If you buy bras or pajamas at Victoria’s Secret (VSXY), you probably know the routine. You find what you like, then wait for the next sale before you pay for it.
That routine shaped the brand for years, and it cost the company dearly. Shoppers learned that full price was optional, and the stock spent much of the past few years being priced like a mall chain in decline.
The company is now trying to break that habit. Victoria’s Secret & Co. posted second-quarter net sales of $1.61 billion, up 10%, according to its earnings release filed Sept. 3.
“We have made a deliberate decision to reduce our reliance on promotion and increase regular price selling,” CEO Hillary Super said on the earnings call, according to Investing.com’s transcript.
However, that strategy is now reaching the products shoppers want most, right as the holiday season starts.
According to a Bank of America research report reviewed by TheStreet, Victoria’s Secret is keeping merchandise featured in its 2026 Fashion Show out of promotions. The bank found the items selling out in a Los Angeles store a few weeks after they arrived.
What Bank of America saw inside a Victoria’s Secret store
Bank of America hosted a store tour in Los Angeles after the Oct. 18 Fashion Show, which the brand held at Sony Pictures Studios in Culver City and streamed on YouTube, Hello! Magazine reported.
Inside the store, the analysts found a noticeable pickup in traffic ahead of the show and frequent sell-outs of Fashion Show-branded merchandise. Runway pieces carried special tags and had dedicated displays styling key looks.
Those tags matter for your wallet. Tagged products are excluded from promotions, which the bank called “an example of how the company continues to pull back on promos,” wrote BofA analyst Mary Sport in the Oct. 20 note, titled “Store tour highlights strategic changes to drive stronger margins.”
Read more: Victoria’s Secret closes 38 stores as customer tastes change
I see those tags as the clearest sign yet that the discount era is ending at the top of the assortment.
The company’s own numbers back that up. Comparable sales rose 9% in the second quarter, according to the earnings release, and Super said regular-price selling grew at a low-double-digit rate.
“The regular price selling continues to be where all the growth is coming from,” Chief Financial Officer Scott Sekella said on the call.
Wall Street wasn’t impressed at first. Shares fell 13% to $73.78 in premarket trading on Sept. 3 after revenue missed estimates by about $10 million, Investing.com reported. They closed at $89.84 on Oct. 19, according to MarketBeat, a rebound of roughly 22% by my math.
Holiday gifts and Gen Z shoppers give the brand an opening
The timing works in the company’s favor. Deloitte expects holiday retail sales to rise 4% to 4.8% this season, to between $1.70 trillion and $1.71 trillion, according to its holiday forecast released Sept. 10.
“Consumers continue to place importance on making the holidays special for their friends and families,” said Natalie Martini, Deloitte’s U.S. retail and consumer products leader, in the release.
Victoria’s Secret is aiming its holiday push at gifts. The bank’s analysts found sleep gift sets already showcased at the front of the store, with the full holiday collection arriving over the next few weeks, and associates pitching beauty products on clean ingredients and scent notes.
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Both categories have momentum. Beauty delivered its 12th straight quarter of sales growth, and sleep grew by a mid-teens rate, Super said on the call. For more on that push, see TheStreet’s look at how Victoria’s Secret is chasing Bath & Body Works with fragrance.
Younger shoppers are a big part of the bet. Collaborations with LoveShackFancy and the K-pop group TWICE are pulling in a younger customer, Sport wrote, and comfort-focused bras such as FlexFactor keep selling at a higher average price per item.
“We definitely see Gen Z wanting a store experience even more than other groups of customers,” Super said on the call.
Given that backdrop, it’s easy to understand why Bank of America thinks the Fashion Show buzz can carry sales and traffic through the holidays.
Victoria’s Secret excludes Fashion Show items from promotions to protect margins, Bank of America found.Panama7 / Getty Images
Why fewer discounts could mean fatter retail margins
The bigger prize is profit. Bank of America sees operating margins climbing beyond 10%, helped by remodeled stores that have posted double-digit sales gains in less space, thanks to better traffic and conversion.
Management wants half of its global fleet remodeled by the end of what the bank labels fiscal 2027, “leaving a significant amount of whitespace remaining,” Sport wrote.
The bank’s model shows how steep that climb is. BofA forecasts the operating margin will reach:
8% for the fiscal year ending in January 2027, up from 6.1% a year earlier
9.7% the following year
10.3% the year after that
BofA’s $95 price objective is based on 15 times its fiscal 2027 earnings estimate, between mall-based apparel peers at 11 times and high-growth consumer names at 18 times.
For the current year, the bank expects $4.67 a share, near the top of the company’s own adjusted guidance of $4.45 to $4.70, according to the September release.
Other banks have turned more bullish this month, too. Morgan Stanley raised its target to $104 from $101 on Oct. 19, and Needham started coverage with a Buy and a $106 target on Oct. 16, MarketBeat reported.
Much will likely depend, however, on whether shoppers who were trained to wait for a sale keep paying full price once the runway buzz fades. The company guided to just $10 million to $20 million in third-quarter operating income, so the holiday quarter has to do most of the work.
The note flags the same pressure. Downside risks include “overseas digital retailers taking share by offering lower-priced alternatives,” Sport wrote, a real threat when your phone can find a cheaper bra in seconds.
In my analysis, the practical takeaway for shoppers is simple. If a runway piece is on your holiday list, I wouldn’t count on it going on sale.
For investors, the bank’s verdict is clear. “We maintain our Buy rating as we think continued sales momentum supports significant OM [operating margin] expansion and double-digit EPS growth,” Sport wrote.
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