Victoria's Secret & Co. (VSCO) shares soared on Friday after the lingerie retailer posted results that weren't just good—they were substantially better than anyone expected. And here's where it gets interesting: this is happening while short sellers have been betting heavily against the stock.

The company reported third-quarter net sales of $1.472 billion, up 9% from $1.347 billion a year earlier. That beat the company's own guidance range of $1.390 billion to $1.420 billion, and it crushed analyst estimates of $1.410 billion. When you beat your own raised expectations, you're doing something right.

The Short Squeeze Setup

According to market data, short interest in Victoria's Secret climbed from 9.61 million to 10.92 million shares last period, representing 22.79% of the public float. With an average of 2.10 million shares traded daily, that translates to about 5.21 days to cover. These are exactly the conditions that can amplify volatility and potentially trigger a short squeeze when momentum shifts positive. And momentum definitely shifted positive.

The Numbers Behind the Rally

The company posted a net loss of $37 million, or $0.46 per diluted share, compared with a net loss of $56 million, or $0.71 per diluted share, a year earlier. On an adjusted basis, the loss came in at $0.27 per share, significantly better than the $0.59 loss analysts had expected.

The operating loss narrowed to $19 million from $47 million in the prior-year quarter. But the real story is in the margins.

Hillary Super, Victoria's Secret chief executive officer, highlighted the broad-based strength: "We delivered a standout third quarter, with outperformance on net sales and earnings per share, exceeding the high-end of our guidance. Net sales increased 9% over last year, driven by strength across Victoria's Secret, PINK, and Beauty, and supported by momentum across channels and geographies."

Scott Sekella, the company's chief financial and operating officer, emphasized the margin story: "Building on strong first-half results, our third quarter exceeded expectations. We delivered robust adjusted gross margin expansion of 170 basis points, driven by a reduced promotional approach and higher regular-priced selling, while leveraging the strength of our business model."

Translation: They're selling more stuff at full price instead of constantly running sales. That's exactly what investors want to see.

Channel Performance

Breaking down the results by channel reveals strength across the board. North America stores generated $778.2 million in net sales, up 5.4% from $738.1 million. Direct sales hit $428.5 million, up 4.3% from $411.0 million. But the standout was International, which surged 33.5% to $264.8 million from $198.3 million. Total comparable sales increased 8% in the quarter.

The company noted that year-to-date results include an approximately $20 million negative impact on direct net sales from a website closure due to a security incident in the second quarter of 2025. Despite that headwind, they still beat expectations.

Starting in the third quarter of 2025, the company began reporting direct sales in the European Union within the International channel, with those EU direct sales reaching $12 million in the quarter.

Raised Guidance Across the Board

For the fourth quarter, Victoria's Secret forecasts net sales of $2.170 billion to $2.200 billion, compared with $2.106 billion in the prior-year quarter and matching the $2.171 billion analyst estimate. The company expects adjusted EPS of $2.20 to $2.45, compared with a $2.23 estimate, and GAAP EPS of $2.14 to $2.39.

The bigger news is the full-year guidance raise. The company now expects fiscal 2025 net sales of $6.450 billion to $6.480 billion, up from prior guidance of $6.330 billion to $6.410 billion. That new range compares favorably to the $6.389 billion analyst estimate.

Adjusted EPS guidance was raised to $2.40 to $2.65 from $1.80 to $2.20—a massive increase—compared with analyst estimates of $2.12. GAAP EPS is forecast at $1.91 to $2.16 for the full year.

The outlook includes an estimated net tariff impact of approximately $90 million for fiscal year 2025, down from prior guidance of $100 million. The company also noted that last year's results included an approximately $26 million benefit from a cumulative adjustment for a change in accounting estimate related to expected future redemption on outstanding gift cards.

Stock Reaction

Victoria's Secret shares jumped 15.10% to $47.84 at the time of publication on Friday, trading near the 52-week high of $48.73. For those short sellers betting against the stock, this was an expensive day.