Victoria’s Secret & Co. VSXY has rallied sharply as sales, earnings and investor sentiment have improved. The move reflects a cleaner turnaround story, but it also leaves less room for execution missteps.
The investment question is no longer whether the business has stabilized. It is whether earnings power, valuation and margin durability still support upside after the stock’s 2026 run. Victoria's Secret shares have surged 43.5% so far in the year.
VSXY Earnings Outlook Has Reset Higher
Victoria’s Secret raised its fiscal 2026 net sales guidance to $7.03-$7.13 billion from $6.85-$6.95 billion after a stronger first quarter. Adjusted operating income guidance moved to $550-$580 million from $430-$460 million.
The reset matters because it came with accelerating demand. Comparable sales rose 13% in the first quarter, following an 8% gain in the fourth quarter of fiscal 2025, marking a fourth straight quarter of positive comps.
Victoria's Secret & Co. Price, Consensus and EPS Surprise
Victoria's Secret & Co. price-consensus-eps-surprise-chart | Victoria's Secret & Co. Quote
Victoria’s Secret Valuation Still Has a Case
VSXY trades at 15.62X forward 12-month earnings, above the Zacks sub-industry multiple of 14.33X but below the Zacks Retail-Wholesale sector at 22.59X and the S&P 500 at 21.13X. That leaves a valuation case, though not a deep-discount one.
The $89 price target implies further upside and reflects 17.96X forward 12-month earnings. Still, VSXY now trades above its three-year median multiple of 11.20X, making consistent delivery more important from here.
VSXY Margin Recovery Supports the Bull Case
The quality of the earnings improvement is central to the bull case. Adjusted gross margin expanded 240 basis points to 37.6% in the first quarter, helped by higher regular-price selling, fewer promotions and buying and occupancy leverage.
That matters more than headline sales alone. A rerating can hold only if sales growth flows through to margins, and first-quarter adjusted operating income rose 153% to $80 million.
Victoria’s Secret Risks Could Cap Upside
Tariffs remain a key risk. Management now expects roughly $75 million of gross tariff cost for fiscal 2026, and any adverse rate change could pressure the margin gains from sourcing actions, full-price selling and lower markdowns.
Costs also require discipline. Adjusted selling, general and administrative expenses rose 14% year over year to $507 million in the first quarter. American Eagle Outfitters, Inc. AEO, through Aerie, remains relevant in intimates and apparel, while Abercrombie & Fitch Company ANF gives investors another specialty apparel benchmark through brands including Abercrombie and Hollister.
Why VSXY Screens Well Right Now
VSXY still screens well, but the setup is more balanced after the rally. The stock carries a Zacks Rank #1 (Strong Buy), with a VGM Score of A, Value Score of B, Growth Score of B and Momentum Score of C. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Rank supports the near-term case because it reflects favorable earnings estimate revision trends, while the Value and Growth scores point to solid characteristics on those factors. The Momentum Score of C is a useful reminder that investors are weighing upside against a stock that has already moved hard.
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Victoria's Secret & Co. (VSXY): Free Stock Analysis Report
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