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Victoria's Secret & Co. (VSCO)·Q1 2026 Earnings Summary

Executive Summary

  • Q1 FY26 net sales $1.35B and adjusted operating income $32M both exceeded guidance; adjusted EPS $0.09 beat consensus, and revenue was above Street as momentum improved in March–April .
  • EPS and revenue were above S&P Global consensus (EPS $0.0406*, revenue $1.326B*), a meaningful beat vs expectations; total comps declined 1% YoY as North America was flat and International grew 9% .
  • Guidance: FY25 net sales maintained at $6.2–$6.3B; adjusted operating income lowered to $270–$320M (from $300–$350M) due to net tariff impact (~$50M) and cost dynamics .
  • Near-term catalyst/risk: cybersecurity incident drives ~$20M Q2 net sales headwind and ~$10M operating income impact; tariff escalation and promotional mix (higher GWP penetration) pressure gross margin, partially offset by reduced traditional promos .

What Went Well and What Went Wrong

  • What Went Well

    • International strength: reported sales +9% to nearly $200M; China digital delivered strong double-digit growth .
    • Category performance: Beauty up low single digits; VSX sports bras up 20%; PINK apparel sustained positive comps with margin and AUR expansion .
    • Operating discipline: adjusted SG&A rate 32.8% (better than 34.5–35.5% guidance) via pullback in non-customer spend and strategic shift of marketing into Q2 .
    • Quote: “Our teams delivered… results exceeding our guidance and broad-based strength across both our brands.” — CEO Hillary Super .

  • What Went Wrong

    • Gross margin compression: adjusted gross margin 35.2%, down 170 bps YoY, driven by elevated air freight, tariff-related order adjustments, and higher GWP penetration vs plan .
    • Comps and panties softness: total comparable sales -1%; panties softer with lower promo intensity vs competitors; management weighing share vs promo strategy .
    • Guidance reduced for FY25 adjusted operating income amid tariff headwinds (~$120M gross, ~$70M mitigated) and macro uncertainty .

Financial Results

MetricQ4 FY25Q1 FY26Vs Prior Year (Q1 FY25)Vs Estimates
Revenue ($USD Billions)$2.106 $1.353 $1.359 → $1.353 (-0.5%) $1.353 vs $1.326* → beat
GAAP EPS ($)$2.33 ($0.02) ($0.05) → ($0.02) improvement n/a
Adjusted EPS ($)$2.60 $0.09 $0.12 → $0.09 $0.09 vs $0.0406* → beat
Adjusted Gross Margin Rate (%)38.60%*35.2% 36.9% → 35.2% (approx -170 bps) n/a
Adjusted Operating Income ($USD Millions)$299 $32 $40 → $32 n/a

Values with * are retrieved from S&P Global.

Segment and Channel Breakdown (Q1 FY26)

Segment/ChannelQ1 FY26 ($USD Millions)Q1 FY25 ($USD Millions)YoY
Stores – North America$721.3 $729.1 -1.1%
Direct$433.2 $448.8 -3.5%
International$198.4 $181.5 +9.3%
Total Net Sales$1,352.9 $1,359.4 -0.5%

KPIs (Q1 FY26)

KPIQ1 FY26Prior Year/Context
Total Comparable Sales-1% Flat–down trend noted by brand
AUR+2% YoY Driven by PINK and Beauty
Store Traffic vs MallOutpaced mall in Mar/Apr Trajectory turned positive in “Marpril”
Adjusted SG&A Rate32.8% (better than 34.5–35.5% guidance) -120 bps vs prior year

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Sales ($B)FY25$6.2–$6.3 $6.2–$6.3 Maintained
Adjusted Operating Income ($M)FY25$300–$350 $270–$320 Lowered
Tariff Net Impact ($M)FY25n/a~50 (gross ~$120; mitigation ~$70) New disclosure (headwind)
Adjusted EPS ($)FY25$2.69 (FY24 actual) context $1.80–$2.20 Introduced range
Capital Expenditures ($M)FY25~$240 ~$220 Lowered
Adjusted Free Cash Flow ($M)FY25n/a~$150–$200 Introduced
Net Sales ($B)Q2 FY25$1.380–$1.410 $1.380–$1.410 (incl. ~$20M cyber impact) Maintained (with incident impact)
Adjusted Operating Income ($M)Q2 FY25$15–$35 $15–$35 (incl. ~$10M incident impact) Maintained
Adjusted EPS ($)Q2 FY25$0.00–$0.15 $0.00–$0.15 Maintained
Adjusted Gross Margin Rate (%)Q2 FY25~35.4 (FY24 actual) context ~35.0 Slightly lower
SG&A Rate (%)Q2 FY2531.0 (FY24 actual) context ~33.0 Higher (timing of marketing)
Non-Operating Expense ($M)Q2 FY25~$20 (FY24 actual) ~$17 Lower
Tax Expense ($M)Q2 FY25n/a~$0–$5 Introduced

