Victoria’s Secret’s (VSXY) Bra Boom Just Rewrote Its Growth Story

On September 3, Victoria's Secret & Co. reported strong second-quarter results, surpassing their own guidance across multiple metrics. Net sales increased by 10% to $1.611 billion, while adjusted diluted earnings per share nearly tripled, reaching $0.95. The company's fifth consecutive quarter of positive comparable sales highlighted a shift from a recovery narrative to one of growth.

The bra business led the charge, growing in the mid-teens and accounting for roughly half of the brand's total growth. New product innovations, such as the Very Sexy Envy bra and the Flex Factor balcony frame, allowed the company to sell at full price instead of relying on discounts. Regular price sales rose in the low double digits, and average unit retail accelerated to high single-digit growth, up from mid-single digits in the first quarter.

The PINK line also contributed to momentum, growing at a high single-digit rate following the launch of Marshmallow, the brand's first new bra pillar in two years. Customer acquisitions expanded in the 18 to 24 age group, and international sales jumped 20% to $273.4 million, driven by digital and store performance in China. Despite the positive outlook, the company raised full-year guidance for sales, operating income, and earnings per share.

However, challenges remain, including a stumble in the June semiannual sale due to a deliberate decision to enter the period with less discounted inventory, which pressured top-line growth before it rebounded in July. Looking ahead, the third-quarter forecast calls for a loss of $0.09 to a gain of $0.01 in adjusted earnings per share, a significant drop from the quarter just reported.

Factors contributing to this include rising transportation costs, increased marketing investments, and potential tariff hikes. While the forward price-to-earnings ratio of 17.01 appears reasonable for a company posting triple-digit operating income growth, a significant short interest of 16.29% indicates that bearish sentiment still exists.