Intimatewear and beauty retailer Victoria’s Secret (NYSE: VSCO) reported revenue ahead of Wall Streets expectations in Q3 CY2025, with sales up 9.2% year on year to $1.47 billion. Guidance for next quarter’s revenue was better than expected at $2.19 billion at the midpoint, 0.9% above analysts’ estimates. Its non-GAAP loss of $0.27 per share was 54.2% above analysts’ consensus estimates.

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StockStory’s Take

Victoria’s Secret delivered third quarter results that significantly surpassed Wall Street’s expectations, supported by broad-based sales and margin expansion across its core brands. Management pointed to a clear shift in customer engagement and brand momentum, highlighting the impact of the revived Victoria’s Secret Fashion Show and targeted marketing driving customer acquisition. CEO Hillary Super described the results as “a powerful multiplier effect,” with the Intimates business returning to growth and market share gains in a declining U.S. category. The company also reported its first customer file growth of the year, fueled by new and reactivated shoppers, particularly among younger demographics.

Looking ahead, Victoria’s Secret raised its full-year outlook, with leadership emphasizing continued momentum into the holiday season and early 2026. Management credits planned innovation in bras and beauty, further digital and social marketing investments, and ongoing store enhancements as key to sustaining growth. CEO Hillary Super stated, “We have a full pipeline of innovation in the bra world in particular as well as in the beauty world, and we are building on what we’ve learned from partnerships and collaborations.” The company is also closely managing tariff headwinds, with strategic pricing and operational improvements expected to help preserve margins as it executes on its growth strategy.

Key Insights from Management’s Remarks

Management attributed the quarter’s outperformance to brand engagement, product innovation in bras and beauty, and a renewed focus on customer acquisition that drove both traffic and market share gains.

• Fashion Show Boost: The revived Victoria’s Secret Fashion Show generated strong digital and in-store traffic, especially among younger customers, driving a measurable lift in new and reactivated shoppers and increasing market share above 1% in U.S. intimates.
• Bra Category Leadership: The company’s focus on style, innovation, and marketing led to mid-single-digit growth in bras, with initiatives like the Body by Victoria Flex Factor and Very Sexy campaigns supporting higher average selling prices and reduced discounting.
• PINK Brand Acceleration: PINK achieved double-digit sales growth, driven by apparel and successful collaborations such as LoveShackFancy, which attracted new Gen Z customers and saw viral engagement, notably with K-pop group TWICE.
• Beauty Category Expansion: Beauty, a high-frequency purchase category, continued to grow, supported by product innovation and integrated campaigns. Only 40% of the customer base shops beauty, which management sees as a near-term opportunity for cross-selling and market share capture.
• International Growth: International sales rose over 30%, powered by digital momentum in China and new store openings, with management citing accelerated growth and strong traction during key events like Singles Day.

Drivers of Future Performance

Victoria’s Secret expects product innovation, digital engagement, and further operational efficiency to underpin growth, while tariff pressures and consumer trends remain key watchpoints for margins.

• Innovation Pipeline: Management highlighted a robust pipeline of bra and beauty launches for 2026, leveraging insights from recent collaborations to keep the assortment fresh and relevant for key demographics, particularly 18-24-year-olds.
• Margin Expansion Efforts: The company aims to achieve low double-digit operating margins over the next few years, driven by higher average selling prices, disciplined promotions, and leveraging its operational foundation, though tariffs will remain a headwind in the near term.
• Store and Channel Optimization: Ongoing investments in the ‘Store of the Future’ concept and digital channels aim to improve the customer experience, drive higher engagement, and support international and North American growth as the brand expands its reach and assortment.

Catalysts in Upcoming Quarters

In future quarters, our analysts will monitor (1) the pace of product innovation in bras and beauty, especially upcoming launches and collaborations; (2) the effectiveness of digital and social campaigns in driving new customer acquisition and engagement; and (3) continued progress in margin expansion despite tariff-related cost pressures. Execution on store format upgrades and international expansion will also be key signposts for sustained growth.

Victoria's Secret currently trades at $48.77, up from $41.57 just before the earnings. Is the company at an inflection point that warrants a buy or sell? The answer lies in our full research report (it’s free for active Edge members).

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