0001856437-26-000013
SEC filingStrong 15% revenue growth and operating margin expansion to 4.9% highlight improved merchandise margins, partially offset by tariff headwinds.
In the first quarter of 2026, Victoria's Secret & Co. delivered robust top-line growth, with net sales increasing 15% to $1.560 billion compared to $1.353 billion in the prior year. The increase was broad-based across all channels. Gross profit rose $111 million to $585 million, with the gross margin expanding 240 basis points to 37.5% despite a $14 million incremental headwind from tariffs. The margin improvement was driven by lower promotional activity, increased regular-priced selling, and leverage on buying and occupancy expenses from higher sales. Operating income surged $56 million to $76 million, and the operating margin improved to 4.9% from 1.5%, reflecting strong sales growth and improved merchandise margins. Net income attributable to Victoria's Secret & Co. was $48 million, or $0.56 per diluted share, compared to a net loss of $2 million, or $(0.02) per share, in the prior year. Adjusted net income (non-GAAP) was $51 million, or $0.60 per diluted share, excluding $4 million in restructuring charges and $6 million in intangible amortization (prior year only).
Management highlighted continued focus on the "Path to Potential" growth plan, including supercharging bra authority, recommitting to PINK, fueling beauty growth, and evolving brand projection. The company expects to manage costs while investing in product innovation and customer experience. Capital expenditures for fiscal 2026 are estimated between $220 million and $240 million, primarily for stores, technology, and logistics. The tariff environment remains uncertain; while the company is seeking refunds for IEEPA tariffs, a new 10% global tariff under Section 122 has been imposed. Management estimates tariffs, net of mitigation, negatively impacted operating income by approximately $85 million in fiscal 2025 and by an incremental $14 million in Q1 2026. Additionally, a proxy contest initiated by BBRC post-Q1 is expected to incur extra professional fees in Q2 2026. The company believes its liquidity, including cash and ABL facility availability, is sufficient to fund operations and growth initiatives over the next 12 months.
As of May 2, 2026, cash and cash equivalents totaled $207M, down sharply from $518M at fiscal year-end due to share repurchases ($100M) and capital expenditures ($54M). Total debt stood at $990M, comprising $378M term loan, $597M senior notes, and $15M drawn under the ABL facility. Net debt increased $15M sequentially. The company has $685M of remaining availability under its $750M ABL facility, providing ample liquidity.
No significant purchase commitments were disclosed in the notes. The company has supplier finance program obligations of $137M recorded in accounts payable. Deferred revenue, primarily from gift cards and loyalty programs, was $226M.
During Q1 2026, the company repurchased 2.2M shares for $100M under its March 2024 Share Repurchase Program, leaving $150M in remaining authorization. No dividends were paid. Capital expenditures totaled $54M, representing 3.46% of sales. Debt activity included $55M in ABL borrowings and $40M in ABL repayments, plus a $1M term loan payment.
The company operates as a single reportable segment. Net sales of $1.56B grew 15.3% YoY, driven by strength in both North American stores (+11.4% to $803M) and international (+44.7% to $288M), with direct channel up 8.3%. U.S. sales comprised 79.5% of total; outside U.S. contributed 20.5%. Operating income improved to $76M from $20M, reflecting margin expansion.