Victoria's Secret & Co. Q1 2026 Earnings Report

Victoria's Secret & Co. EPS Results

• Actual EPS: $0.60
• Consensus EPS: $0.29
• Beat/Miss: Beat by +$0.31
• One Year Ago EPS: $0.09

Victoria's Secret & Co. Revenue Results

• Actual Revenue: $1.56 billion
• Expected Revenue: $1.52 billion
• Beat/Miss: Beat by +$38.38 million
• YoY Revenue Growth: N/A

Victoria's Secret & Co. Announcement Details

• Quarter: Q1 2026
• Date: 6/2/2026
• Time: Before Market Opens
• Conference Call Date: Tuesday, June 2, 2026
• Conference Call Time: 8:30AM ET

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. In 1982, the brand was acquired by L Brands (formerly The Limited, Inc.), which expanded its footprint across the United States and internationally. In August 2021, Victoria’s Secret & Co. was spun off as an independent, publicly traded company, marking a new chapter focused on brand repositioning, product innovation and omnichannel growth.

Victoria’s Secret & Co. designs, sources and distributes products from its headquarters in Columbus, Ohio. Its core apparel offerings encompass bras, panties, lingerie, loungewear and activewear, complemented by beauty and personal care lines. The company emphasizes fit, innovation and experiential retail, investing in store remodels, digital enhancements and loyalty programs to deepen consumer engagement.

Serving primarily the North American market, Victoria’s Secret has also expanded its reach through online sales in Europe, Asia and Latin America. The company is led by an executive leadership team reporting to a board of directors and continues to pursue strategic partnerships and international distribution agreements to fuel its global growth ambitions.

Victoria's Secret & Co. Q1 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Victoria’s Secret & Co. posted a very strong Q1, with net sales up 15%, comparable sales up 13%, adjusted operating income up 153% to $80 million, and adjusted EPS rising to $0.60, all above guidance.
• Positive Sentiment: Broad-based brand momentum continued across Victoria’s Secret, PINK, and Beauty, each delivering double-digit sales growth, while the company saw strong new-customer acquisition, file growth, and gains in intimates market share.
• Positive Sentiment: Management said the promo detox is working, with higher regular-price selling and mid-single-digit AUR growth helping drive gross margin expansion despite tariff pressure. The company suggested there is still room for further margin improvement as promotions are reduced over time.
• Positive Sentiment: The 2026 outlook was raised materially, with full-year net sales now expected at $7.03 billion-$7.13 billion, adjusted operating income at $550 million-$580 million, and adjusted EPS at $4.35-$4.60, reflecting both stronger business trends and more favorable tariff assumptions.
• Neutral Sentiment: International, especially China, remained a major growth driver, with reported international sales up 45% in Q1 and management saying the business still has meaningful long-term runway, though it is navigating tariff uncertainty and a disruptive shareholder campaign.

Presentation

[Operator]

Good morning. My name is Amanda, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Victoria's Secret & Co.'s first quarter 2026 earnings conference call. Please be advised that today's conference is being recorded. All parties will remain in a listen-only mode until the question and answer session of today's call. I would now like to turn the call over to Kevin Wynk, Global Controller at Victoria's Secret & Co.. Kevin, you may begin.

[Kevin Wynk, Global Controller at Victoria's Secret & Co]

Thanks, Amanda. Good morning and welcome to Victoria's Secret & Co.'s first quarter earnings conference call for the period ended May 2, 2026. Joining me on the call today is Chief Executive Officer, Hillary Super, and Chief Financial and Operating Officer, Scott Sekella. We are available today for approximately 30 minutes to answer any questions. I would like to remind you that any forward-looking statements we may make today are subject to our safe harbor statements found in our SEC filings and in our press releases. Certain results we discuss on the call today are adjusted results that exclude the impact of certain items described in our press release and our SEC filings. Reconciliation of these and other non-GAAP measures to the most comparable GAAP measures are included in our press release, our SEC filings, and the investor presentation posted on the investor section of our website.

[Kevin Wynk, Global Controller at Victoria's Secret & Co]

With that, I'll turn the call over to Hillary.

[Hillary Super, CEO at Victoria's Secret & Co]

Good morning and thank you for joining us. I am pleased to report a very strong quarter and start to 2026. The momentum we built in the back half of 2025 continued through the first quarter, and we delivered results that exceeded both our top and bottom line guidance. The strength was broad-based across the business. Victoria's Secret, PINK, and Beauty all delivered double-digit sales growth. We achieved our fourth consecutive quarter of positive comps, with total comp sales increasing 13% and driving total sales growth of 15%. We also saw strength across channels and geographies. We were particularly encouraged by double-digit gains in new customer acquisition and continued file growth across all age and income cohorts. In fact, we saw the strongest growth from customers and households earning under $50,000 annually and over $200,000 underscoring the broad resonance of our brands across the consumer landscape.

[Hillary Super, CEO at Victoria's Secret & Co]

During the quarter, we continued to gain share in intimates, particularly amongst 18 to 24-year-olds. Traffic also accelerated from the fourth quarter, reinforcing the momentum we are seeing across the business. We are now a little more than a year into our Path to Potential strategy. Our new management team is hitting its stride. We are executing with precision and agility, deepening connections with our customers, and strengthening the foundation of the business while driving sustainable long-term value. A big part of our work is what we call world building, creating distinct and emotionally resonant worlds for the VS and PINK brands. These are immersive brand ecosystems where product, marketing, customer experience, and visual identity all work together to create a clear and recognizable look and feel for each brand. For Victoria's Secret, that world is sexy, glamorous, and luxurious. For PINK, it is bold, playful, and irreverent.

[Hillary Super, CEO at Victoria's Secret & Co]

When those worlds take shape with the right product and storytelling, we create a strong emotional connection with the customer that drives results. At the same time, we have remained highly disciplined in how we drive growth. A key part of that discipline has been a promo detox. We are reducing promotions and markdowns and replacing promotional offers with compelling emotional messaging. The result is a healthier, more brand-led business. The customer is responding. We are seeing strong AUR growth reflecting the increased strength of our brand propositions. That brand strength was on full display during one of our biggest moments this quarter, Valentine's Day. Across Victoria's Secret, PINK, and Beauty, we delivered double-digit growth and drove positive comps across key gifting categories during the Valentine's Day period. These results were driven by a stronger assortment, culturally relevant campaigns, and a more strategic media mix.

[Hillary Super, CEO at Victoria's Secret & Co]

Valentine's Day is especially important for VS, and we leveraged key learnings from last year and delivered a more fashion-forward, colorful assortment with a breadth of newness across end uses. We partnered with Hailey Bieber on a modern, sexy campaign that resonated with customers while also optimizing our marketing spend by investing earlier and more strategically in channels where she is most engaged. As a result, we delivered growth in the month of February for the first time in 8 years. For PINK, we leaned into agility and cultural connection. Following the strong response to the K-pop group TWICE at the fashion show, we partnered with them again for Valentine's Day. We paired that partnership with newness in our Wink franchise.

