Intimatewear and beauty retailer Victoria’s Secret (NYSE:VSCO) reported Q2 CY2025 results exceeding the market’s revenue expectations, 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 Operating Income: $55.12 million vs analyst estimates of $31.67 million (3.8% margin, 74.1% 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: $1.82 billion
“I am excited to share that our momentum continued building in the second quarter, once again delivering results that beat our sales and operating income guidance. We delivered comparable sales growth in both Victoria’s Secret and PINK, in North America and across the globe, and in our stores and online channels. These results reflect disciplined execution, the power of the evolving Victoria’s Secret and PINK brands, and early progress on our Path to Potential strategy. The business was strong throughout the quarter and accelerated in July and into August, driven by product innovation, newness and evolved storytelling that is connecting with both existing and new customers,” said VS&Co Chief Executive Officer Hillary Super.
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.
Revenue Growth
A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul.
With $6.27 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 struggled to generate demand over the last six years (we compare to 2019 to normalize for COVID-19 impacts). Its sales dropped by 3.4% annually despite opening new stores. This implies its underperformance was driven by lower sales at existing, established locations.
This quarter, Victoria's Secret reported modest year-on-year revenue growth of 3% but beat Wall Street’s estimates by 4%. Company management is currently guiding for a 4.3% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to remain flat over the next 12 months. While this projection indicates its newer products will catalyze better top-line performance, it is still below average for the sector.
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Store Performance
Number of Stores
Victoria's Secret sported 1,376 locations in the latest quarter. Over the last two years, it has generally opened new stores, averaging 1.1% annual growth. This was 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 gives us insight into this topic because it measures organic growth for a retailer's e-commerce platform and brick-and-mortar shops that have existed for at least a year.
Victoria's Secret’s demand has been shrinking over the last two years as its same-store sales have averaged 1.3% annual declines. This performance is concerning - it shows Victoria's Secret artificially boosts its revenue by building new stores. We’d like to see a company’s same-store sales rise before it takes on the costly, capital-intensive endeavor of expanding its store base.
In the latest quarter, Victoria's Secret’s same-store sales rose 4% year on year. This growth was a well-appreciated turnaround from its historical levels, showing the business is regaining momentum.
Key Takeaways from Victoria's Secret’s Q2 Results
It was good to see Victoria's Secret beat analysts’ EPS expectations this quarter. We were also glad its revenue outperformed Wall Street’s estimates. On the other hand, its EPS guidance for next quarter missed. Overall, we think this was a decent quarter with some key metrics above expectations. The stock traded up 7.6% to $24.50 immediately after reporting.
Victoria's Secret had an encouraging quarter, but one earnings result doesn’t necessarily make the stock a buy. Let’s see if this is a good investment. We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.