Victoria’s Secret’s Comeback Is Real—The Stock’s Problem Is Different

Key Points

• Victoria’s Secret beat Q2 earnings expectations and raised guidance, but shares sold off as investors focused on slowing growth and high expectations.
• CEO Hillary Super’s Path to Potential strategy has improved brand momentum, profitability and the company’s outlook.
• Analysts still see upside, but valuation risk and a competitive retail backdrop make the stock a more difficult call after its rally.

Victoria's Secret & Co. NYSE: VSXY just attracted one of the more confusing earnings reactions of the year. The retailer beat Wall Street's earnings estimate comfortably on Sept. 3. Sales were up, adjusted net income soared, and earnings per share beat analysts’ expectations. Yet shares tumbled sharply in the aftermath.

Recognizing just how far this stock has come is important to understand why investors are so jumpy. The question is whether the sell-off was warranted, or whether, given the company’s recent turnaround, expectations simply got too high.

The Turnaround Has Changed Expectations

A year ago, Victoria’s Secret was trading at around just $25 per share. Having fallen out of favor with shoppers, it spent years struggling with declining net sales, shrinking profit margins, and intense market skepticism about its ongoing brand turnaround.

The current stock turnaround began in the second half of 2025. CEO Hillary Super, who took over in the fall of 2024 after leading Anthropologie and Savage X Fenty, built a "Path to Potential" strategy around reclaiming leadership in the bra category, revitalizing the Pink sub-brand, expanding into beauty, and modernizing how the company markets its products.

The rollout weathered a rocky start, including a more than 50% stock decline in the first half of 2025. Then a stronger rebound took hold. The reintroduced Victoria's Secret Fashion Show in October 2025 drove a reported 60%-plus year-over-year traffic lift to its websites and more than 15% increase in new customer conversions. The brand also said it gained more than a point in the U.S. bra market share during the holiday quarter.

Q2 Earnings Show Stronger Operating Momentum

Except for the annual bump from holiday sales, results came unsteadily. The recent second-quarter results for the period ended Aug. 1 told a different story, though apparently not as much as many observers had wanted. And this came after a decisive earnings beat for the first quarter.

Net sales grew to $1.61 billion, narrowly below the $1.62 billion consensus estimate but still up 10% from a year earlier.

Adjusted earnings per share came in at 95 cents, well ahead of the 76 cents analysts expected. Total comparable sales rose 9% in the quarter, a deceleration from the 13% comp growth posted in the prior quarter, a trend investors will want to watch closely.

On the profitability side, the news was better. Adjusted gross profit expanded to 38.8% of sales, up from 35.6% a year ago, consolidated net income hit $188 million, more than 10 times the year-ago period, and adjusted net income reached $80.2 million, nearly three times last year’s second quarter. In other words, the picture is a business generating real operating leverage as it grows.

Guidance Failed to Impress Investors

At the same time, management also raised full-year revenue guidance to net sales in the range of $7.1 billion to $7.18 billion, compared with $6.55 billion for 2025. Adjusted operating income is projected to hit $560 million to $590 million in fiscal 2026 compared with $403 million a year earlier.

For the third quarter of 2026, the company expects net sales to be in the range of $1.57 billion to $1.6 billion compared with net sales of $1.47 billion for the third quarter of 2025. Operating income for the third quarter of 2026 is expected to be in the range of $10 million to $20 million compared to an adjusted operating loss of $18 million in the third quarter of 2025.

Even with the projected increases, guidance reportedly came in only modestly ahead of where analysts had been modeling, which appears to be the real reason the stock sold off so sharply despite the headline earnings beat.

In addition, Victoria’s Secret shares are up roughly 43% year-to-date and more than 200% over the past 12 months, even after pulling back more than 21% over the past month. It now trades at a price/earnings ratio of nearly 22, far above the roughly 17 times it traded at the end of fiscal 2025, when the stock price was much lower. Expectations, more than earnings growth, have powered much of this rally.

Analysts Still See Upside, But Expectations Are Split

With a consensus rating of Moderate Buy from 14 analysts covering the stock, the recommendations are evenly split between Buy and Hold.

The average 12-month target price is $89, implying about 18% upside from current values. The highest price target is $110, while the lowest is $68 per share.

Signaling the sentiment that exists now, two analysts since the day before the earnings were announced raised their targets to $101 and $100 per share. Two other analysts lowered their targets to $106 and $87.

Beyond the valuation risk of high expectations, Victoria’s Secret is working to recover its position of strength in a highly promotional, competitive landscape.

American Eagle Outfitters (AEO), Abercrombie & Fitch (ANF), The Gap (GAP), and a slew of privately held lingerie and intimate apparel brands are among some of the names battling in the market.

Investors Have to Weigh Momentum Against Valuation

The questions for investors are relatively clear.

Has Hillary Super brought back the historical strength of Victoria’s Secret, sustainably and powerfully enough to continue driving it upward? Will the widespread adoption of GLP-1 drugs continue to reshape demand for lingerie and form-fitting clothing? And can Victoria's Secret keep meeting expectations that it is helping to set?

For cautious investors, the combination of a slowing comparable-sales trend, a raised valuation, and the lack of a dividend might argue for patience.

Investors who remember what Victoria’s Secret achieved in the past might find the excitement and momentum hard to resist.