[Hillary Super, CEO at Victoria's Secret & Co]

The resulting campaign drove over 2 billion impressions through the Valentine's Day period, more than tripling last year's levels, underscoring the power of putting ourselves at the center of the cultural conversation and the untapped potential in our core business. Beauty also delivered a great Valentine's Day performance, with double-digit growth across the category and continued strength in fine fragrance and mist. This was driven in part by integrating Beauty into brand storytelling and deploying strategic marketing support on the days that matter in the final lead up to the holiday. While Valentine's Day is an important moment for us, our performance was broad-based throughout the quarter. Before I dive deeper into the quarter's performance, I want to briefly acknowledge the current environment. We remain thoughtful about the consumer environment and continue to monitor it closely.

[Hillary Super, CEO at Victoria's Secret & Co]

Despite macro uncertainty, our first quarter results, improving customer engagement, and the strong resonance of our product and storytelling give us confidence in the resilience of our business and the strength of the connection we are building with our customer. In a world that can feel heavy at times, she is increasingly looking for ways to feel seen, comforted, and restored. We are uniquely positioned to offer her an escape, something that is just for her. I'll walk you through our progress during the quarter in each pillar of our Path to Potential strategy: supercharging our bra authority, recommitting to PINK, fueling growth in Beauty, and evolving our brand projection and go-to-market strategy. I'll provide an update on our international business before turning it over to Scott to discuss our financial performance in detail and our raised 2026 outlook. I'll start with our first pillar, supercharging our bra authority.

[Hillary Super, CEO at Victoria's Secret & Co]

This quarter, our bra business grew low double digits, contributing significantly to overall company growth with strength broad-based across silhouettes and price tiers. When we win in bras, we create a halo across the entire VS brand. This quarter, we saw that again in panties and in sleep with sales up mid-teens in both categories. Bras also drove stronger new customer acquisition versus last year. These results reflect the cohesiveness of the brand and the strength of our execution. VS is really in its groove at the intersection of innovation, technical expertise, and fashion authority. Those elements are increasingly working in concert. As a result, we are bringing more joy, personality, and fashion relevance into our assortments. At the center of this progress is a disciplined focus on our core.

[Hillary Super, CEO at Victoria's Secret & Co]

Over the last 18 months, we have edited and refined our top 10 bra frames, strengthening fit, comfort, and styling across the foundation of the business. That work has made the core stronger, healthier, and more productive. This also creates room for us to introduce more innovation and adjacent offerings such as bra tops, bralettes, and online bras. Innovation takes multiple forms for us. Technical innovation to deliver real-life solutions through improved fit, comfort, and performance, and fashion innovation through new colors, fabrications, treatments, and styles. During the quarter, we executed across both dimensions. The result is a brand with a stronger fashion point of view and a deeper connection with the customer. We saw that come to life through launches like our refreshed Signature collection and our new Invisible Strapless collection. Following a successful Valentine's Day, we relaunched Signature, our most foundational, everyday essentials, including our top-selling T-shirt bra.

[Hillary Super, CEO at Victoria's Secret & Co]

For the launch, we brought new energy to one of our most important franchises, combining improved fit and comfort with a bold, modern expression of the brand. As we've done consistently across the business, we coupled the product with a disruptive campaign featuring many of our Angels. We also launched our Invisible Strapless collection, combining customer insight with our best technical innovations to deliver a product that is both functionally superior and culturally relevant. The campaign, starring Angel Reese, taps into the outerwear as outerwear trend and shows how we're pairing breakthrough innovation with standout talent to cut through at exactly the right moment heading into strapless season. As we look ahead, we are encouraged by the broad-based strength across the bra portfolio.

[Hillary Super, CEO at Victoria's Secret & Co]

A healthier core is giving us the freedom to expand into opportunistic areas in ways that feel compelling to both loyal and new customers, supporting continued growth and deeper engagement across the business. That balance is helping us gain share in bras and gives us confidence in the durability and scalability of this category. Turning to our next pillar, recommitting to PINK. Over the past year, we have reset the foundation of the PINK brand. That work is now starting to translate into real momentum. PINK delivered low double-digit growth this quarter, driven by strength in core apparel and intimates and improved regular price selling. Across PINK, we saw meaningful engagement around fashion-led assortments, frequent newness, and sharper cultural relevance. This engagement translated into strong new customer growth during the quarter led by 18-24-year-olds.

[Hillary Super, CEO at Victoria's Secret & Co]

Our PINK icons remain at the core of the business, driving both growth and frequency and giving us a consistent platform to build from as we layer in new fabrics, silhouettes, and styling. At the same time, we've re-established intimates as another growth driver. During the quarter, we delivered a consistent drumbeat of newness in fun, flirty, and reverent prints and patterns that contributed to new customer growth with less promotion. A key part of our progress revitalizing PINK has been aligning the brand to a modern young customer and the moments that matter most in her life. This quarter, this included Valentine's Day, spring break, and summer kickoff. For example, we channeled the spring break mindset through our second annual PINK Break event, which drove strong customer acquisition, traffic, and sales growth with less reliance on promotions. We also saw success reaching a younger demographic through expanded apparel offerings.

[Hillary Super, CEO at Victoria's Secret & Co]

We drove new customer growth by showing up in bigger, louder ways with the items she needs for her every day. This includes denim, going-out tops, and flirty ruffle skirts that provide outfitting for every life moment. I'm particularly encouraged that PINK is beginning to stand more clearly on its own. On top of that, collaborations and partnerships will continue to play a key role in creating excitement. We see them as an important complement to the foundation, built on recognizable brand codes, a clear point of view, and a more confident and distinct relationship with the customer. Looking ahead, we continue to see proof points that reinforce our belief that PINK is a full lifestyle brand. We see significant opportunities both in existing and new categories, including apparel, accessories, and Beauty, and our progress in these areas gives us strong confidence in the runway ahead.

[Hillary Super, CEO at Victoria's Secret & Co]

Turning to our third pillar, fueling growth in Beauty. We were encouraged by the momentum we saw in Beauty in the first quarter. The business accelerated to low double-digit growth, driven by continued strength in fine fragrance and the Mist collection. Key to our performance this quarter was increased newness, integrated brand campaigns, and surgical marketing on the days that matter. Our consistent drumbeat of newness is driving connection and relevance. As an example, in March, we launched Bombshell Bouquet, a vibrant spring extension of a top-selling franchise, bringing fresh energy to Mother's Day gifting. Throughout the quarter, we amplified this newness through integrated brand campaigns, which drove engagement, brand heat, and increased regular price selling. T

[Hillary Super, CEO at Victoria's Secret & Co]

his summer, our cross-category campaign featuring Angel Reese was our most integrated Beauty marketing activation to date, highlighting fragrance as the final outfitting layer and driving Bombshell Bronze as our top fine fragrance at launch.

[Hillary Super, CEO at Victoria's Secret & Co]

By bringing intimates and fragrances together as one powerful brand story, we are building out the brand's world and deepening our connection with her. Looking ahead, we will continue to expand the world of Bombshell through product extensions, building on its strength as America's number one fragrance. At the same time, we have developed deeper insight into the customer journey to Beauty. We know where, when, and through which channels she converts, and we are working to optimize those touch points with the right product and message. That includes identifying specific days and times around the holidays when Beauty can be a meaningful driver of incremental revenue and customer acquisition. In these moments, we are taking a surgical approach to marketing that is delivering results. This was evident this quarter as we identified and seized the Valentine's Day opportunity, driving double-digit growth in the period.

