Executive Summary

Q2 delivered a clean top- and bottom-line beat with net sales $1.459B (+3% YoY) and adjusted EPS $0.33 vs S&P Global consensus $0.13; beat driven by stronger full‑price selling, lower promo intensity, and international outperformance despite a May digital outage (~$20M sales headwind) . S&P Global estimates used where noted.*
Gross margin expanded 20 bps YoY to 35.6% and 60 bps above guidance as promotions were reduced and AURs improved; adjusted operating income was $55M, $20M above the high end of guidance .
FY25 net sales guidance raised to $6.33–$6.41B (from $6.2–$6.3B), while adjusted operating income held at $270–$320M due to a higher net tariff impact (~$100M, +$50M vs prior); Q3 guide embeds an adjusted loss per share of $(0.55)–$(0.75) .
Stock catalysts: evidence of sustained AUR/margin discipline, international acceleration (Q2 +22% to $228M), and brand “moments” (return of Fashion Show) vs. headwinds from tariff step-up and elevated Q3 loss guide .

What Went Well and What Went Wrong

What Went Well

Pricing/promo discipline expanded GM to 35.6% (+20 bps YoY; +60 bps vs guide) as the company relied less on the Semi‑Annual Sale and drove more full‑price selling; AURs +1% and +8% ex‑panties .
International momentum: sales +22% YoY to $228M, helped by high single-digit retail comps and strength in China digital; store openings contributed .
Brand/product resonance: Body by Victoria FlexFactor launch and PINK x LoveShackFancy drove outsized traffic and zero‑discount success, with “exceptionally large” basket sizes; CEO: “record‑breaking collaboration… achieved with zero discounting” .

Quote: “We delivered gross margins of 35.6% for the quarter, 20 basis points above last year and 60 basis points above our guidance.” — CEO Hillary Super .

What Went Wrong

Tariffs stepped up (assumptions now 30% China/20% non‑China) lifting FY25 net tariff impact to ~$100M (+$50M vs prior); this offset part of the Q2 outperformance and constrained the FY AOI raise .
May cybersecurity incident/digital outage hurt Q2 sales by ~$20M and operating income by ~$14M; Q3 outlook also reflects tariff pressure and higher store/digital investments .
SG&A rate delevered YoY to 31.8% (from 31.0%) due to shifted marketing spend and higher incentive comp despite dollars better than plan .

Financial Results

Headline results and estimate comparison

Metric	Q4 2025	Q1 2026	Q2 2026
Revenue ($B)	$2.106*	$1.353	$1.459
Primary/Adjusted EPS ($)	$2.60*	$0.09*	$0.33
EBITDA ($M)	$337*	$88*	$112*

Consensus (S&P Global) vs Actual, Q2 2026: Revenue $1.406B est vs $1.459B actual; EPS $0.13 est vs $0.33 actual; EBITDA $86.7M est vs $112M actual (beats across all three) *.
Values with asterisks retrieved from S&P Global.

Sources: Revenue/EPS/EBITDA estimates and actuals (S&P Global)*; Q1 revenue (transcript) ; Q2 revenue/EPS (8‑K/PR) .

Profitability and operating metrics

Metric	Q1 2026	Q2 2026
Gross Margin %	35.2%	35.6%
Adjusted Operating Income ($M)	$32	$55
Adjusted SG&A % of Sales	32.8%	31.8%

Channel/Geography – Q2 2026 sales and YoY growth

Channel/Geo	Q2 2026 Sales ($M)	YoY %
Stores – North America	$824.8	3.1%
Direct	$406.5	(5.5%)
International	$227.8	21.8%
Total	$1,459.1	3.0%

KPIs and other highlights

KPI	Q2 2026	YoY/Seq context
Comparable Sales	+4%	Sequential improvement from Q1; comps positive across brands/channels
AUR	+1% overall; +8% ex‑panties	Reflects lower discounts and mix
International retail comps	High single digits	Sales +22% to $228M
Traffic vs mall	“Significantly outpaced”	Continued into August

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Net Sales	FY 2025	$6.20–$6.30B	$6.33–$6.41B	Raised
Adjusted Operating Income	FY 2025	$270–$320M	$270–$320M	Maintained
Net Tariff Impact	FY 2025	~$50M net (implied: $120M gross/$70M mitigation)	~$100M net; mitigation ~$70M	Higher headwind
Tariff Assumptions	FY 2025	30% CN / 10% non‑CN	30% CN / 20% non‑CN	Increased non‑CN
Net Sales	Q3 2025	—	$1.39–$1.42B	New
Adj. Operating Income (Loss)	Q3 2025	—	$(35)–$(55)M	New
Adj. EPS	Q3 2025	—	$(0.55)–$(0.75)	New
Gross Margin %	Q3 2025	—	~34% (vs 34.8% LY)	Down YoY
Marketing Spend	FY 2025	—	“Basically flat YoY”	Qualitative
Capex	FY 2025	~$220M	~$200M	Lowered
Adjusted FCF	FY 2025	$150–$200M	$150–$200M	Maintained
Weighted Avg Shares	FY 2025	~83M	~83M	Maintained

