Victoria's Secret & Co (VSCO) is having a moment. The lingerie retailer just posted a strong third quarter and is carrying real momentum into the holiday season, powered by customers actually willing to pay full price and improving demand across its entire business.
Telsey Advisory Group analyst Dana Telsey maintained a Market Perform rating on the stock but bumped her price target from $45 to $50, pointing to momentum that's continuing well beyond the third quarter and into the critical holiday shopping period.
The numbers tell a compelling story. Victoria's Secret crushed third-quarter expectations with an 8% same-store sales gain, with strength pretty much everywhere you'd want to see it: Victoria's Secret brand, PINK, North America, international markets, physical stores, and e-commerce. It's not often you get that kind of clean sweep.
What's driving the outperformance? Telsey credits a growing customer base and higher regular-price selling that reduced the need for constant promotions. Less discounting means better gross margins, which came in above consensus estimates. When you can sell products at full price instead of marking everything down, that's usually a sign your product is resonating.
Black Friday Success
Strong Black Friday store traffic, fueled by a site-wide 40% discount, reinforced management's confidence enough to revise full-year guidance upward. Telsey responded by raising her fiscal 2025 revenue forecast to $6.484 billion from $6.395 billion and lifting her fiscal 2025 earnings per share estimate to $2.65 from $2.10. She's now modeling fiscal 2026 EPS of $2.80.
The turnaround is being driven by what Victoria's Secret calls its "Path to Potential" strategy, and it's actually showing tangible progress. The plan rests on four pillars: reasserting bra leadership, refocusing PINK, expanding beauty, and refining brand projection and go-to-market execution.
Product Momentum
North American bra sales grew mid-single digits in the third quarter, with new products like the Body By Victoria FlexFactor and Very Sexy franchises performing particularly well. These aren't just incremental improvements—they represent real product innovation in a category where Victoria's Secret built its reputation.
PINK has returned to growth after some rocky periods, posting double-digit revenue gains driven by apparel and a rebound in intimates. The October Fashion Show and successful LoveShackFancy collaborations pulled in new customers and reactivated lapsed ones, and crucially, they were buying at full price.
Beauty represents what Telsey calls an under-penetrated growth opportunity. The category is approaching $1 billion in North America, but only about 40% of Victoria's Secret customers are buying beauty products today. Management is planning to scale the category and leaned into giftable items for the holidays, which makes sense given the seasonal dynamics.
Looking Ahead
For the fourth quarter, guidance centers on $2.17 billion to $2.20 billion in revenue, reflecting 4% to 6% growth. The gross margin guide of 37.0% to 38.0% includes a $65 million net tariff impact, though that's being partially offset by a disciplined promotional strategy and leverage on buying and occupancy costs.
Inventory will exit the fourth quarter up mid-teens, driven by growth needs, tariff impacts, and a shift toward ocean freight. It's a deliberate choice to support the business momentum.
Telsey concluded that disciplined merchandising, stronger storytelling, and a growing customer base position Victoria's Secret to regain market share and margins. It's early, but the turnaround looks like it has legs.
VSCO Price Action: Victoria's Secret (VSCO) shares were up 1.29% at $49.68 at the time of publication on Monday. The stock is trading near its 52-week high of $50.21.