[Hillary Super, CEO at Victoria's Secret & Co]

Looking ahead, as we continue to build the innovation and operational agility needed to scale over time, we are excited about the combination of a strong core, regular newness, continued franchise expansion, and a more integrated approach. Finally, turning to our fourth pillar, evolving our brand projection and go-to-market strategy. During the quarter, we continued to propel brand heat beyond the fashion show and the holiday season with a higher frequency of emotionally connected product campaigns and media activations. To start, we owned Valentine's Day by bringing together product, creative talent, and media to drive accelerated growth. In April, we announced Angels Among Us to extend the excitement of our iconic fashion show beyond a single moment. We launched a nationwide search for the next Angel and invited our community to apply, opening the doors to the brand with live castings in cities across America.

[Hillary Super, CEO at Victoria's Secret & Co]

We saw an overwhelming response to our announcement. Over 100,000 aspiring Angels participated in the application process. The search drove conversations and engagement across social platforms and earned media, generating more than 1.7 billion media impressions. We are excited to meet these women and capture their stories. We plan to share those stories with our community over the next several months leading up to our fashion show this fall. The strong interest and social engagement around Angels Among Us reinforces our belief that the fashion show is more than a single moment. We are deepening our customer engagement as we build the fashion show into an ongoing franchise. Other major brand moments from the quarter include Mother's Day, which took on a more emotional tone, celebrating motherhood while reinforcing that being sexy and being a mom are not mutually exclusive.

[Hillary Super, CEO at Victoria's Secret & Co]

The campaign was a success with strong sales growth versus last year that helped support our momentum into Q2. Finally, the new PINK store in SoHo recently brought the brand into the cultural heartbeat of New York. Customers began lining up at 1:00 A.M. on the day of opening, and the response translated to strong, regular priced demand, especially among our 18 to 24-year-old customers, as she fully immersed herself in the PINK world. As we support these initiatives, we are becoming more precise in how we reach her. Our performance marketing and customer analytics capabilities are improving, allowing us to target more effectively, scale our biggest brand moments, and drive more customer acquisition and engagement. The differentiated brand identities we are creating for Victoria's Secret and PINK are coming to life across product, marketing, and channel experiences.

[Hillary Super, CEO at Victoria's Secret & Co]

When a customer enters our stores, opens our app, or sees our campaigns, she should feel like she's stepping into a distinct and emotionally resonant world. That consistency, supported by highly effective media spend and a variety and breadth of content, is helping us to drive brand heat. As a result, our customer file continues to grow in both VS and PINK and across channels, with total VS&Co growth up mid-single digits in the quarter. Our focus on new customer acquisition paid off, with new customer growth accelerating from mid-single digits in Q4 to low double digits in Q1. We are also seeing market share expansion in key categories. During the quarter, we once again continued to outperform the broader intimates market and grew our share. At the same time, stronger brand relevance, trust, and overall perception signal that our strategy is working.

[Hillary Super, CEO at Victoria's Secret & Co]

We are growing sales through customer count and higher average spend as we lead with emotion over promotion. Overall, our evolving brand projection and go-to-market strategy is strengthening customer connection, improving marketing efficiency, and supporting more durable long-term growth. Before I close, I want to touch on our international business. As we continue strengthening our North America business and core brands, we are increasingly seeing the effects of that work extend globally. Growth was broad-based globally with particular strength in core bras, sleep, and fine fragrance. China remained a key driver for our international business and continues to represent a meaningful growth opportunity. We are seeing strong engagement across our digital and social channels there, which is helping us deepen customer connections and build brand awareness. We are listening closely and being deliberate in how we go to market.

[Hillary Super, CEO at Victoria's Secret & Co]

The key franchises we are building, such as the fashion show and Valentine's Day, are resonating globally, and we are being thoughtful about tailoring our marketing to the needs of local markets. International remains a significant long-term growth opportunity for us, and we continue to see meaningful runway ahead. In closing, we demonstrated broad-based momentum across the business in the first quarter, and that is carrying into second quarter. Our customer file continues to grow across new, active, and reactivated customers. The business is growing globally, and we are delivering this growth with more efficiency. Across both VS and PINK, we are strengthening our core franchises while layering in more fashion, technical innovation, and culturally relevant storytelling. We are also continuing our world-building efforts across both brands, creating more distinct and immersive brand identities, and leaning into our foundational heritage as an entertainment brand.

[Hillary Super, CEO at Victoria's Secret & Co]

The Path to Potential strategy is driving continued momentum in our business, giving us confidence in the remainder of the year. We continue to have a strong pipeline of product launches, including more bra launches for both brands than we had last year. We also have a robust calendar of collaborations, partnerships, and high-impact brand moments ahead, including the return of the fashion show, where we plan to extend the halo even further with Angels Among Us. More people are engaging with our brands, talking about our brands, and participating in our brand moments. That growing engagement is creating a multiplier effect across the business and gives us confidence in our ability to sustain growth over time. Today also marks an important milestone for the company as we begin trading under our new ticker symbol, VSXY.

[Hillary Super, CEO at Victoria's Secret & Co]

Our new ticker reflects our evolution into a business that is more confident in its identity and clearer about the opportunity ahead. We celebrate sexy in all forms. Not as one look or one definition, but as a feeling every woman owns for herself. We are uniquely positioned to capture and reflect that feeling in a way no one else can. VSXY reflects the strengths of our brands, the connection we are building with our customer, and the work our teams have done to reposition this company for long-term value creation. Before I hand it over to Scott, I want to take a moment to thank the team for all their hard work. As our Q1 results show, we are really starting to hit our groove and accelerate momentum. I'll now turn the call over to Scott.

[Scott Sekella, Chief Financial and Operating Officer at Victoria's Secret & Co]

Thanks, Hillary. Thank you, everyone, for joining today's call. We are extremely pleased to report first quarter results that well exceeded the high end of our guidance on both the top and bottom line. As Hillary discussed, the momentum we built in the back half of 2025 continued into the first quarter, and we are firmly in growth mode. We remain keenly focused on prioritizing and driving investment in the key customer-facing areas of the business, spanning product innovation, brand strength, and customer experience. Executing with focus and discipline across our Path to Potential strategy, we delivered a very strong start to the new fiscal year, continuing into Q2, which positions us well to deliver long-term, sustainable, profitable growth. Now, let's turn to the first quarter results in greater detail. Net sales were $1.56 billion, an increase of $207 million or 15% compared to last year.

[Scott Sekella, Chief Financial and Operating Officer at Victoria's Secret & Co]

Comp sales increased 13%. Adjusted operating income increased 153% to $80 million, and adjusted EPS increased over 500% to $0.60, all well above the high end of our guidance. As Hillary noted, we registered strong growth at Victoria's Secret, PINK, and Beauty, and the quarter's strength was broad-based across categories, channels, and geographies. We saw continued momentum in key sales metrics year-over-year. Store and digital traffic both increased, which helps support our customer file growing mid-single digits, an acceleration from Q4 and our third consecutive quarter of growth. This was driven by strong new customer acquisition combined with improved retention rates. Strong product acceptance, emotional brand connection, and growing brand heat at Victoria's Secret, PINK, and Beauty drove another quarter of higher regular price selling.

