VSCO Q1 Earnings Call: Brand Investments and New Leadership Amid Flat Sales

Intimatewear and beauty retailer Victoria’s Secret (NYSE:VSCO) reported Q1 CY2025 results beating Wall Street’s revenue expectations, but sales were flat year on year at $1.35 billion. On the other hand, next quarter’s revenue guidance of $1.40 billion was less impressive, coming in 1.1% below analysts’ estimates. Its non-GAAP profit of $0.09 per share was significantly above analysts’ consensus estimates.

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StockStory’s Take

Victoria’s Secret’s first quarter featured disciplined execution and targeted product innovation across its core brands. CEO Hillary Super noted the company countered early-quarter macroeconomic headwinds by accelerating new product launches, updating creative content for better customer engagement, and optimizing its marketing mix. Pink apparel maintained positive momentum with its third consecutive quarter of comparable sales growth and notable average unit retail expansion, while Beauty achieved its seventh straight growth quarter. Management also cited strong international results, especially in digital channels, and highlighted agile inventory management. Super stated the performance stemmed from “a more balanced assortment with a wider range of categories, sensibilities, and end uses.”

Looking ahead, Victoria’s Secret focuses on differentiated brand experiences and marketing strategies for customer acquisition and navigating macroeconomic uncertainty. Management plans to clarify brand identities, expand product and marketing innovation pipelines, and leverage new leadership, including a Chief Marketing Officer, to optimize spend and storytelling. CEO Hillary Super stated, “We are maintaining our forecasted net sales range...reflecting our belief that we’re well-positioned to navigate a complex and challenging market environment.” The company aims to mitigate tariff headwinds via cost optimization, pricing adjustments, and supply chain diversification, remaining cautious about consumer sentiment and pricing pressure. Management prioritizes operational discipline and targeted investments for sustainable growth and margin improvement.

Key Insights from Management’s Remarks

Management attributed the quarter’s performance to quick adjustments in product assortment, strategic marketing, and focused execution in international markets despite a challenging environment.

• Product innovation pipeline: Rapid introduction of new collections, such as the Lacey Panty franchise and the expansion of Pink apparel, played a key role in driving customer engagement and higher basket sizes. Management also highlighted new launches in beauty and an increased focus on comfort technologies in bras, reflecting evolving customer preferences for versatility and comfort.
• Shift in marketing strategy: The company moved marketing spend away from traditional promotions and toward targeted acquisition and digital activations. Initiatives included testing new paid search strategies, more frequent product drops, and experiential events like the Pink break, which increased repeat visits and conversion among Gen Z shoppers.
• Store and digital channel optimization: Victoria’s Secret continued expanding its “Store of the Future” concept, aiming for it to comprise 25% of the fleet by year-end. Management cited outperformance of these stores and described efforts to bring in-store energy to digital channels, particularly for Pink’s digitally native audience.
• International growth momentum: The international business posted high single-digit sales growth, with notable strength in China’s digital channels. Management emphasized the value of regional partnerships and tailored assortments for these markets, and sees continued expansion as a key growth driver.
• Leadership team transformation: The company implemented a new brand president structure for Victoria’s Secret, Pink, and Beauty, and hired a new Chief Marketing Officer with a mandate to sharpen brand differentiation and accelerate customer acquisition. These changes are intended to support more agile decision-making and long-term brand revitalization.

Drivers of Future Performance

Victoria’s Secret’s guidance reflects a cautious approach, with success hinging on brand differentiation, tariff mitigation, and evolving marketing strategies.

• Tariff and supply chain headwinds: Management expects tariffs to be the largest margin headwind for the year, with mitigation efforts focused on vendor negotiations, sourcing diversification, and selective pricing actions. Most tariff mitigation is anticipated to take effect in the back half of the year, while inbound freight costs are expected to moderate.
• Brand and marketing investments: A key priority is driving customer acquisition through a rebalanced marketing funnel, reduced reliance on traditional promotions, and increased spend on digital and experiential activations. The new Chief Marketing Officer will oversee a segmented media plan and ongoing optimization of the marketing mix.
• Product innovation and category growth: Continued investment in product newness, especially in Pink apparel, Beauty, and sports bras, is expected to support revenue and margin growth. The company plans to accelerate product creation timelines and introduce new comfort and movement technologies to meet shifting consumer demand.

Catalysts in Upcoming Quarters

In future quarters, the StockStory team will be watching (1) the pace of customer acquisition and effectiveness of new marketing strategies, (2) the impact of tariff mitigation and supply chain adjustments on gross margins, and (3) continued international sales momentum, especially in digital channels and new markets. Execution on upcoming product launches and brand differentiation efforts will also be key markers for tracking progress.

Victoria's Secret currently trades at a forward P/E ratio of 10.3×. Is the company at an inflection point that warrants a buy or sell? Find out in our full research report (it’s free).

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