Shares of Victoria's Secret & Co. (NYSE: VSXY) tumbled 5.6% in premarket trading on Thursday, September 3, 2026, as investors weighed a mixed second-quarter performance against cautious guidance for the current period. The stock, which closed Wednesday at $84.81, initially plunged 21.1% before recovering to $80.02 by 09:26 EDT, according to Yahoo Finance data.
The retailer, based in Reynoldsburg, Ohio, reported net sales of $1.611 billion for the quarter ended August 1, 2026, a 10.4% increase year-over-year but slightly below the $1.62 billion consensus estimate compiled by LSEG. More notably, adjusted operating income surged to $124 million, more than doubling from $55.1 million in the same period last year, and well above the company's own guidance of $90 million to $100 million.
Despite the robust earnings beat, the market's reaction was tempered by the company's outlook for the third quarter. Victoria's Secret projected adjusted operating income of $10 million to $20 million, implying an operating margin of approximately 0.95% at the midpoint of its sales guidance. This thin margin outlook suggests that the second-quarter outperformance may not be sustainable, especially as the company plans to increase marketing spend in the second half of the year.
Chief Financial and Operating Officer Scott Sekella attributed the strong quarterly results to "stronger regular-price selling and disciplined execution." However, the earnings report included a significant one-time benefit: over $140 million in tariff refunds under the IEEPA, which were excluded from adjusted figures. Without this windfall, underlying gross margin improved to 38.8% of sales from 35.6% in the prior year.
Sales growth was broad-based, with international revenue climbing 20.0%, North American store sales up 8.9%, and direct sales rising 8.1%. The company also raised its full-year guidance, lifting the midpoint of its sales forecast by $60 million to $7.14 billion and adjusted operating income by $10 million to $575 million.
However, analysts noted that the full-year guidance increase was modest relative to the quarterly beat, and the implied third-quarter margin remains thin. The revised adjusted EPS guidance of $4.45 to $4.70 puts the stock at roughly 17.5 times forward earnings, based on the current share price of $80.02.
Investor sentiment remains divided. According to S&P Global data, analysts are split between three strong buys, three buys, and five holds, with an average price target of $94.60 before the report—11.5% above Wednesday's close. The key risk factors include increased promotional activity, rising marketing expenses, and potential softness in holiday demand, as well as ongoing uncertainty around tariff regulations.
The market's reaction underscores the challenge Victoria's Secret faces in convincing investors that its turnaround is durable, rather than reliant on one-time tariff refunds. With the critical holiday season ahead, the company must now prove it can sustain momentum through regular-price selling and disciplined execution.