[Scott Sekella, Chief Financial and Operating Officer at Victoria's Secret & Co]

This, combined with disciplined inventory management, enabled us to continue pulling back on promotions, including promotional levels, number of events, and number of days. First quarter AURs were up mid-single digits compared to last year. Our top-line performance was strong throughout the quarter. Overall, we delivered double-digit growth in both February and the March to April period, which takes into account the timing shift in the Easter holiday and school spring breaks. Digital traffic grew at a faster rate than the growth in stores. Our stores traffic grew mid-single digits and significantly outperformed the mall. This outperformance accelerated from the fourth quarter. The strength in both channels is particularly encouraging as it demonstrates the strong and growing customer engagement across our entire retail ecosystem. As Hillary outlined in her review, from a brand perspective, Victoria's Secret, PINK, and Beauty all registered low double-digit year-over-year retail sales growth.

[Scott Sekella, Chief Financial and Operating Officer at Victoria's Secret & Co]

We saw strength in both North America and international. In North America, our total intimates business across VS and PINK accelerated from Q4, registering low double-digit growth. As Hillary described, the strength was driven by increased fashion newness throughout the quarter and strong Valentine's Day performance. As Hillary also noted, our international business continued delivering outstanding results with reported sales growth of 45% in the first quarter, inclusive of retail comp sales growth up mid-teens. The growth was led by another quarter of outstanding performance in China, primarily in the digital channel, which continues to be driven by social selling. This performance builds on the momentum we established throughout 2025. As I've previously mentioned, we began fulfilling digital orders in Europe out of our new European distribution center in the third quarter last year, and thus began recording these sales as part of our international channel at that time.

[Scott Sekella, Chief Financial and Operating Officer at Victoria's Secret & Co]

Adjusting for the reporting shift of these European digital sales from direct sales to international sales, first quarter international sales grew 36%. First quarter adjusted gross margin dollars were $587 million, an increase of 23% over last year. Adjusted gross margin rate in the quarter was 37.6%, compared to an adjusted gross margin rate of 35.2% in the first quarter last year, well exceeding our guidance. We expanded our year-over-year adjusted gross margin rate by 240 basis points, despite approximately $14 million or 90 basis points of incremental net tariff pressure in the quarter. The strong rate expansion was a result of higher merchandise margins, driven by an increased mix of regular price selling and continued reduction in promotions, reflecting the promo detox strategy Hillary outlined. Additionally, we had significant buying and occupancy leverage driven by the 15% net sales growth.

[Scott Sekella, Chief Financial and Operating Officer at Victoria's Secret & Co]

When compared to our guidance for the quarter, the tariff rate changes in the quarter favorably impacted gross profit by approximately $14 million or approximately 90 basis points. Adjusted SG&A dollars were $507 million in the first quarter. Our adjusted SG&A rate was 32.5% compared to 32.8% last year. The 30 basis points of SG&A leverage was better than our guidance and driven by the sales beat and continued expense management, partially offset by higher incentive compensation expense associated with our quarter outperformance and investments in store labor and other customer-facing initiatives to support growth. Adjusted operating income of $80 million was 153% above last year's adjusted operating income of $32 million. Excluding the $14 million tariff benefit relative to guidance, results were still well above the high end of our guidance of $32 million-$42 million.

[Scott Sekella, Chief Financial and Operating Officer at Victoria's Secret & Co]

Non-operating expenses, consisting principally of interest expense, were $12 million in the quarter, down from last year's $14 million, driven primarily by the lower level of weighted average borrowings. Adjusted income tax expense was $8 million, which was higher than our guidance, driven by the earnings outperformance in the quarter. Our adjusted net income per diluted share was $0.60, significantly better than our guidance of net income per diluted share of $0.20-$0.30 and last year's first quarter adjusted net income per diluted share of $0.09. During the quarter, we repurchased 2.2 million shares for $100 million at an average price of approximately $45 per share. As of the end of the first quarter, $150 million remains on our $250 million repurchase authorization approved in March of 2024.

[Scott Sekella, Chief Financial and Operating Officer at Victoria's Secret & Co]

We had 85 million weighted average shares outstanding in the quarter, favorable to our guidance of 87 million shares. Turning to the balance sheet, our inventories remain in a healthy position. First quarter total inventories were up 5% year-over-year, lower than our guidance of up high single digits, driven by lower estimated tariff impacts and top-line outperformance in the quarter. From a liquidity standpoint, we ended the first quarter with a cash balance of $207 million, an increase of $69 million above last year, and with $15 million outstanding on our ABL compared to $105 million last year. Our cash balance and the remaining availability under our ABL leaves us in a strong financial position with ample flexibility for continued execution of our strategic priorities. Now, moving to our outlook for 2026.

[Scott Sekella, Chief Financial and Operating Officer at Victoria's Secret & Co]

First off, regarding tariffs, our forecast assumes that imported goods remain at the current 10% rate under Section 122 through the end of July. Subsequently, given the uncertainty regarding what will happen following the current expiration of Section 122 tariffs, we are assuming that tariff rates return to 20% through the end of the year, which is consistent with rates in place prior to Section 122. Lastly, while we are actively pursuing refunds associated with the IEEPA tariff, our outlook does not contemplate any recovery of refunds. As we discussed, we registered significant outperformance in the first quarter and the strong momentum has carried into the second quarter of 2026. For fiscal year 2026, we are raising our top and bottom line guidance.

[Scott Sekella, Chief Financial and Operating Officer at Victoria's Secret & Co]

We now expect net sales to be in the range of $7.03 billion-$7.13 billion, up from the prior range of $6.85 billion-$6.95 billion and compared to net sales of $6.553 billion in fiscal year 2025. The increased net sales outlook represents year-over-year growth of 7%-9% compared to the prior guidance of 5%-6% and embeds an expectation that our top-line strength continues through the balance of the year, reflecting a low double-digit two-year comp for the balance of the year. We now expect 2026 adjusted operating income in the range of $550 million-$580 million compared to $403 million in fiscal 2025. This represents an increase of $120 million at both ends of our prior guidance range of $430 million-$460 million.

[Scott Sekella, Chief Financial and Operating Officer at Victoria's Secret & Co]

The $120 million increase comprises $55 million driven by underlying business strength and top-line expansion, with the remaining $65 million reflecting more favorable net tariff impacts than previously expected. The rate guidance implies adjusted operating margin expansion of approximately 170 to 200 basis points year-over-year. We are raising our fiscal year 2026 adjusted net income per diluted share to be in the range of $4.35-$4.60, up from the prior range of $3.20-$3.45, and compared to adjusted net income per diluted share of $3 in fiscal year 2025. Our forecast assumes weighted average diluted shares outstanding of approximately 84 million. We continue to estimate capital expenditures in the range of $220 million-$240 million in fiscal 2026, or approximately 3% of sales.

[Scott Sekella, Chief Financial and Operating Officer at Victoria's Secret & Co]

In North America, we continue to expect store counts at the end of 2026 to be flat to slightly up compared to last year, with 45% of our global fleet in our Store of the Future design, including 30% in North America and 55% internationally. Turning to our outlook for the second quarter of 2026. We are forecasting net sales in the range of $1.59 billion-$1.615 billion, compared to net sales of $1.459 billion in the second quarter of 2025. This outlook assumes top-line growth of approximately 9% to 11%, based on our continued momentum quarter to date in our North America business, as well as strength in our international business. It is important to note that the start of PINK Friday shifts from Q2 to Q3 this year, representing a Q2 growth headwind of approximately 1%.

