Victoria’s Secret, Facing A Slide In Sales And Profit, Is In Need Of A New Brand Pitch Fast

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Victoria’s Secret, Facing A Slide In Sales And Profit, Is In Need Of A New Brand Pitch Fast

Victoria’s Secret’s profit tumbled as it extended its streak of mostly declining sales. Photographer: Christopher Dilts/Bloomberg)© 2017 Bloomberg Finance LP

The once-hot Victoria’s Secret is losing its cool, and not even its upcoming “Angels”-graced annual fashion show broadcast will make much difference.

The No. 1 U.S. lingerie label, extending a string of comparable-sales declines since 2016, reported another 2% dip in comparable sales, led by a 6% drop at its physical stores, in the quarter that ended Nov. 3. The unit, counting nearly 1,200 stores in North America and still more than half of parent L Brands’ total sales, also continued its dramatic shift away from its former role as the company’s biggest profit contributor. Victoria’s Secret saw its fiscal third-quarter operating income tumble 89%, or a whopping $120 million, to $14.2 million.

In sharp contrast, its once-lagging sister chain Bath & Body Works continued to outperform, with a 13% jump in comparable sales and a 29% surge in operating profit.

Internationally, L Brands’ loss widened sharply, also led by Victoria’s Secret.

L Brands’ shares, having lost more than two-fifths of their value this year, declined more than 4% in after-hours trading after the company reported earnings late Monday.

With the sharp profit drops at Victoria’s Secret, L Brands said it’s slashing quarterly dividend by half to $1.20 a share, beginning with the March payout, to save about $325 million in cash. For good reason, the company’s cash tumbled 53% to $348 million. L Brands has previously also said it will shut all of its upscale Henri Bendel boutiques and is exploring options for its acquired La Senza lingerie chain.

“Our number one priority is improving performance at Victoria’s Secret Lingerie and Pink,” said Chairman and CEO Leslie Wexner in prepared remarks. “We have lost our close connection to our customer….Our new leaders are coming in with a fresh perspective and looking at everything … our marketing, brand positioning, internal talent, real estate portfolio and cost structure. Most important is improving our merchandise assortments.”

L Brands on Monday named Tory Burch president and former Club Monaco president and CEO John Mehas as CEO of Victoria’s Secret Lingerie, effective early 2019, replacing Jan Singer, who has resigned. It’s also named a new ceo for its Pink label targeting college-age consumers.

Mehas will have a tall order ahead of him. Victoria’s Secret is contending with declining customer traffic not just because of what the company described as “the cumulative impact of” its decision to exit the swim and apparel businesses and to eliminate  its catalogs and direct-mail promotional offers, on top of what it admitted was “poor assortment.”

The brand’s traditional identity and the glammed-up look of its Angels at the center of its brand pitch is increasingly losing relevance to a growing crop of shoppers seeking to express themselves just the way they are and favoring brands they see as more authentic. For instance, Victoria’s Secret’s mall rival Aerie, owned by American Eagle Outfitters and known for its #AerieReal tagline as it features real customers in their natural looks, has expanded its market share in the five years through 2017 to 2.3%. Victoria’s Secret’s share during the same period dropped 2 percentage points to 28.8% during the same period, according to Euromonitor data.

Online, ThirdLove, backed by a former Victoria’s Secret executive, and  Walmart-owned Bare Necessities also are eager to steal some of Victoria’s Secret’s thunder and are growing sales with their respective pitches about extended sizes for all body types.

Yes, as Wexner said in prepared remarks, Victoria’s Secret still has the “competitive advantage” of 1 billion visits to its stores each year. The brand is seeking to stem sales declines by unveiling new bras, panties, sleepwear and Pink loungewear to stoke demand, and it’s also considering expanding its assortment to include eyewear, shoes and swimwear, a previously exited category in yet another admission that it had made a mistake.   

However, as much as Victoria’s Secret has, in Wexner’s words,  a “leading market share” with “high emotional content, strong customer engagement through social media and in-store experiences,” it still has some big soul searching to do to grapple with what exactly its brand stands for in today’s changing cultural climate. One poignant example: this remark by company chief marketing officer Ed Razek in a recent Vogue interview about whether Victoria’s Secret would consider featuring a transgender model in its fashion show, has invited many sharp rebukes. “No, I don’t think we should. Well, why not? Because the show is a fantasy.”

Standing behind what Razek believes the brand represents may be one thing, but being in tune with the signs of times and what today’s consumers may value in a brand is yet another.

Victoria’s Secret will need to figure out how to strike that delicate balance fast. After all, today’s consumers are even less forgiving, and their social-media-aided voice carries even more weight.

