Victoria’s Secret & Co. Q4 Earnings Call Highlights

Victoria’s Secret & Co. (NYSE:VSCO) reported fourth-quarter and full-year fiscal 2025 results that management said exceeded guidance on both the top and bottom line, with momentum extending into early fiscal 2026. On the company’s earnings call for the period ended Jan. 31, 2026, Chief Executive Officer Hillary Super said the retailer “returned to growth mode” in 2025, with full-year comparable sales up 5% and fourth-quarter comparable sales up 8%.

Q4 growth driven by broad-based demand and higher regular-price selling

Chief Financial and Operating Officer Scott Sekella said fourth-quarter net sales rose 8% year-over-year to $2.27 billion, up 9% excluding a one-time gift card breakage benefit recorded in the prior-year quarter. Comparable sales increased 8% for the second consecutive quarter, supported by higher traffic and average order value, reduced promotions, and more regular-price selling. Average unit retails (AURs) increased 6% in the quarter, and were up 7% excluding panties, according to Sekella.

Super highlighted improved execution during the holiday and Valentine’s Day periods compared with the prior year. She said the company amplified the fashion show to sustain traffic through November and Black Friday, maintained a cadence of newness in December—particularly in bras and sleep—and made targeted inventory investments. Sleep “significantly outperformed expectations” and became a key growth engine in the quarter, she added.

For Valentine’s Day, Super said the company shortened the semiannual sale, set the assortment earlier to extend the selling window, and supported launches with marketing that included a campaign featuring Hailey Bieber. Management said the Valentine’s collections at both Victoria’s Secret and PINK outperformed expectations and delivered double-digit sales growth, with store traffic during Valentine’s week increasing significantly year-over-year and outperforming the mall.

Strategic pillars: bras, PINK reset, and steady beauty growth

Super framed fiscal 2025 as early progress under the company’s “Path to Potential” strategy, which she described as built on four pillars: supercharging bra authority, recommitting to PINK, fueling beauty growth, and evolving brand projection and go-to-market.

• Bra authority: Super said bras were put back at the center of the Victoria’s Secret brand, helping restore the bra category to growth for the first time in four years. She said the Victoria’s Secret bra business grew mid-single digits in Q4, alongside reduced promotions that contributed to a mid-single-digit increase in bra AUR. She also cited a “halo” effect into other categories, including panties and sleep. Super said VS panties accelerated in Q4 with increased AURs and delivered the brand’s best performance in panties since 2021.
• PINK: Super said the company reset PINK’s positioning as a digitally native lifestyle brand for 18- to 24-year-olds, resulting in what management called PINK’s strongest growth year in a decade. In Q4, PINK grew high single digits, with apparel penetration and renewed bra momentum. Super and Sekella emphasized pulling back on promotions, with Super citing double-digit AUR expansion, including strength in PINK apparel. The company pointed to viral demand tied to K-pop group TWICE, including two sellouts of the Wear Everywhere bra and what Super called PINK’s most viewed campaign ever, generating more than 79 million social views. Super said PINK app downloads increased 50% in the quarter, accelerating further after Valentine’s Day.
• Beauty: Super said fragrance remains a key differentiator, calling scent the brand’s “secret weapon.” Management said beauty grew low single digits in Q4 and delivered another year of growth in fiscal 2025, led by fine fragrance and supported by mist. Super described Bombshell as “America’s number one fragrance” and said the company is investing in its beauty team and innovation pipeline, with an expectation to accelerate growth in 2027 and beyond.

International results and digital engagement

International was a standout in Q4, with Sekella reporting sales growth of 43% to $276 million, led by “outstanding performance in China,” primarily in digital. Adjusting for a shift in the reporting of European digital sales, international sales grew 27%, Sekella said. Super also cited the importance of social commerce and live streaming in China and said a more coordinated global approach to product and storytelling helped performance. For fiscal 2026, Super said the company expects to deliver double-digit international growth through expansion in existing markets, entering new markets, and leveraging digital and social commerce.

Management also emphasized growth in digital engagement and brand marketing. Super said Q4 app downloads rose 25% and that the company’s apps now drive approximately one-third of digital sales. She also pointed to the release of a behind-the-scenes fashion show documentary, which management said generated more than 36 million social views, and said Valentine’s Day campaigns drove more than 10.5 billion impressions, about three times last year’s level.