[Scott Sekella, Chief Financial and Operating Officer at Victoria's Secret & Co]

We are also lapping the digital outage from last year, which is a Q2 growth tailwind of approximately 1%. With this sales outlook, we expect second quarter 2026 operating income to be in the range of $90 million-$100 million, compared to an adjusted operating income of $55 million in the second quarter of 2025. We expect our second quarter 2026 gross margin rate to be about 38.5%, compared to an adjusted gross margin rate of 35.6% in the second quarter of 2025, representing roughly 290 basis points of expansion. The expected rate expansion is based on the strength of our operating model, which continues to deliver leverage on buying and occupancy expenses as net sales grow, as well as our disciplined promotional strategy and more regular price selling.

[Scott Sekella, Chief Financial and Operating Officer at Victoria's Secret & Co]

We also expect a gross tariff headwind of approximately $15 million in the second quarter and a year-over-year net benefit of approximately 145 basis points compared to the prior year. The SG&A rate in the second quarter of 2026 is expected to be approximately 32.5%, compared to the second quarter 2025's adjusted rate of 31.8%. The forecasted increase in SG&A dollars is primarily driven by store labor investments and other costs to support the customer experience and top-line growth, as well as approximately $7 million of proxy contest-related expenses. Given these inputs and weighted average diluted shares outstanding of approximately 84 million, we estimate second quarter earnings per diluted share to be in the range of $0.65-$0.75, compared to adjusted earnings per diluted share of $0.33 in the second quarter of 2025.

[Scott Sekella, Chief Financial and Operating Officer at Victoria's Secret & Co]

We expect to end the second quarter with inventories up high single digits compared to last year. This expected increase reflects growth to support business trends, the impact of tariffs, and timing related to our operations, mostly due to our strategic shift towards ocean freight from air freight, which results in us taking ownership of inventory earlier as compared to last year. This ownership comparison dynamic will begin to normalize in the back half of the year. In closing, our Path to Potential strategy continues to deliver exceptional results. Our outstanding first quarter performance, with 15% sales growth and over 500% adjusted EPS growth, demonstrates accelerating momentum across Victoria's Secret, PINK, and Beauty. We've raised our full-year guidance, reflecting both our strong Q1 results and continuation of our momentum. Despite tariff headwinds, we're continuing to expand margin while investing in product innovation, brand strength, and customer experience.

[Scott Sekella, Chief Financial and Operating Officer at Victoria's Secret & Co]

Our improved financial position provides flexibility to capitalize on growth opportunities and return value to shareholders. We remain confident in our ability to drive sustainable, long-term, profitable growth. I will now turn the call back over to Hillary for a moment before we get into Q&A.

[Hillary Super, CEO at Victoria's Secret & Co]

Thanks, Scott. Before we get into Q&A, I want to briefly address the campaign launched by one of our shareholders ahead of our upcoming annual meeting. While we respect the perspectives of all shareholders, including BBRC, we believe this campaign is a distraction from the significant progress and momentum we are building across the business. Our focus remains on executing our Path to Potential strategy and delivering results for shareholders. Given this, we would like the Q&A to remain focused on the strong quarter, our strategy, our performance, and our outlook. Operator?

[Operator]

Thank you. Ladies and gentlemen, if you wish to ask a question, please press star one and record your name clearly when prompted. To withdraw your question at any time, you may press star, then two. As a reminder, we ask that each participant limit themselves to one question and one follow-up to allow ample time to respond to each participant that may wish to participate in this portion of the call. For our first question, we will go to the line of Matthew Boss with JPMorgan. Your line is open.

[Matthew Boss, Analyst at JPMorgan]

Thanks. Congrats on a great quarter.

[Scott Sekella, Chief Financial and Operating Officer at Victoria's Secret & Co]

You bet.

[Matthew Boss, Analyst at JPMorgan]

Hillary, could you break down drivers of the traffic acceleration that you saw in the first quarter despite the promotional detox? Could you elaborate on the strong momentum that you cited to start the second quarter? Have you seen any moderation in trends? If you could flag assortment opportunities you see in the second quarter and back half of the year.

[Hillary Super, CEO at Victoria's Secret & Co]

Sure, Matt. Okay. First and foremost, I believe that our content and the talent in our content really resonated with the customer. Let's start there. From there, we also really optimized our media mix, and we saw the biggest growth coming out of paid, both in social and search. I would also add app downloads are up over about 50%, and that's a big driver of traffic as well. Finally, our community is powerful. Their voices and their testimonials of our product and our brand were four times higher than last year, and we see that being a big driver. We see it in the stores where they bring their phone in and talk to us about things they're looking from, they think from also. It's all working together in one ecosystem, and we're really pleased with how that's turning out.

[Hillary Super, CEO at Victoria's Secret & Co]

In terms of the back half, we have a very loaded back half. I'm very excited about it. It includes more bra launches than last year in both brands, including a new franchise launch in PINK. We have a number of partnerships and collaborations that we're excited about throughout the year, as well as amplifying our own content and our own franchises, like the Fashion Show, and extending it with Angels Among Us. We feel fully loaded for the balance of the year, very confident. In terms of your question about May, the trajectory has

[Matthew Boss, Analyst at JPMorgan]

That's great. As a follow-up for Scott, on your raised full-year operating margin forecast, could you just walk through the embedded tariff and freight assumptions versus full price selling opportunity you see this year? How best to think about the next leg potential for margins relative to 10% embedded in the back half of the year?

[Scott Sekella, Chief Financial and Operating Officer at Victoria's Secret & Co]

Yeah, sure, Matt. On operating income, we raised our guide on the low and the high by $120 million. About $55 million of that is from the business outperformance, and about $65 million of that is tariff favorability. As we noted, we're assuming the 10% Section 122 tariffs stay in effect through Q2, through the end of July. In the back half with all the uncertainty, we're assuming they return to sort of the pre-Section 122 rates of about 20%. On the freight side, we've got roughly 30 basis points of headwind planned from Q2 to Q4, so we expect this to be with us for some time. In terms of opportunities, it's a lot of what we've called out. The continued reduction in promos. We've said from the start that that is a multi-year journey. We continue to reduce whether it's events, days, promotional levels.

[Scott Sekella, Chief Financial and Operating Officer at Victoria's Secret & Co]

There's a lot of levers we have to pull there, and we'll continue to do so. That drives our mix more into regular price selling and our AURs continue to be up. They were up mid-single digits in the quarter, and we expect them to continue to be up for the balance of the year. As we go, the leverage we continue to see quarter after quarter on buying and occupancy and on SG&A to a lesser extent as we make some investments on the customer-facing and customer experience side. Really encouraged by the performance momentum that we have.

[Matthew Boss, Analyst at JPMorgan]

Great color. Congrats again.

[Operator]

Thank you. Our next question comes from Corey Tarlowe with Jefferies. Your line is open.

