VSCO Q2 Deep Dive: Store Traffic Momentum, Product Innovation, and Tariff Pressures Shape Outlook

August 29, 2025 at 01:30 AM EDT

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Intimatewear and beauty retailer Victoria’s Secret (NYSE: VSCO) beat Wall Street’s revenue expectations in Q2 CY2025, with sales up 3% year on year to $1.46 billion. On top of that, next quarter’s revenue guidance ($1.41 billion at the midpoint) was surprisingly good and 3.6% above what analysts were expecting. Its non-GAAP profit of $0.33 per share was significantly above analysts’ consensus estimates.

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Victoria's Secret (VSCO) Q2 CY2025 Highlights:

Revenue: $1.46 billion vs analyst estimates of $1.40 billion (3% year-on-year growth, 4% beat)
Adjusted EPS: $0.33 vs analyst estimates of $0.13 (significant beat)
Adjusted EBITDA: $118.7 million vs analyst estimates of $86.72 million (8.1% margin, 36.8% beat)
The company lifted its revenue guidance for the full year to $6.37 billion at the midpoint from $6.25 billion, a 1.9% increase
Adjusted EPS guidance for Q3 CY2025 is -$0.65 at the midpoint, below analyst estimates of -$0.56
Operating Margin: 2.8%, down from 4.4% in the same quarter last year
Locations: 1,376 at quarter end, up from 1,373 in the same quarter last year
Same-Store Sales rose 4% year on year (-3% in the same quarter last year)
Market Capitalization: $1.81 billion

StockStory’s Take

Victoria’s Secret entered the second quarter with operational changes and a renewed brand strategy, but the market responded negatively despite results that exceeded Wall Street’s revenue and profit expectations. Management pointed to ongoing improvements in store traffic and a shift towards higher-quality, regular-priced sales as key drivers. CEO Hillary Super highlighted the success of product launches like Body by Victoria and new marketing approaches, stating, “Momentum in the second quarter grew steadily as the quarter progressed, culminating in July, which was our strongest month of the quarter in terms of sales and new customer growth.”

Looking ahead, Victoria’s Secret’s forward guidance is shaped by continued investment in product innovation and brand moments, such as the upcoming fashion show and expanded gifting assortments for the holidays. Management cautioned that increased tariffs remain a persistent headwind, but they expect mitigation efforts—like diversified sourcing and selective pricing—to help offset these pressures. CFO Scott Sekella emphasized, “Mitigation will definitely increase in 2026. It just takes a little while for some of these levers to play out,” signaling that the company’s long-term strategy involves both operational agility and expense management.

Key Insights from Management’s Remarks

Management credited the quarter’s performance improvements to a combination of product innovation, disciplined promotional strategies, and international growth, while noting that higher tariffs and rising expenses remain challenges.

Product innovation drives engagement: New launches such as the FlexFactor bra and Body by Victoria collection boosted customer acquisition and regular-priced sales, with double-digit new customer growth following campaign launches. CEO Hillary Super noted these efforts connected “deeply with women and how they view wearing bras.”
Reduced discounting supports margins: The company relied less on its semiannual sale, using lower inventory levels and a more compelling regular-priced offering to decrease discounts and raise average unit retail (AUR). Management described this as a key lever for margin expansion despite tariff headwinds.
Strong international momentum: International sales grew 22% year-over-year, with notable strength in China’s digital channels and high single-digit comparable sales in global stores. This growth was mainly driven by the core intimates and beauty categories.
PINK brand repositioning: The PINK brand, targeting 18- to 24-year-old consumers, saw improvement from new collaborations and a shift back to its lifestyle roots. The PINK x LoveShackFancy collection, in particular, delivered record results without discounting and significantly increased engagement.
Operational efficiency and inventory management: Shorter production lead times, such as the 26-week cycle for LoveShackFancy, and strategic inventory allocation enabled Victoria’s Secret to better match product flow with demand. Management also cited the use of data science to optimize store assortments and improve size availability.

Drivers of Future Performance

Victoria’s Secret’s outlook depends on sustaining customer momentum through new products, brand activations, and ongoing mitigation of rising tariff and freight costs.

Brand events and marketing cadence: Key moments like the upcoming fashion show and holiday gifting campaigns are central to driving traffic and customer engagement across both in-store and digital channels. Management believes that a “steady drumbeat” of product launches and creative content will help maintain sales momentum and customer growth.
Tariff and supply chain management: Higher tariffs on imports are expected to pressure margins for the remainder of the year. CFO Scott Sekella said mitigation strategies—such as shifting from air to ocean freight, diversifying sourcing, and targeted pricing changes—will become more effective in 2026, though some benefits are already being realized.
Continued focus on product innovation: The pipeline for bras, sportswear, and beauty products remains robust, with management prioritizing fit, comfort, and expanded assortments to capture a broader demographic. The company is committed to delivering newness, especially to attract younger customers and deepen brand loyalty.

Catalysts in Upcoming Quarters

In upcoming quarters, the StockStory team will focus on (1) whether new product launches and marketing events like the fashion show sustain customer acquisition and traffic gains, (2) the effectiveness of tariff mitigation strategies on gross margins and operating income, and (3) ongoing progress in international markets, especially China. Execution on inventory optimization and the ability to maintain regular-priced selling will also be critical signposts.

Victoria's Secret currently trades at $22.70, in line with $22.76 just before the earnings. Is there an opportunity in the stock?See for yourself in our full research report (it’s free).

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