Victoria’s Secret & Co. shares fell sharply on Thursday as the retailer’s latest quarterly earnings report also attracted a lot of unwanted attention. VSXY stock (NYSE: VSXY) dropped as much as nearly 20% on premarket trading as the retailer posted better-than-expected adjusted earnings and raised its full-year sales guidance.
The steep market response was indicative of the huge expectations investors had placed on the stock after it had rallied earlier in the year. Victoria’s Secret shares had ballooned after earnings announced in August and investors are watching for any signs the company’s turnaround momentum might be fading.
Victoria’s Secret posted adjusted earnings of 95 cents a share in the second quarter of fiscal 2026, which was more than twice as much as Wall Street’s guidance of 77 cents. It also reported net sales of $1.61 billion— up 10 percent from a year ago.
The comparable sales increase of 9% was better than analysts’ expectations of 8.8%. But comparable sales growth slipped slightly from the 13% growth in the previous quarter, which is worrying investors that the retailer’s turnaround might be losing some momentum.
That slowdown seems to have been a big factor in the selloff in Thursday’s session. The headline earnings numbers were good; investors had already priced in some sort of a big improvement after the stock’s big gains in the previous months.
Victoria’s Secret Raises Full-Year Guidance
But what the company did have to do with its sales forecast has been reinforced.
Victoria’s Secret now expects fiscal-year sales to be between $7.1 billion and $7.18 billion, up from its original forecast of $7.03 billion to $7.13 billion. That is in line with Wall Street’s expectations.
The company expects sales to be $1.57 billion to $1.60 billion in the third quarter, in line with analyst guidance, it said.
A better picture to date suggests management is still confident in its broader turnaround strategy. CEO Hillary Super cited broad-based growth and continued execution across the company’s brands as the reasons for the company’s latest results.
The company has been rebuilding Victoria's Secret and working to connect with customers and offer them products they can now order. Marketing dollars to develop the brand, new product launches, and sales of the PINK business are still at the heart of that strategy.
Why is VSXY dropping?
The most relevant question for investors is why earnings and guidance seem poor when they are still quite strong at the same time.
One reason is expectations. Victoria’s Secret shares had already enjoyed a big rally, and investors were looking for evidence that the turnaround could continue accelerating. So a small revenue miss and slower comparable-sales growth became more important for the market.
At the same time, the company’s $1.61 billion quarterly revenue was slightly lower than the $1.62 billion analysts expected. The difference was small, but it seems to have contributed to the negative reaction.
The stock’s response shows how much market valuations can be based on future expectations and not just on whether a company beats or fails to meet earnings expectations.
Strong Profit Growth
Victoria’s Secret also posted a dramatic improvement in profit. In the second quarter, it had net income of $183 million, or $2.18 a share, versus $16.2 million, or 20 cents a share, a year ago. It also received more than $140 million of tariff refunds.
That distinction is important for investors because the adjusted earnings figure gives a different picture of operating performance than the reported GAAP profit, which benefited from the tariff-related refunds.
Investors are also wondering if Victoria’s Secret is going to be able to sustain its growth trajectory and justify the much bigger gains that it is seeing in its stock price.
What Investors Will Watch Next
Investors will have to keep the company’s comparable-sales growth, customer trends, margins, and the company’s ability to keep pace during the holiday shopping period in mind going forward.
The brand is also getting into marketing and new products and getting new products to its brand and preparing for a greater promotional push on its brand and the upcoming fashion-focused programs. Victoria’s Secret is planning a 2026 Fashion Show on October 18 in Los Angeles and “Angels Among Us” series launch.
And for now, Thursday’s pre-market selloff is a huge disconnect between a company’s basic earnings and the stock’s immediate reaction. Victoria’s Secret’s earnings beat and raised its full-year sales outlook, but investors seem convinced that the pace of the turnaround may not be strong enough to satisfy the high expectations in the stock market.
So the sharp decline in VSXY is a common lesson in equity markets: good quarterly results don’t always translate into a higher share price when expectations are already exceptionally high.
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