[Corey Tarlowe, Analyst at Jefferies]

Great. Thanks. Hillary, you mentioned something really interesting and impressive, which was that you're seeing growth among kind of $50,000 and below income cohorts and then several hundred thousand dollars and above in terms of your customer acquisition. Are these 1, where do you see these share gains coming from? 2, what do you see is driving these different customers into your store? 3, what kind of products or what strategies do you have to continue to acquire and maintain the share that you've gained with these customers? Thanks so much.

[Hillary Super, CEO at Victoria's Secret & Co]

Hi, Corey. Yeah. We really love this piece of the business. We saw broad-based growth across all income cohorts in both customer count and customer spend. The largest growth was, as you said, under 50 and over 200,000. The way I think about it is in a world full of choices, she's choosing us. When you think about the 50 and below customer, she's likely choosing not to spend in other places in order to spend with us. When you think about the over 200, she has lots of choices, and she's choosing us because of our brand positioning, our brand messaging, our fashion price product. I think it really points to brand health, brand relevance. At the same time, we're also seeing really, really strong performance in that 18 to 24-year-old cohort. That again, points to brand relevance, brand heat.

[Hillary Super, CEO at Victoria's Secret & Co]

I really think that when the product and the marketing come together and we have the right partnerships with the right talent, it's creating an ecosystem that she just wants to belong to. I think the emotional messaging over the transactional and promotional messaging is telling her that we are worth it, and it's really exciting.

[Corey Tarlowe, Analyst at Jefferies]

That's great. Then I guess a follow-up for Scott. One of the main focuses for investors is not just, I think, the trajectory of the top line recently, but also really the profit opportunity. I know that you've talked to double digits as a margin opportunity, but I think this quarter was a proof point of moving in the direction of that double-digit target that you've laid out for us. Could you maybe talk a little bit about, specific to Q1, what really drove the margin outperformance versus your initial guidance? Then, what you expect to perhaps be a little bit stickier in the profile as we look ahead?

[Scott Sekella, Chief Financial and Operating Officer at Victoria's Secret & Co]

Thanks, Corey. On Q1, we beat our expectations by roughly $40 million on operating income. About $25 million of that was really the outperformance in the business, and $14 million-$15 million was our expectations on tariffs as they lowered from the IEEPA 20% down to 10% Section 122 tariffs. The outperformance on the business still far the biggest driver, and that continues to come from the reduced promos, the outpaced growth and the leverage we get on buying and occupancy in SG&A. Lastly, that more regular price selling. It speaks to that brand heat Hillary was just referencing, and how the consumer at all ends of the spectrum is continuing to engage with us and what that flow through can mean on the outperformance.

[Scott Sekella, Chief Financial and Operating Officer at Victoria's Secret & Co]

We've said all along that double-digit operating margin is within our sights, and it's one, going to be fueled by that growth and the leverage we get on the business. We're seeing that for multiple quarters in a row now.

[Corey Tarlowe, Analyst at Jefferies]

Great. Thanks so much, and best of luck.

[Operator]

Thank you. Our next question comes from Adrienne with Barclays. Your line is open.

[Adrienne Yih-Tennant, Analyst at Barclays]

Thank you very much, and good morning, and fantastic job. Congratulations across the board. Hillary, I wanted to talk about the testament of the product resonance and the bra launches, particularly in the 18 to 24, I think you said, kind of that millennial age range. What is the new customer acquisition percentage as they enter the market, and what are you doing specifically with your advertising strategy to target them specifically? Secondly, a bit of a wild card question. How are you thinking about the GLP-1 adoption and impact of business? Then I have a follow-up for Scott. Thank you so much.

[Hillary Super, CEO at Victoria's Secret & Co]

Hi, Adrienne. I'm not sure I totally understand your first question, but 18 to 24 is a key demographic for us, particularly in the PINK brand, but also in the VS brand. We are targeting them in the ways you would expect. Fashion right product, a youthful sensibility, incredible color and pattern. I think a really good example of that in the VS brand is The Lacie franchise, the [Pink Table], which we've, I think, injected a ton of youthfulness on and energy in. In the PINK brand, we are targeting a 20-year-old. 20 is the target. It halos both ways. We are really studying her deeply to understand how she lives her life, what the moments that matter are, and what's important to her in a brand.

[Hillary Super, CEO at Victoria's Secret & Co]

We are maniacally focused on that 18 to 24-year-old, and that is paying back because that is where we are seeing big growth in our customer acquisition as well as in market share data. Feeling great about that. GLP-1s. So far, we have seen minimal impact to our business. We have looked at existing customers and seen a very, very modest, I'm saying like 3% and below in smaller sizes getting even smaller. In new customers, we are seeing a slightly smaller customer, but I do think that can also be age. It's a little tricky to look at, but it's something that we continue to think about, watch, and sort of forecast in our size right now going forward.

[Adrienne Yih-Tennant, Analyst at Barclays]

Fantastic. Then, Scott Sekella, sort of in this promotional strategy, obviously we've been watching the promos, you're in your fifth consecutive quarter of incredible promotional restraint. Anniversaring that, you're still getting material upside in that gross margin, the merch margin piece of it. We're in that 38 high 30% range. Historically, you've been over 40% when you're at your normal. I'm wondering if you can just speak to the peak to trough, where you are, and what confidence you have in anniversaring pulling back on promos and continuing to still deliver 100 basis point north of that on merch margin expansion for the year. Thanks so much.

[Scott Sekella, Chief Financial and Operating Officer at Victoria's Secret & Co]

Yeah, no, absolutely. Yeah, we've said all along it's a multiyear journey, and we, as you said, continue to pull back on promos. What's interesting, tacking on to the question of new customer acquisition as well. Our new customers are coming in at higher AURs, so it proves that coming in on the emotion versus promotion, as Hillary likes to say. That gives us confidence that it's not being driven by promos. We continue to read and react and look at the length of events, the level of promotion, the number of days, all of that to say, what can we continue to pull back and still get that customer engagement?

[Scott Sekella, Chief Financial and Operating Officer at Victoria's Secret & Co]

The other thing we've seen, we saw it Q4, we saw it last year in Q2, and we expect it to continue, is semiannual sale will be less of the thing in those periods. Then we can still introduce newness. It gives us a lot of confidence as we go forward we can continue to pull back. We do see a world where gross margins are again in the 40s. We'd be there if it wasn't for tariffs right now. We feel confident on it.

[Adrienne Yih-Tennant, Analyst at Barclays]

Fantastic. Great results. Thank you.

[Operator]

Thank you. Our next question comes from Ike Boruchow with Wells Fargo Securities. Your line is open.

[Ike Boruchow, Analyst at Wells Fargo Securities]

Hey morning, let me add my congrats. One for Hillary, one for Scott. I know you mentioned, Hillary, you really haven't had a great Valentine's Day in almost a decade. That's a nice turn. I guess when you look at the business or your former company, is there a correlation between a strong Valentine's Day to a strong holiday? Is there a good read-through, in some respect, that gives you good line of sight? I know you're only guiding a low single-digit rev in the back half, just kind of curious how you would align those two dynamics. Scott, I'm sorry if I missed it. Three months ago, you guided a tariff headwind for the year of $40 million. What is that now? I assume it's either nothing or a tailwind.

