So, here's a classic market puzzle: a company beats earnings, raises guidance, and its stock... goes down. That's what happened to Victoria's Secret & Co. (VSCO) on Thursday. The lingerie retailer reported fourth-quarter results that looked pretty good on paper, but investors seemed more focused on something else: the company is starting a strategic review of its DailyLook business.

Let's break it down. For the quarter, net sales came in at $2.27 billion, up 8% from a year ago and slightly above what analysts were expecting. The adjusted earnings per share figure was $2.77, which handily beat the estimate of $2.52. So far, so good.

Digging into the sales channels, the story gets more interesting. Sales from stores in North America were up 5.2% to $1.22 billion. Direct sales (think online) rose 2.8% to $773.2 million. But the real standout was international, where sales jumped a whopping 43.1% to $276.4 million. Total comparable sales for the company increased 8%.

The company noted that last year's results got a bit of a boost—about $26 million—from an accounting estimate change related to gift cards. If you strip that out, this year's net sales growth looks even better, at roughly 9% year-over-year. Adjusted operating income increased about 16%, and adjusted diluted EPS grew about 18%.

All of that sounds like the kind of report that should make shareholders happy. But then there's the DailyLook news.

The company announced it is beginning a strategic review of DailyLook, which it calls a "non-core asset." For those keeping score at home, DailyLook came into the Victoria's Secret fold as part of the acquisition of Adore Me back in December 2022. The review, the company says, is part of its focus on its core brands—Victoria's Secret and PINK—under what it calls its "Path to Potential" strategy. At the same time, it's also looking at ways to "optimize" the broader Adore Me business within its portfolio. In plain English: they're figuring out what to do with this thing they bought, and investors are wondering if that means a sale, a spin-off, or something else entirely.

On a conference call with analysts, CEO Hillary Super struck an optimistic tone about the core business. "In the quarter, our customer responded enthusiastically to our product and marketing, as demonstrated by growing new customer acquisition and increased AURs," Super said. "Our 2025 results reflect the progress we have made against our Path to Potential strategy as we build brand heat and powerful connections with our customers around the world."

Management also provided some color on other topics. They noted that the conflict in the Middle East has caused some shipping delays, but they don't expect it to materially affect the overall business. A small number of franchise stores in the region have temporarily closed. They also highlighted that the PINK brand operates independently in terms of products, with its mix being roughly 30% focused on collaborations and 30% on core products.

Looking ahead, the company's guidance suggests it expects the momentum to continue. For the full fiscal year 2026, Victoria's Secret expects adjusted EPS in the range of $3.20 to $3.45. The consensus estimate among analysts was $3.23, so the midpoint of their guidance is above that. They see sales coming in between $6.85 billion and $6.95 billion, compared to a consensus estimate of $6.80 billion.

For the current quarter (Q1 of FY26), the forecast is even more bullish relative to expectations. They see adjusted EPS of $0.20 to $0.30, while the street was looking for just $0.09. Sales are projected to be $1.49 billion to $1.525 billion, versus a consensus of $1.421 billion.

The company added a caveat that its current outlook does not include any potential impact from tariff changes, though it is monitoring developments closely.

Despite the strong quarterly numbers and the raised guidance for the year ahead, Victoria's Secret shares were down sharply, falling about 13% in premarket trading. Sometimes the market reacts to what you say you're going to do next, not just what you just did. In this case, the strategic review of DailyLook appears to be the story of the day.