Victoria's Secret (VSCO)

Intimatewear and beauty retailer Victoria’s Secret (NYSE:VSCO) reported Q4 CY2025 results beating Wall Street’s revenue expectations, with sales up 7.8% year on year to $2.27 billion. On top of that, next quarter’s revenue guidance ($1.51 billion at the midpoint) was surprisingly good and 6.4% above what analysts were expecting. Its non-GAAP profit of $2.77 per share was 9.7% above analysts’ consensus estimates.

Company Overview

Spun off from L Brands in 2020, Victoria’s Secret (NYSE:VSCO) is an intimate clothing and beauty retailer that sells its own brands of lingerie, undergarments, and personal fragrances.

Apparel sales are not driven so much by personal needs but by seasons, trends, and innovation, and over the last few decades, the category has shifted meaningfully online. Retailers that once only had brick-and-mortar stores are responding with omnichannel presences. The online shopping experience continues to improve and retail foot traffic in places like shopping malls continues to stall, so the evolution of clothing sellers marches on.

Retailers offering intimates, undergarments, and sleepwear for women include American Eagle’s (NYSE:AEO) Aerie brand and LVMH’s (ENXTPA:MC) La Perla brand as well as private companies ThirdLove and Adore Me.

A company’s long-term sales performance is one signal of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul.

With $6.55 billion in revenue over the past 12 months, Victoria's Secret is a mid-sized retailer, which sometimes brings disadvantages compared to larger competitors benefiting from better economies of scale.

As you can see below, Victoria's Secret’s 1.1% annualized revenue growth over the last three years was sluggish, but to its credit, it opened new stores and increased sales at existing, established locations.

This quarter, Victoria's Secret reported year-on-year revenue growth of 7.8%, and its $2.27 billion of revenue exceeded Wall Street’s estimates by 2%. Company management is currently guiding for a 11.4% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 3.1% over the next 12 months, an acceleration versus the last three years. This projection is above the sector average and suggests its newer products will catalyze better top-line performance.

Number of Stores

The number of stores a retailer operates is a critical driver of how quickly company-level sales can grow.

Victoria's Secret operated 1,420 locations in the latest quarter. It has generally opened new stores over the last two years and averaged 1.4% annual growth, faster than the broader consumer retail sector.

When a retailer opens new stores, it usually means it’s investing for growth because demand is greater than supply, especially in areas where consumers may not have a store within reasonable driving distance.

Same-Store Sales

A company's store base only paints one part of the picture. When demand is high, it makes sense to open more. But when demand is low, it’s prudent to close some locations and use the money in other ways. Same-store sales is an industry measure of whether revenue is growing at those existing stores and is driven by customer visits (often called traffic) and the average spending per customer (ticket).

Victoria's Secret’s demand rose over the last two years and slightly outpaced the industry. On average, the company’s same-store sales have grown by 2.4% per year. This performance suggests its measured rollout of new stores could be beneficial for shareholders. When a retailer has demand, more locations should help it reach more customers and boost revenue growth.

In the latest quarter, Victoria's Secret’s same-store sales rose 8% year on year. This growth was an acceleration from its historical levels, which is always an encouraging sign.

Victoria's Secret has bad unit economics for a retailer, giving it less room to reinvest and grow its presence. As you can see below, it averaged a 36.5% gross margin over the last two years. That means Victoria's Secret paid its suppliers a lot of money ($63.47 for every $100 in revenue) to run its business.

Victoria's Secret’s gross profit margin came in at 37.7% this quarter, in line with the same quarter last year. Zooming out, the company’s full-year margin has remained steady over the past 12 months, suggesting it strives to keep prices low for customers and has stable input costs (such as labor and freight expenses to transport goods).

Victoria's Secret’s operating margin has generally stayed the same over the last 12 months, averaging 4.5% over the last two years. This profitability was lousy for a consumer retail business and caused by its suboptimal cost structureand low gross margin.

Analyzing the trend in its profitability, Victoria's Secret’s operating margin might fluctuated slightly but has generally stayed the same over the last year. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

In Q4, Victoria's Secret generated an operating margin profit margin of 10.1%, down 2.6 percentage points year on year. Since Victoria's Secret’s operating margin decreased more than its gross margin, we can assume it was less efficient because expenses such as marketing, and administrative overhead increased.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Sadly for Victoria's Secret, its EPS declined by 16.2% annually over the last three years while its revenue grew by 1.1%. This tells us the company became less profitable on a per-share basis as it expanded.

In Q4, Victoria's Secret reported adjusted EPS of $2.77, up from $2.60 in the same quarter last year. This print beat analysts’ estimates by 9.7%. Over the next 12 months, Wall Street expects Victoria's Secret’s full-year EPS of $2.92 to grow 5.5%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Victoria's Secret broke even from a free cash flow perspective over the last two years, giving the company limited opportunities to return capital to shareholders.

We were impressed by Victoria's Secret’s optimistic revenue guidance for next quarter, which blew past analysts’ expectations. We were also happy its revenue outperformed Wall Street’s estimates. On the other hand, its gross margin slightly missed. Zooming out, we think this was a good print with some key areas of upside. The stock remained flat at $59.48 immediately following the results.

Updated: March 5, 2026 at 7:11 AM EST

Before investing in or passing on Victoria's Secret, we urge you to understand the company’s business quality (or lack thereof), valuation, and the latest quarterly results - in that order.

We see the value of companies helping consumers, but in the case of Victoria's Secret, we’re out. To kick things off, its revenue growth was uninspiring over the last three years. While its growth in physical locations shows it’s staying on track and slowly expanding its presence, the downside is its declining EPS over the last three years makes it a less attractive asset to the public markets. On top of that, its operations are burning a modest amount of cash.

Victoria's Secret’s P/E ratio based on the next 12 months is 19.5x. This multiple tells us a lot of good news is priced in - we think other companies feature superior fundamentals at the moment.

Wall Street analysts have a consensus one-year price target of $65.44 on the company (compared to the current share price of $59.48).