Is VSXY Worth Buying as Growth Improves but Valuation Stays Rich?

Victoria's Secret & Co. VSXY is delivering faster growth, wider margins and stronger earnings expectations, but its valuation has moved above both its historical norm and the Zacks sub-industry average. That leaves investors weighing whether the operating recovery is strong enough to justify a richer multiple.

The business has several growth levers beyond its core bra category, yet tariffs, higher marketing investment and discretionary-demand risk still argue for selectivity.

VSXY’s Growth Story Is Getting Stronger

Victoria's Secret raised fiscal 2026 net sales guidance to $7.10-$7.18 billion, implying growth of 8%-10% from fiscal 2025. The Zacks data also show projected earnings growth of 56.3% for the current fiscal year, a notable acceleration in the earnings profile.

The improvement is broad-based. Bras grew in the mid-teens in the second quarter, PINK increased in the high single digits and Beauty posted its 12th consecutive quarter of sales growth. Adjusted earnings were 95 cents per share, up 187.9% year over year and 21.8% above the Zacks Consensus Estimate of 78 cents.

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

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

Victoria’s Secret Trades Above Its Historical Median

VSXY trades at 14.13X forward 12-month earnings, above the the industry's 12.18X multiple and well above its five-year median of 9.14X. The stock is therefore no longer priced like a deeply discounted turnaround.

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That premium raises the burden of proof. If earnings growth remains strong, the higher valuation may be supported. A slowdown in sales, margin expansion or customer growth could make the multiple harder to defend.

VSXY Has Catalysts Beyond the Core Bra Business

International expansion gives Victoria's Secret another growth avenue. Reported international sales rose 20% in the second quarter, while China remained a leading growth market. PINK's improving brand relevance and Beauty's sustained growth add diversification to the recovery.

Store modernization and digital engagement provide further catalysts. Management expects 45% of the global fleet to operate in the Store of the Future format by fiscal 2026-end, while customer acquisition has been particularly strong among 18- to 24-year-olds.

Victoria’s Secret Still Faces Margin and Demand Risks

Tariff uncertainty remains a key risk, and management expects rising transportation costs to offset part of the third-quarter gross-margin benefit from stronger full-price selling and buying and occupancy leverage. The adjusted SG&A rate is projected at about 37.5%, up from 36.5% a year earlier, as marketing and incentive compensation increase.

Inventory was up 8% year over year at quarter-end, making continued demand strength and disciplined promotions important. Competition is also active. American Eagle Outfitters, Inc. AEO reported 19% comparable-sales growth at Aerie in its fiscal second quarter, while Abercrombie & Fitch Co. ANF marked its 15th consecutive quarter of net sales growth and raised its full-year outlook.

VSXY’s Quality Scores Clash With Weak Momentum

The operating recovery is meaningful, but the valuation premium and near-term cost pressures make the risk-reward less straightforward. Investors may want to see continued earnings delivery before treating the stronger growth profile as sufficient reason to pay a higher multiple.

VSXY currently carries a Zacks Rank #3 (Hold). It also has a VGM Score of A, a Value Score of A and a Growth Score of A, reflecting favorable characteristics across valuation and growth factors. Its Momentum Score of F points to weaker recent price action, reinforcing a patient stance on timing rather than an aggressive buy decision. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. 

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

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