[Ike Boruchow, Analyst at Wells Fargo Securities]

Specifically, in Q4, if tariff rates go back to where you're planning them to go back to, that $65 million headwind that you had last Q4, what does that turn into this year in terms of what's baked into your plan? Thanks.

[Hillary Super, CEO at Victoria's Secret & Co]

I'll take that first one, Ike. In terms of your question about the relationship between Valentine's Day and holiday, I haven't seen a direct correlation between Valentine's Day and the next holiday. I've really actually seen it in the inverse, where great customer acquisition in Q4 sets us up for a great Q1. I will say that the consistency of what we're delivering, the brand heat we're creating, the product elevation that we're driving, all of this is compounding over time as the team gets in its stride, as we learn from our own work and then optimize that and move forward and learn that, oh, we can tweak this a little further, push this a little higher. We're just all getting in our groove as a team.

[Hillary Super, CEO at Victoria's Secret & Co]

I do think that the things that we have been learning will continue to multiply as we move into the back half of the year. I do have confidence. Is it based on Valentine's Day? Not necessarily, but it's just based on the general overall strong execution that.

[Scott Sekella, Chief Financial and Operating Officer at Victoria's Secret & Co]

In terms of your tariff question, it's a good question. As we said versus the prior expectation, our tariff is $65 million. That implies that our net tariff benefit, if you will, on the full year is $25 million, but that's only a benefit because of the hard work on the mitigation side of things. Even with this tariff assumption of 10% Q2 and then returning to 20% in the back half, the gross tariffs on the year are still a headwind of about $75 million. That's what we're up against and how we're the business.

[Ike Boruchow, Analyst at Wells Fargo Securities]

Got it. Thank you.

[Operator]

Thank you. Our next question comes from Marni Shapiro with The Retail Tracker. Your line is open.

[Marni Shapiro, Analyst at The Retail Tracker]

Hey, everybody. Congratulations. Numbers have looked fantastic. The energy is great. Just two quick ones. If you could just give us an update on VSX, because the product really has looked significantly better. The color choices have been really good. I see you've extended like the glossy collection into current colors and things like that. If you can give us an update there. Feels like you should be owning the activewear bras. If you could also talk, and this is kind of a bigger picture, Hillary, but the younger customer loves the scarcity model. That's almost as important to them as the cool factor. They love to wait online for things. Could you talk a little bit about the ability to do collaborations and drops that sell out, kind of the Dotcake Park sweatshirt model vis-à-vis either Victoria's Secret or PINK and how that could work?

[Hillary Super, CEO at Victoria's Secret & Co]

Sure, thanks, Marni. I always await your commentary. Okay. VSX. We have right-sized that business. I think this time last year it was a little over assorted, and we were over-investing in it from a marketing perspective. I think what we've learned through the Path to Potential is that the four top strategies have so much juice in them that we are doubling down on things like bras, PINK, and Beauty in this first phase of the Path to Potential. Right-sizing VSX, standing for, as you said, bras as our frame, and as a vehicle for sports, but also as one of her options in her overall bra wardrobe, perfecting the fit and the technology there. In future seasons, we will start building back to VSX in a bigger way.

[Hillary Super, CEO at Victoria's Secret & Co]

We see that now as a slightly later activity for us based on the amount of opportunity we see in more adjacent categories like bras with panties and sleep and that ecosystem. We're seeing just much more productive growth in that area right now. In terms of younger customers and the scarcity model, I think that's something we think about a lot. We're seeing in our business right now. If you look at Victoria's Secret brand, The Lacie collection is something that we are chasing like crazy right now. It is a bit of a candy store environment scarcity model. I tried to go on and buy some this week and couldn't buy my size. We are chasing that, and I think that is creating a bit of a frenzy, and it's good to have a few stock-outs here and there.

[Hillary Super, CEO at Victoria's Secret & Co]

It does create that full price demand. As we are back on promos, we do want customers to feel like they need to buy it now. We are seeing that in good pockets of our business. On the PINK side with collabs, absolutely that's the way we're approaching it, and I will say it's the way we're approaching it in our core business. We have a tote bag right now that we have, I think, 10,000 or 15,000 back orders on. It is a PINK branded tote. That to me is a signal of brand health. That's a signal that we have an accessories business we can grow out. Just a lot of exciting learnings that are happening in real time, and that's why I say this team is really getting in its stride.

[Hillary Super, CEO at Victoria's Secret & Co]

As we cross the one-year mark as a team, we have founded learnings that are happening, and we're acting on those learnings every day.

[Marni Shapiro, Analyst at The Retail Tracker]

Great. Thank you, guys.

[Operator]

Thank you. Our next question comes from Simeon Siegel with Guggenheim Partners. Your line is open.

[Simeon Siegel, Analyst at Guggenheim Partners]

Thanks. Hey, everyone. Morning. Really great job. Hillary, my question is not going to be as exciting as Marni's, but really encouraging to hear about all the improvements in customer acquisition. You're clearly bringing people into the brands. Can you share a bit about how you're thinking about the retention and maybe further lifting their new customer spend as they enter year two and beyond? Scott, sorry if I missed it, did you say what AUR was? Just how you're thinking about this quarter, and then within the guidance price versus unit. Thanks, guys.

[Hillary Super, CEO at Victoria's Secret & Co]

Yeah, sure. While we are acquiring new customers at an accelerated rate, we are also retaining and reactivating them in a really strong way as well. We have an engine that is working really well. I would say the app is a very key part of that, and keeping that content and entertainment engine going and engaging in the places where she lives. I think it used to be that we had a store and we had a site, and those are the two places you came to with the brand at any given moment. That is just not what it is anymore. There is an ecosystem of digital content out there, and we are engaging with her where she is, and then we are inviting her into our channels. We're having a lot of success really meeting her where she is.

[Hillary Super, CEO at Victoria's Secret & Co]

As she evolves, which we know she is doing very quickly in terms of discovery with LLMs, et cetera, we are very focused on future-proofing ourselves and making sure that we are evolving with her. Top of mind for us and having a lot of success at it now and continue to move with the customer as needed.

[Scott Sekella, Chief Financial and Operating Officer at Victoria's Secret & Co]

On the AURs, yeah, for Q1, we were up mid-single digits and for the balance of the year, we expect that to continue in that mid-single digit, maybe low single-digit range. The caveat on that is Q4. As we know, that's a heavier promotional quarter, and that's one where we need to read and react on promos even closer. That's the only disclaimer I would say. We feel good about that. In terms of units, what we're seeing is slight increases in units, and that's really driven more in the regular price side and less in the discount markdown side of things. We really like that mix.

[Simeon Siegel, Analyst at Guggenheim Partners]

Great. Thanks a lot, guys. Best of luck for the rest of the year. Nice job.

[Hillary Super, CEO at Victoria's Secret & Co]

Thanks, Simeon.

[Operator]

Thank you. Our next question comes from Dana Telsey with Telsey Advisory Group. Your line is open.

[Dana Telsey, Analyst at Telsey Advisory Group]

Hi. Good morning, everyone, congratulations on the progress. As you think about some categories like sport and Beauty, what are you seeing there, Hillary? How do you see that growing and contributing going forward? Then just on the margin, Scott, anything new with occupancy costs and what you're seeing? I saw the new PINK store on Broadway in SoHo, and it looks terrific. Any additional thoughts for some standalones like that? Thank you.

