Intimatewear and beauty retailer Victoria’s Secret (NYSE: VSCO) reported Q3 CY2025 results beating Wall Street’s revenue expectations, with sales up 9.2% year on year to $1.47 billion. Guidance for next quarter’s revenue was better than expected at $2.19 billion at the midpoint, 0.9% above analysts’ estimates. Its non-GAAP loss of $0.27 per share was 54.2% above analysts’ consensus estimates.
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Victoria's Secret (VSCO) Q3 CY2025 Highlights:
- Revenue: $1.47 billion vs analyst estimates of $1.41 billion (9.2% year-on-year growth, 4.7% beat)
- Adjusted EPS: -$0.27 vs analyst estimates of -$0.59 (54.2% beat)
- Adjusted Operating Income: -$18,000 vs analyst estimates of -$41.28 million (0% margin, 100% beat)
- Revenue Guidance for Q4 CY2025 is $2.19 billion at the midpoint, above analyst estimates of $2.17 billion
- Adjusted EPS guidance for the full year is $2.53 at the midpoint, beating analyst estimates by 19%
- Operating Margin: -1.3%, up from -3.5% in the same quarter last year
- Locations: 1,404 at quarter end, up from 1,380 in the same quarter last year
- Same-Store Sales rose 8% year on year (3% in the same quarter last year)
- Market Capitalization: $3.33 billion
Hillary Super, VS&Co Chief Executive Officer, said, “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. These outstanding results reflect disciplined execution of our Path to Potential strategy. Building on the third quarter’s outperformance as well as the solid start to our fourth quarter, we are raising our full year outlook and are well positioned for a successful holiday season and finish to our fiscal 2025.”
Company Overview
Spun off from L Brands in 2020, Victoria’s Secret (NYSE: VSCO) is an intimate clothing and beauty retailer that sells its own brands of lingerie, undergarments, and personal fragrances.
Revenue Growth
A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul.
With $6.39 billion in revenue over the past 12 months, Victoria's Secret is a mid-sized retailer, which sometimes brings disadvantages compared to larger competitors benefiting from better economies of scale.
As you can see below, Victoria's Secret struggled to increase demand as its $6.39 billion of sales for the trailing 12 months was close to its revenue three years ago (we compare to 2019 to normalize for COVID-19 impacts). This was surprising given it opened new stores to expand its reach.
This quarter, Victoria's Secret reported year-on-year revenue growth of 9.2%, and its $1.47 billion of revenue exceeded Wall Street’s estimates by 4.7%. Company management is currently guiding for a 3.8% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 2% over the next 12 months. Although this projection suggests its newer products will catalyze better top-line performance, it is still below average for the sector.
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Store Performance
Number of Stores
A retailer’s store count influences how much it can sell and how quickly revenue can grow.
Victoria's Secret sported 1,404 locations in the latest quarter. Over the last two years, it has generally opened new stores, averaging 1.2% annual growth. This was faster than the broader consumer retail sector.
When a retailer opens new stores, it usually means it’s investing for growth because demand is greater than supply, especially in areas where consumers may not have a store within reasonable driving distance.
Same-Store Sales
The change in a company's store base only tells one side of the story. The other is the performance of its existing locations and e-commerce sales, which informs management teams whether they should expand or downsize their physical footprints. Same-store sales provides a deeper understanding of this issue because it measures organic growth at brick-and-mortar shops for at least a year.
Victoria's Secret’s demand within its existing locations has barely increased over the last two years as its same-store sales were flat. Victoria's Secret should consider improving its foot traffic and efficiency before expanding its store base.
In the latest quarter, Victoria's Secret’s same-store sales rose 8% year on year. This growth was an acceleration from its historical levels, which is always an encouraging sign.
Key Takeaways from Victoria's Secret’s Q3 Results
It was good to see Victoria's Secret beat analysts’ EPS expectations this quarter. We were also excited its gross margin outperformed Wall Street’s estimates by a wide margin. Zooming out, we think this quarter featured some important positives. The stock traded up 13.1% to $47.03 immediately after reporting.
Indeed, Victoria's Secret had a rock-solid quarterly earnings result, but is this stock a good investment here? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free for active Edge members.