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4 2025, Q1 2026)	Current Period (Q2 2026)	Trend
Pricing & Promotions	Testing fewer “box” promos; pullback planned in 2025	Lower discounting drove GM +20 bps; AUR +1% (+8% ex‑panties); continued shift to GWPs	Improving discipline
Tariffs/Macro	FY25 net tariff ~+$50M (net) in plan	Assumptions raised to 30% CN/20% non‑CN; FY net ~$100M; mitigation levers outlined	Headwind intensifying
Supply chain/Lead times	Goal to shorten cycles; apparel to ~26 weeks	Executed LoveShackFancy in 26 weeks; faster chase in panties (2–3 weeks)	Faster, more agile
PINK Recommitment	Major runway in apparel; focus on Gen Z	Record collab; PINK apparel double‑digit growth; new customer accounts up double digits	Re‑accelerating
Beauty Growth	7th straight growth quarter in Q1	8th straight growth quarter; body care/seasonal fragrance leading	Sustained strength
International	Double-digit growth; new countries/DC in EU	Sales +22% to $228M; China digital strong	Accelerating
Store of the Future	Positive early lifts; target ~25% of NA fleet	Recent remodels showed double‑digit lifts; ~190 NA stores by YE	Positive ROI
Cyber incident	May outage referenced in Q1/Q2 setup	~$20M sales impact; ~$14M OI impact in Q2	Residual impact, contained

Management Commentary

“We grew net sales 3% despite the digital outage in May… and delivered gross margins of 35.6%… 60 bps above our guidance.” — CEO Hillary Super .
“Adjusted operating income of $55M exceeded the high end of our second quarter guidance by $20M.” — CEO Hillary Super .
“International… sales grew 22% to $228M… with strength in China digital.” — CFO/COO Scott Sekella .
“Our guidance now assumes net tariff impact of ~$100M in 2025… we’re maintaining adjusted operating income guidance despite estimated incremental net tariff pressure of $50M.” — CFO/COO Scott Sekella .
“Store of the Future… more recent [projects show] a double‑digit lift in sales from pre to post.” — CFO/COO Scott Sekella .
Product/brand: Body by Victoria FlexFactor launch (7/23) featured flexible titanium underwire to deliver comfort and support — consistent with the quarter’s bra innovation narrative .

Q&A Highlights

Pricing/promo strategy: Company will continue pulling back on traditional promos, using selective price modifications and GWPs; mindful of entry points and ceilings to preserve value and drive full‑price mix .
Store of the Future ROI: Double‑digit lift in recent remodels driven by traffic and better assortments; ongoing rollout in 2025 .
Tariffs and 2026 mitigation: Expect more ocean/less air, supplier diversification, continued promo pullback and expense control; mitigation to increase in 2026 as sourcing shifts play through .
Category performance: Q2 improvement in core intimates; panties “very strong” in both brands; bras improved with positive full‑price selling, aided by Body by Victoria launch .
Fashion show/marketing: Marketing dollars flat YoY but rebalanced; plan to “amplify” Fashion Show with cultural impact while keeping spend flat overall .

Estimates Context

Q2 vs S&P Global consensus: Revenue $1.459B vs $1.406B est; EPS $0.33 vs $0.13 est; EBITDA $112M vs $86.7M est — broad beats driven by lower discounting, AUR gains, and international strength *.
Prior quarters: Q1 revenue $1.353B vs $1.326B est; EPS $0.09 vs $0.04 est; EBITDA $88M vs $84M est *.
Implications: Street likely raises FY revenue on stronger Q2 and raised FY sales guide, but holds/edges down EPS/AOI given tariff net impact lifted to ~$100M and Q3 loss guide; focus shifts to durability of promo discipline and international momentum .
Values with asterisks retrieved from S&P Global.

Key Takeaways for Investors

Mix/pricing discipline is sticking: GM +20 bps YoY and above guide, AURs rising, and promo pullback didn’t derail comps; watch SG&A efficiency vs. marketing cadence into holiday .
International is an underappreciated growth engine (Q2 +22% to $228M), with China digital strength and continued store expansion; EU DC should support speed and digital penetration .
Tariffs are the swing factor: FY25 net tariff ~$100M now embedded; mitigation actions are in-flight, with larger benefit expected in 2026; valuation sensitivity to tariff path remains high .
Brand “moments” (Body by Victoria, PINK collabs, Fashion Show) are driving traffic and new customer growth without discounting — a positive sign for elasticity and margin resilience .
Near-term setup: Q3 guided to a deeper loss on tariffs and investments; trading setup likely favors looking through Q3 to holiday momentum and the Fashion Show halo if execution replicates last year .
Medium-term thesis: If PINK re‑acceleration and Beauty growth persist alongside disciplined promos and sourcing mitigation, the business can compound margins while re‑building the customer file and share in core categories .

Notes:

All company figures and quotes are from the Q2 2026 8‑K/press release and earnings call transcript unless otherwise noted .
Values marked with an asterisk (*) are retrieved from S&P Global (consensus and actuals via GetEstimates).

Victoria's Secret & Co. (VSCO)·Q2 2026 Earnings Summary