[Hillary Super, CEO at Victoria's Secret & Co]

Hi, Dana. I'll take a crack at the sport and Beauty, and I have a few thoughts about the PINK store as well that I'll sneak in there, and then Scott can round it out. I spoke about sport a minute ago. I think it's a very saturated market. It's a market that's going through a lot right now, I think. I do think sports bras are ours to own, and we are doubling down on that. At the same time, we are seeing so many other bigger returns in our business, primarily in bras, in panties, in sleep, the PINK brand, Beauty, that we are just prioritizing that work right now, knowing that both sport and swim are opportunities for us to grow more aggressively in the out years. On our radar, but not as important as the big four. That's sport.

[Hillary Super, CEO at Victoria's Secret & Co]

With beauty continues to be a growth driver. It actually grew on par with the two brands. We saw nice acceleration coming out of Q4 into Q1. We grew market share. We're feeling good about it. We are also laser focused on newness and the frequency of newness in Beauty, which we are finding to be a big driver of our success in Q1. Innovation and our pipeline making sure that our pipeline is full of innovation is the way I should say that. The team is working fast and furious on that. They're also working on PINK Beauty, which we continue to see as an opportunity, that's really a reinvention more than an evolution. That's probably in mid-2027, still feeling great about it, good about the current business really good about the future innovation. PINK.

[Hillary Super, CEO at Victoria's Secret & Co]

The PINK SoHo store has been tremendously successful. It is now our number 1 PINK store. Again, it's only been open about three weeks. We see a number of things there that can translate into existing stores in terms of treatments, some of the visual treatments in that store that really pinkify the experience. We think we can layer that into key stores that have already been remodeled. We're always looking for opportunistic locations where our customer is. We prefer a short-term lease for proof of concept that moves to a longer-term lease, we're evaluating those case by case and just feeling really optimistic about what we're learning in this location.

[Scott Sekella, Chief Financial and Operating Officer at Victoria's Secret & Co]

Just to round out from a bigger picture, we did say, well, over the last few years, our North American store base has been a net decline. This year it's flat to slightly up. We continue to view our store fleet as a competitive advantage to give that customer experience that others can't really provide in the same way.

[Dana Telsey, Analyst at Telsey Advisory Group]

Thank you.

[Operator]

Thank you. Our next question comes from Mauricio Serna with UBS. Your line is open.

[Mauricio Serna, Analyst at UBS]

Great. Sorry about that. Great. Good morning, and thanks for taking my question. Just two quick follow-ups. On the Beauty business, very nice to see the acceleration in the top line. Maybe could you talk about how you're thinking about that business for the balance of the year? Like what you can do to keep that double-digit growth, given that historically this has been like a pretty strong business, so technically versus the rest, the comparison might be a little bit difficult on a multi-year basis. A quick one on the margins. I guess margin top line. Could you talk about just Middle East, like what kind of exposure do you have in terms of revenues and if there's any impact to bottom line or margins, just given how I would think that there's some franchise royalty business there.

[Mauricio Serna, Analyst at UBS]

I don't know if it's like a headwind or a tailwind to gross margin, given the current situation. Thank you.

[Hillary Super, CEO at Victoria's Secret & Co]

Sure. I'll take the first one. Beauty, we feel good about it. We are coming up on three years of growth in beauty. We still feel that fine fragrance is really the crown jewel of this business, and in particular Bombshell. We think there's a lot of opportunity to build out the world of Bombshell and really own that in a more meaningful way. We also think newness is key. We are increasing our cadence of newness. Thirdly, I would say we've integrated beauty into the campaign of the brand and really created a much more cohesive brand and world-building story, and that is really working for beauty.

[Hillary Super, CEO at Victoria's Secret & Co]

Finally, I would just say there are a handful of days each quarter where Beauty really drives the business in an outsized way, and making sure we're surgically spending our media on those days and marketing in a very pointed way on those days can have very outsized returns. Those are some of the shorter-term things that we're looking at. We feel great about Beauty and strong about the months and years ahead.

[Scott Sekella, Chief Financial and Operating Officer at Victoria's Secret & Co]

In regards to the Middle East question, as you said, our business in the Middle East is a royalty business based on our franchise partner sales. While that business has seen some disruption, our business models largely kept us shielded, and so the impacts of that are factored into the guidance that we provided.

[Mauricio Serna, Analyst at UBS]

Great. Thank you for that, and congratulations on the results.

[Scott Sekella, Chief Financial and Operating Officer at Victoria's Secret & Co]

Thanks, Mauricio.

[Hillary Super, CEO at Victoria's Secret & Co]

Thank you.

[Operator]

Thank you. We have time for one more question. Our last question comes from Brooke Roach with Goldman Sachs. Your line is open.

[Brooke Roach, Analyst at Goldman Sachs]

Good morning, and thank you for taking our question. Hillary, as you've executed the differentiated marketing and customer experiences this year, such as Angel Search and Valentine's, how are you thinking about your willingness to reinvest in additional marketing spend to fuel the flywheel into the back half of this year and into next year? Then Scott, maybe a related question. How are you thinking about the flow-through from here should you outperform the plan that you've laid out today?

[Hillary Super, CEO at Victoria's Secret & Co]

Thanks, Brooke. Are you reading our minds? Are you spying on us? What's happening? We're talking a lot about that, and we have a lot of confidence, and we're kind of working on our revised LRP and starting to think about next year's budget right now, and we definitely believe there's an opportunity, and we need to massage all the numbers. We are seeing incredible results. The more we invest, the more we generate, and we think there's more opportunity there, and we're very excited, not only about the back half of this year, but about 2027. You'll see us evolving on this topic, and we'll be talking about it more on future calls, but feeling really excited about what we can do in the marketing organization.

[Scott Sekella, Chief Financial and Operating Officer at Victoria's Secret & Co]

On the flow-through question, we took the OI up $120 million, as we said, $55 million of that was related to base business performance, $65 million to the tariff assumption change. On the $55, coming off of taking the top line up $180 million on the low and the high. That's roughly a 30% flow-through on that. That's really how we kind of see this as we go forward and right around that 30% range when you factor in variable costs and things that we could reinvest in a small way as we go forward.

[Operator]

Thank you. Does that conclude your question?

[Brooke Roach, Analyst at Goldman Sachs]

Yes, it does.

[Operator]

Thank you. Thank you all for participating in the Victoria's Secret & Co.'s first quarter 2026 earnings conference call. That concludes today's conference. Please disconnect at this time and enjoy the rest of your day.

Participants

Analysts

• Adrienne Yih-Tennant, Analyst at Barclays
• Brooke Roach, Analyst at Goldman Sachs
• Corey Tarlowe, Analyst at Jefferies
• Dana Telsey, Analyst at Telsey Advisory Group
• Hillary Super, CEO at Victoria's Secret & Co
• Ike Boruchow, Analyst at Wells Fargo Securities
• Kevin Wynk, Global Controller at Victoria's Secret & Co
• Marni Shapiro, Analyst at The Retail Tracker
• Matthew Boss, Analyst at JPMorgan
• Mauricio Serna, Analyst at UBS
• Scott Sekella, Chief Financial and Operating Officer at Victoria's Secret & Co
• Simeon Siegel, Analyst at Guggenheim Partners