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 FY24 and prior)Current Period (Q1 FY26)Trend
Tariffs/MacroFY25 outlook initially set with AOI $300–$350M; macro cautious tone Net tariff impact ~$50M; Q2 tariff headwind ~$10M; mitigation levers underway Worsened headwind; mitigation back-half weighted
Supply Chain/SecurityNo cyber issues disclosed prior; holiday quarter strong execution May 24 incident; ~$20M Q2 sales and ~$10M OI impact; systems restored May 29 Transitory disruption; recovery phase active
Product Innovation (Bras/VSX)Q4 strength across categories; focus on innovation VSX sports bras +20%; wireless outpaced core bras; proprietary tech highlighted Improving traction; comfort-centric
PINK StrategyRecommit to PINK noted; multi-category ambition PINK apparel positive comps; higher AUR/margins; acquisition focus for new customers Momentum building; acquisition next
Marketing/PromotionsHoliday period less promotional than prior Shift from traditional promos to GWPs; funnel optimization; CMO hire Structural evolution; basket-building focus
International GrowthQ4 double-digit retail growth globally Reported sales +9%; JV partners executing well; store-of-the-future expanding Sustained strength

Management Commentary

  • Strategic posture: “We are stepping into a new era of sexy… delivering high emotion fashion and brand stories that resonate” — CEO Hillary Super .
  • Category focus: “VSX bras were up 20% in the quarter… proprietary Bra within a Bra technology gives her the confidence of a perfect fit” .
  • Margin drivers: “Gross margin rate pressure… elevated air freight, tariff-related adjustments, and higher GWP penetration, partially offset by reduced traditional promos” — CFO Scott Sekella .
  • Expense discipline: “Find efficiencies in non-customer areas… fewer projects, done better” — CFO .
  • Leadership/organization: Brand presidents and CMO appointments to drive “Path to Potential” strategy (April 8 press release) .

Q&A Highlights

  • Marketing strategy: CMO to push targeted acquisition, always-on bra campaigns, and entertainment-based activation in back-half; brands pushed farther apart in creative .
  • Tariff mitigation: Cost optimization, sourcing diversification, air-to-ocean mix, selective pricing and promo optimization; mitigation benefits weighted to H2 .
  • Gross margin composition: Largest headwinds from inbound rates and raw material write-offs tied to resourcing; GWPs up, traditional promos down; B&O favorability helps .
  • Customer behavior: Younger consumers shift toward sports bras and wireless; margin impact of sports bras limited at enterprise level .
  • PINK and acquisition: Strength driven by existing/lapsed customers; acquisition is priority; active more lifestyle-driven than pure performance .

Estimates Context

  • Q1 FY26 vs S&P Global consensus: Adjusted EPS $0.09 vs $0.0406*; revenue $1.353B vs $1.326B*; both beats likely drive positive estimate revisions for FY25 EPS despite AOI guidance cut. Values retrieved from S&P Global.
  • Implications: FY25 adjusted operating income lowered to $270–$320M suggests Street may reduce margin expectations; Q2 guidance implies sequential marketing cost timing and incident headwinds that may temper near-term EPS outlook .

Key Takeaways for Investors

  • Beat vs Street: Both EPS and revenue exceeded consensus; underlying momentum improved notably in March–April, with stores outperforming mall traffic .
  • Margin mix headwinds: Elevated freight, tariffs, and higher GWP penetration weighed on gross margin; management is shifting promo strategy and executing mitigation levers .
  • Guidance recalibration: FY25 AOI lowered to $270–$320M on tariffs; capex reduced to ~$220M; free cash flow targeted at ~$150–$200M, preserving liquidity while investing in store-of-the-future and tech .
  • International as growth engine: Reported international sales +9% with strong China digital; store-of-the-future footprint expanding to ~25% of North America by year-end .
  • Category strategy: Sports bras, wireless, and beauty are growth vectors; PINK apparel is comp-positive with higher AUR/margins; intimates share pressured but innovation pipeline is robust .
  • Near-term watch items: Q2 incident costs ($20M sales/$10M OI) and tariff rate timing; monitor gross margin trajectory and promo mix evolution .
  • Medium-term thesis: Organizational upgrades (brand presidents, CMO) and product/marketing modernization underpin brand differentiation; international scaling and mix shift to higher-margin beauty support margin recovery over time .

Source Documents Read

  • Q1 FY26 earnings call transcript (full) –.
  • Q1 FY26 8-K 2.02 and press release (June 11, 2025) .
  • Q1 FY26 related press releases: preliminary results and security incident (June 3, 2025) ; new date announcement (June 5, 2025) .
  • Prior quarter (Q4 FY24) press release and 8-K exhibit (March 5, 2025) .
  • Q2 FY25 press release (for trajectory context) .

S&P Global consensus values marked with * and disclaimer: Values retrieved from S&P Global.