Bull of the Day: Victoria's Secret (VSXY)

Victoria’s Secret, a Zacks Rank #1 (Strong Buy), has quietly become one of the most convincing turnaround stories in retail.

Once written off as a fading mall relic, the specialty retailer of intimates, apparel and beauty has strung together four consecutive quarters of positive comparable sales, expanded margins, and raised guidance — and the market has taken notice, with shares up more than 40% year to date.

The stock’s recent upgrade reflects a powerful wave of upward earnings estimate revisions, historically one of the most reliable forces driving share prices higher. Last month, the company changed its ticker from VSCO to VSXY alongside a broader brand reset under CEO Hillary Super.

Shares continue to display impressive relative strength, sharply outperforming the broader apparel-retail group. This is the kind of price action that tends to accompany a business whose fundamentals are inflecting higher.

Victoria’s Secret is part of the Zacks Retail – Apparel and Shoes industry group, which currently ranks in the top 26% out of approximately 250 Zacks Ranked Industries. Because it is ranked in the top half of all Zacks Ranked Industries, we expect this group to outperform the market over the next 3 to 6 months.

Notably, stocks in this industry are relatively undervalued, and the group carries projected earnings growth well above the S&P 500’s expected pace:

Image Source: Zacks Investment Research

A positive earnings outlook for its constituent companies in aggregate provides a powerful foundation that should lead to higher prices in the future. Historical research studies suggest that approximately half of a stock’s price appreciation is due to its industry grouping. In fact, the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1.

It’s no secret that investing in stocks that are part of leading industry groups can give us a leg up relative to the market. By focusing on leading stocks within the top 50% of Zacks Ranked Industries, we can dramatically improve our stock-picking success.

Company Description

Victoria’s Secret & Co. is a specialty retailer of modern, fashion-inspired collections spanning signature bras and panties, lingerie, sleepwear, apparel, sport and swim, as well as award-winning prestige fragrances and body care.

The company operates through its flagship Victoria’s Secret brand, the youth-focused PINK brand, and a fast-growing Beauty business, supported by an expanding international footprint built on an asset-light model of joint ventures and partner-operated stores.

The turnaround underway is broad-based and, importantly, rooted in improved product and brand execution rather than discounting. Bras — the heart of the franchise — grew in the low double digits in the first quarter, creating a halo that lifted adjacent categories like panties and sleepwear.

PINK is resonating again with 18-to-24-year-olds, with app downloads up more than 50%, while Beauty continues to contribute. Management is also modernizing the fleet, targeting roughly 45% of global stores in its “store of the future” format by year-end, and leaning into international markets, where first-quarter sales jumped nearly 45%.

Earnings Trends and Future Estimates

The first quarter of fiscal 2026 was a standout. Net sales rose 15% to $1.56 billion, comparable sales climbed 13% — marking a fourth straight quarter of positive comps — and the company swung to net income of $47.7 million.

Crucially, the quality of the beat was high: a deliberate shift toward full-price selling and fewer promotions lifted average unit retail and expanded adjusted gross margin by 240 basis points to 37.6%, while adjusted operating income surged 153% to $80 million. The lesson is clear — selective retailers can still protect margins when the product connects.

Management responded by raising its full-year fiscal 2026 outlook, now guiding to net sales of $7.03-$7.13 billion (up from $6.85-$6.95 billion) and adjusted operating income of $550-$580 million (up from $430-$460 million).

Analysts have rushed to catch up: over the past 60 days, the Zacks Consensus Estimate for the current fiscal year has jumped from $3.49 to $4.61 per share, implying roughly 53.7% year-over-year growth, with next year’s estimate pointing to another 18.9% increase. This is exactly the kind of momentum that powers the Zacks Rank.

Image Source: Zacks Investment Research

Let’s Get Technical

Victoria’s Secret VSXY has transformed from a broken-down laggard into one of the better momentum stories in retail. After bottoming, shares have staged a powerful recovery and continue to trend higher. This is precisely the kind of stock we want in our portfolio — one that is trending well and receiving positive earnings estimate revisions.

Image Source: StockCharts

Notice how shares reside above upward-sloping 50-day (blue line) and 200-day (red line) moving averages, a hallmark of a healthy bull trend. With both improving fundamentals and a constructive technical picture, VSXY appears positioned to continue its outperformance.

Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. As we know, Victoria’s Secret has recently witnessed sharp upward revisions. As long as this trend remains intact (and VSXY continues to deliver earnings beats), the stock will likely continue its bullish run.

Bottom Line

Backed by a leading industry group and a powerful history of accelerating fundamentals, it’s not difficult to see why this turnaround has captured investor attention. Currently, VSXY sports a Zacks Rank #1 (Strong Buy), driven by robust upward estimate momentum, along with a VGM Score of A.

The combination of record-quality comps, expanding margins, full-price discipline, asset-light international growth and a rising estimate trend makes for a compelling package. If you haven’t already, be sure to put Victoria’s Secret on your watchlist.

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This article originally published on Zacks Investment Research (zacks.com).

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