's Secret & Co. ›

Shares of Victoria's Secret (NYSE: VSCO) rallied on Thursday, up as much as 11.8% before retreating to a 4.8% gain as of 10:26 a.m. ET.

Victoria's Secret reported second-quarter earnings today, which beat analyst expectations on both the top and bottom lines. The company has recently revamped some of its leadership, and it appears those moves are paying off.

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Victoria's Secret's top line gets a lift

In the second quarter, Victoria's Secret grew revenue 2.8% to f $1.46 billion, on the back of a solid 4% lift in comparable-store sales. Victoria's Secret continues to rationalize its store footprint, and it seems to be yielding positive traffic at its remaining stores. Meanwhile, adjusted non-GAAP (generally accepted accounting principles) earnings per share of $0.33 handily beat estimates by $0.20, above the previously guided range.

Management also raised full-year revenue guidance to a range of $6.33 billion to $6.41 billion, compared to prior guidance of $6.20 billion to $6.30 billion, with an adjusted operating income range of $270 million to $320 million, despite an increased $100 million impact from tariffs.

CEO Hillary Super noted it was "our first full quarter under our refreshed leadership team, and the impact was clear -- sharper execution, reenergized culture, and more high-emotion storytelling, delivering significant momentum as we enter the back half of the year."

Image source: Getty Images.

Will results shrug off activists?

Victoria's Secret had come under fire from activist investors a couple of months ago, who demanded the company's chairman and rest of the board step down after years of underperformance. So perhaps the strong results will keep these investors happy for the time being.

In any case, the stock looks cheap at 12 times this year's earnings estimates. While this year's earnings should mark a decline from 2024, it also includes a negative tariff impact, which should theoretically only be a one-time cost.

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Billy Duberstein and/or his clients have no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.