Margins, cash flow, and portfolio actions

Sekella said fiscal 2025 net sales rose 6% to $6.553 billion excluding the prior-year gift card breakage benefit. Adjusted operating income increased 16% to $403 million and adjusted EPS increased 22% to $3.00, despite $85 million in net tariff pressure during the year.

In Q4, adjusted gross margin rate was 39.4%, compared with 39.7% a year ago, or about 38.9% excluding the prior-year gift card breakage benefit. Sekella said the company expanded adjusted gross margin rate by 50 basis points excluding the gift card benefit, despite about $60 million, or 250 basis points, of net tariff pressure in the quarter. Drivers included leverage on buying and occupancy, reduced promotions, and increased regular-price selling. Adjusted operating income was $316 million, above the company’s guidance range of $265 million to $290 million. Adjusted EPS was $2.77, above guidance of $2.20 to $2.45.

On the balance sheet, Sekella said cash ended Q4 at $518 million, up $291 million from last year, and the company generated $312 million in free cash flow for the year, including a $69 million litigation settlement benefit. Excluding that, adjusted free cash flow was $244 million. The company repaid all outstanding borrowings under its $750 million ABL credit facility during the quarter, Sekella said.

Management also addressed portfolio actions involving DailyLook and Adore Me. Sekella said the company initiated a strategic review of DailyLook as a “non-core asset.” For Adore Me, Sekella said the company discontinued the intimates-based subscription offering, converted it to a loyalty program, and exited the Adore Me distribution center in Mexico, transitioning fulfillment to the U.S. The company recorded a non-cash pre-tax impairment charge of $120 million related to long-lived assets and a $36 million charge for inventory reserves and restructuring, which were excluded from adjusted results.

Fiscal 2026 outlook: sales growth expected, tariff mitigation underway

For fiscal 2026, the company guided net sales of $6.85 billion to $6.95 billion, representing growth of about 5% to 6% versus fiscal 2025. Operating income is expected to be $430 million to $460 million, implying operating margin expansion of roughly 20 to 50 basis points despite incremental tariff headwinds, Sekella said. EPS is expected to be $3.20 to $3.45.

The guidance is based on tariff assumptions consistent with rates in place prior to “recent developments,” Sekella said, adding that the company did not include the impact of potential tariff changes. For 2026, Sekella said the company assumes incremental gross tariff costs of about $160 million and expects to mitigate most of that, resulting in an incremental net tariff impact of about $40 million. Mitigation efforts include vendor cost optimization, sourcing diversification, freight mix changes, and strategic pricing actions, including more targeted promotions and selective price adjustments where the company sees market value gaps.

For the first quarter of fiscal 2026, the company forecast net sales of $1.49 billion to $1.525 billion, up from $1.353 billion a year earlier, representing expected growth of 10% to 13%. Operating income is expected to be $32 million to $42 million and EPS is expected to be $0.20 to $0.30. Sekella said tariffs are expected to have the greatest impact in the first half, with Q1 seeing the largest impact because Q1 of last year was not affected by tariffs.

In Q&A, Super said customer file growth is being led by new customer acquisition, with an uptick in younger customers, and described the transformation as “early to mid” innings, with the Victoria’s Secret brand further along than PINK and beauty viewed as more long-term due to innovation and regulatory timelines. Management also said it is monitoring Middle East disruptions, citing some franchise store closures but limited direct exposure due to the royalty-based structure, and said it has no meaningful sourcing exposure in the region.

About Victoria’s Secret & Co. (NYSE:VSCO)

Victoria’s Secret & Co is a leading designer, manufacturer and marketer of intimate apparel, beauty products and accessories for women. The company operates a portfolio of brands that includes Victoria’s Secret, renowned for its lingerie, bras and sleepwear; PINK, a line targeting younger consumers with activewear and lifestyle products; and Victoria’s Secret Beauty, offering fragrances, cosmetics and personal care items. Products are sold through retail stores as well as direct-to-consumer channels, including e-commerce platforms and mobile applications.

The origins of Victoria’s Secret date back to 1977, when founders Roy and Gaye Raymond opened the first store in San Francisco.