Momentum continues in Q2, but holiday promotions loom ahead
- Q2 2026 comparable sales rose 9 percent, leading the company to raise its full-year guidance.
- A $148 million cash tariff refund removes near-term risk, but rates are expected to return to 20 percent in the fourth quarter.
- The bra business grew in the mid-teens, driven by new launches like the Marshmallow pillar.
- International sales remain a strong growth engine, reporting a 20 percent increase in the second quarter.
- The company expects positive operating income in the third quarter despite heavy marketing investments.
The turnaround gains traction
Victoria's Secret is proving its recovery is real. In the second quarter of 2026, comparable sales increased by 9 percent. This strong performance prompted management to raise full-year guidance for both sales and profit. The company expects to generate positive operating income in the third quarter, even with heavy marketing spending.
The bull case rests on better product and less discounting. The company calls this a promo detox. Average prices are rising as shoppers buy more items at regular price. New products are working well, especially in the core bra category which grew in the mid-teens.
The bear case still revolves around tariffs and holiday margins. The company received $148 million in cash for tariff refunds in the second quarter, which clears up a major short-term worry. However, management expects tariff rates to return to roughly 20 percent in the fourth quarter. They also warned that the holiday season will be highly promotional, which could put pressure on profit margins.
Stores, sites, partners, loyalty
Victoria's Secret makes money by selling intimates, sleepwear, apparel, and beauty products under the Victoria's Secret, PINK, and Adore Me brands. It reaches customers through North America stores, company websites, and international franchise partners.
The core strategy is to sell more items at full price. In the past, the company relied heavily on discounts to drive traffic. Now, it focuses on product innovation and targeted marketing to protect profit margins.
A massive loyalty program with about 35 million members is central to the model. This helps the company bring customers back without relying only on coupons. Adore Me recently shifted from a subscription model to a loyalty program, which remains a key transition to watch.
The model works best when shoppers are willing to pay for new styles. It breaks down if fashion misses build up inventory, forcing the company to cut prices. The broader intimates market is heavily skewed toward value, so any slip in brand appeal can quickly hurt sales.
Where the demand is showing
Bras
Bras are the main growth engine, growing in the mid-teens in the second quarter. New launches like the Marshmallow pillar are bringing shoppers back.
PINK
PINK is aimed at younger shoppers and continues to show strong growth. It helps introduce new customers to the wider brand system.
Beauty
Beauty is approaching $2 billion globally and driving consistent growth. Nostalgic archive drops, like the pink square bottles, sell out quickly.
Sleepwear
Sleepwear remains a key growth area. It provides a steady source of demand outside of the core intimates categories.
VSX activewear
VSX is being deprioritized in the near term. The company is focusing its resources on bras, PINK, and beauty right now.
Adore Me
Adore Me acts as a digital growth engine. It recently changed from a subscription model to a loyalty program.
Sales by channel
Mix is based on Q1 2026 net sales in the filings. North America stores remain the largest channel, followed by direct and international.
What could break the story
Tariff rates return in the fourth quarter
High impact · High oddsWhile the company secured a $148 million cash tariff refund in the second quarter, forward risk remains. Management expects tariff rates to return to about 20 percent in the fourth quarter. This will increase costs during the most important selling season.
Holiday promotions squeeze margins
High impact · Medium oddsThe company has successfully reduced discounting so far this year. However, management signaled that the fourth quarter will be highly promotional. If competitors cut prices aggressively, Victoria's Secret may have to follow, hurting margins.
Adore Me loyalty transition loses revenue
Medium impact · Medium oddsAdore Me moved away from an intimates subscription offer and into a loyalty program. Subscriptions provide sticky, predictable revenue. The open question is whether the new loyalty model can retain that spending base.
Proxy contest distracts management
Medium impact · Medium oddsBBRC and Chairman Brett Blundy initiated a proxy contest seeking to withhold votes against directors. This creates legal costs and boardroom noise. The risk is that leadership time is pulled away from executing the turnaround.
In one breath
Is Victoria's Secret growing again?
Yes. In the second quarter of 2026, comparable sales rose 9 percent and the company raised its full-year guidance.
What is the biggest risk for VSXY?
Tariffs and holiday discounting. While they received a large tariff refund recently, rates are expected to return to 20 percent in the fourth quarter.
Why is Victoria's Secret cutting back VSX activewear?
Management is rightsizing VSX to focus on core intimates, PINK, and Beauty. Activewear may still be a future option, but it is not the main priority right now.
Sources and research notes
This page combines Finn's company research with public filings and other cited materials. The thesis is reviewed when material company information changes; Finn Scores use the latest available scoring data.
- Thesis reviewed
- September 13, 2026
- Score data
- September 27, 2026
- Reviewed by
- Shivam Bharuka
