US Stock Market Move | Tariffs costs and operating expenses drag down stock prices. Victoria's Secret (VS) Q4 performance exceeds expectations but still drops by 12.16%.

On Thursday, the stock price of Victoria's Secret (VSCO.US) saw a significant decline, closing down by 12.16% at $52.7, despite the company's strong overall performance in its latest financial report. Concerns over rising tariff costs, expenses related to the acquisition of Adore Me, and increasing operating expenses were the main factors dragging down the stock price. The company's performance for the fourth quarter of the 2025 fiscal year, as announced, showed that both revenue and profits exceeded Wall Street expectations. During the reporting period, Victoria's Secret achieved sales of $2.27 billion, an 8% increase year-over-year, surpassing analysts' expectations of $2.23 billion; adjusted earnings per share were $2.77, also higher than the market's expected $2.52. However, the company's quarterly net profit was $184 million, a slight decrease from $193 million in the same period the previous year. From an operational standpoint, several core business segments of the company showed improvement. CEO Hillary Super stated that the core lingerie business of Victoria's Secret had its first growth in four years, the PINK brand recorded its best growth performance in a decade, and the overall market share of the company increased. Same-store sales grew by 8% during the reporting period, significantly higher than the market's previous expectation of 5.6%. The company also provided a performance guidance that exceeded market expectations. Victoria's Secret expects full-year sales for the 2026 fiscal year to be between $6.85 billion and $6.95 billion, with a year-over-year growth of approximately 5% to 6%, surpassing analysts' expectations of $6.77 billion. For the current quarter, the company anticipates sales of $1.49 billion to $1.53 billion, a year-over-year increase of 10% to 13%, also exceeding market expectations. Despite the strong performance, multiple cost pressures are causing investors to remain cautious. The company expects to incur approximately $160 million in tariff costs in 2026, although it plans to offset this through price increases, promotions, and cost negotiations with suppliers, it is still expected to have a net impact of about $40 million. Additionally, the company is facing financial pressures from the acquisition of the online lingerie brand Adore Me in 2022. In the latest quarter, the company recorded a goodwill impairment loss of $119.6 million, as well as restructuring costs of $36.3 million for fulfillment centers. Furthermore, the company is conducting a strategic evaluation of the DailyLook apparel subscription business obtained through the acquisition, to focus more on the core brand business. Operating costs are also on the rise. The company expects the sales, management, and administrative expense rate for the first quarter to increase to 33%, slightly higher than the same period last year, primarily due to increased investment in store employees. Additionally, the company plans to increase marketing spending this year, with the Valentine's Day marketing campaign in collaboration with the Korean K-pop group TWICE achieving record results. Victoria's Secret CFO Scott Sekella stated during the earnings conference call that the company is maintaining growth momentum as it enters the 2026 fiscal year, but there is still uncertainty in the macroeconomic environment. The company will continue to control costs while increasing investment in product innovation and brand building.