Victoria’s Secret & Co. (VSCO Quick QuoteVSCO - Free Report) is putting together what looks like a multi-year recovery built on stronger brand relevance, better product, and tighter execution. The company is also showing signs that demand is becoming more durable, not just promo-driven.

With its Zacks Rank #1 (Strong Buy), VSCO is benefiting from momentum across core categories, a refreshed PINK strategy, and a beauty business that continues to add diversification. You can see the complete list of today’s Zacks #1 Rank stocks here.

VSCO Brand Relevance Is Returning Across Channels

VSCO’s turnaround case rests on a simple idea: brand heat is translating into measurable results. Comparable sales rose 8% in the fourth quarter and 5% in fiscal 2025. The company also posted market share gains in intimates for three consecutive quarters. 

The more important signal is what sits underneath those comps. Customer counts are rising, and spend per customer is increasing. That mix suggests deeper engagement and a broader customer file, which can support demand beyond a single product cycle. 

In the broader Retail – Apparel and Shoes group, peers like Tapestry, Inc. (TPR Quick QuoteTPR - Free Report) and Levi Strauss & Co. (LEVI Quick QuoteLEVI - Free Report) are also reminders that brand strength can matter as much as promotions in driving traffic and conversion. VSCO’s recent performance argues it is moving back into that brand-led lane.

Victoria's Secret Bras Lead a Core Category Reset

Bras are the centerpiece of the improved product-market fit. The category returned to annual growth for the first time since 2021, a meaningful inflection for a business that is closely tied to intimate apparel leadership.

That progress matters because it does not stop at bras. Management’s “Path to Potential” approach highlights a multiplier effect, where strength in bras helps lift adjacent categories such as panties and sleep. In practice, better core assortments can create more cross-category baskets and repeat purchasing.

This is also where storytelling and inventory alignment show up as competitive advantages. When the product is right and launches are better timed, the brand can convert demand with less reliance on discounting.

Victoria's Secret & Co. Price, Consensus and EPS Surprise

Victoria's Secret & Co. price-consensus-eps-surprise-chart | Victoria's Secret & Co. Quote

VSCO Pricing Power Improves With Less Discounting

Margin quality is improving in a way that looks structural. The company is leaning into higher-quality full-price selling and reducing promotional intensity across Victoria’s Secret and PINK. A key datapoint was a 6% increase in fourth-quarter average unit retail. 

Inventory discipline is a big part of that equation. Tighter alignment between product desirability and inventory levels supports regular-price selling and improves the effectiveness of go-to-market decisions. Management expects continued benefits from pricing and merchandise mix.

Tariffs remain a real headwind, but the model has shown resilience. VSCO absorbed about $85 million of tariff pressure in fiscal 2025 and still delivered a 37% adjusted gross margin. For fiscal 2026, management expects an incremental gross tariff cost of about $160 million, with mitigation actions designed to reduce the net impact to roughly $40 million.

Victoria's Secret PINK Repositioning Rebuilds Gen Z Demand

PINK is increasingly framed as a growth lever rather than a turnaround repair job. The brand is being positioned as digitally native and culturally relevant for Gen Z, with influencer-led campaigns and a consistent cadence of product drops. App downloads rose 50% in the quarter, pointing to improving engagement with younger shoppers. 

The financial tell is pricing power. PINK delivered high single-digit growth in the fourth quarter alongside double-digit average unit retail expansion, suggesting improving demand and a healthier willingness to pay. 

If the brand continues rebuilding emotional connection with younger consumers, it can support new customer acquisition while also expanding the funnel for adjacent categories over time.

VSCO Beauty Adds a Second Growth Engine

Beauty adds balance to the story. Management described the category as a nearly $1-billion business that delivered another year of growth in 2025, with fourth-quarter sales up in the low single digits.

Newness is part of what is working. The holiday edition of Bombshell is cited as an example that resonated with customers, reinforcing the role of product refresh in driving repeat purchasing.

The longer runway is still ahead. Management expects a larger beauty ramp in 2027 and beyond, which helps explain why beauty is viewed as more than just a supporting category to intimates.

Victoria's Secret Store Upgrades Support Conversion

The Store of the Future rollout is designed to improve customer experience, engagement, and conversion. Management expects North America’s Store of the Future presence to reach about 250 stores, or 30% of the fleet, by the end of fiscal 2026. 

Internationally, the format is expected to reach roughly 55% of the fleet, with about 50% of the global fleet converted by the end of fiscal 2027. The company is also supporting the effort with disciplined capital spending, guiding to fiscal 2026 capital expenditures of $220 million to $240 million, or about 3% of sales.

Over time, better formats can lift sales productivity and help create fixed-cost leverage across store occupancy and buying expenses as volumes rise.

VSCO Next Quarter & FY26 Outlook

Management’s fiscal 2026 outlook frames what must hold for the turnaround to stay on track. Net sales are projected between $6.85 billion and $6.95 billion, with adjusted operating income expected at $430 million to $460 million. Earnings per share is guided to $3.20 to $3.45. 

For the first quarter of fiscal 2026, net sales are forecast between $1.49 billion and $1.525 billion, with operating income expected at $32 million to $42 million. Gross margin is expected to be about 35.5%, up 30 basis points year over year, despite about 175 basis points of tariff pressure.