Related on Forbes: Why L Brands Is Shuttering All Henri Bendel stores 

Related on Forbes:  Sustainability is no longer an afterthought in the fashion industry

Related on Forbes: Lululemon Founder: I want the brands to stand for something

Related on Forbes: Why Walmart just bought Bare Necessities 

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Victoria’s Secret’s profit tumbled as it extended its streak of mostly declining sales. Photographer: Christopher Dilts/Bloomberg)© 2017 Bloomberg Finance LP

The once-hot Victoria’s Secret is losing its cool, and not even its upcoming “Angels”-graced annual fashion show broadcast will make much difference.

The No. 1 U.S. lingerie label, extending a string of comparable-sales declines since 2016, reported another 2% dip in comparable sales, led by a 6% drop at its physical stores, in the quarter that ended Nov. 3. The unit, counting nearly 1,200 stores in North America and still more than half of parent L Brands’ total sales, also continued its dramatic shift away from its former role as the company’s biggest profit contributor. Victoria’s Secret saw its fiscal third-quarter operating income tumble 89%, or a whopping $120 million, to $14.2 million.

In sharp contrast, its once-lagging sister chain Bath & Body Works continued to outperform, with a 13% jump in comparable sales and a 29% surge in operating profit.

Internationally, L Brands’ loss widened sharply, also led by Victoria’s Secret.

L Brands’ shares, having lost more than two-fifths of their value this year, declined more than 4% in after-hours trading after the company reported earnings late Monday.

With the sharp profit drops at Victoria’s Secret, L Brands said it’s slashing quarterly dividend by half to $1.20 a share, beginning with the March payout, to save about $325 million in cash. For good reason, the company’s cash tumbled 53% to $348 million. L Brands has previously also said it will shut all of its upscale Henri Bendel boutiques and is exploring options for its acquired La Senza lingerie chain.

“Our number one priority is improving performance at Victoria’s Secret Lingerie and Pink,” said Chairman and CEO Leslie Wexner in prepared remarks. “We have lost our close connection to our customer….Our new leaders are coming in with a fresh perspective and looking at everything … our marketing, brand positioning, internal talent, real estate portfolio and cost structure. Most important is improving our merchandise assortments.”

L Brands on Monday named Tory Burch president and former Club Monaco president and CEO John Mehas as CEO of Victoria’s Secret Lingerie, effective early 2019, replacing Jan Singer, who has resigned. It’s also named a new ceo for its Pink label targeting college-age consumers.

Mehas will have a tall order ahead of him. Victoria’s Secret is contending with declining customer traffic not just because of what the company described as “the cumulative impact of” its decision to exit the swim and apparel businesses and to eliminate  its catalogs and direct-mail promotional offers, on top of what it admitted was “poor assortment.”

The brand’s traditional identity and the glammed-up look of its Angels at the center of its brand pitch is increasingly losing relevance to a growing crop of shoppers seeking to express themselves just the way they are and favoring brands they see as more authentic. For instance, Victoria’s Secret’s mall rival Aerie, owned by American Eagle Outfitters and known for its #AerieReal tagline as it features real customers in their natural looks, has expanded its market share in the five years through 2017 to 2.3%. Victoria’s Secret’s share during the same period dropped 2 percentage points to 28.8% during the same period, according to Euromonitor data.

Online, ThirdLove, backed by a former Victoria’s Secret executive, and  Walmart-owned Bare Necessities also are eager to steal some of Victoria’s Secret’s thunder and are growing sales with their respective pitches about extended sizes for all body types.

Yes, as Wexner said in prepared remarks, Victoria’s Secret still has the “competitive advantage” of 1 billion visits to its stores each year. The brand is seeking to stem sales declines by unveiling new bras, panties, sleepwear and Pink loungewear to stoke demand, and it’s also considering expanding its assortment to include eyewear, shoes and swimwear, a previously exited category in yet another admission that it had made a mistake.   

However, as much as Victoria’s Secret has, in Wexner’s words,  a “leading market share” with “high emotional content, strong customer engagement through social media and in-store experiences,” it still has some big soul searching to do to grapple with what exactly its brand stands for in today’s changing cultural climate. One poignant example: this remark by company chief marketing officer Ed Razek in a recent Vogue interview about whether Victoria’s Secret would consider featuring a transgender model in its fashion show, has invited many sharp rebukes. “No, I don’t think we should. Well, why not? Because the show is a fantasy.”

Standing behind what Razek believes the brand represents may be one thing, but being in tune with the signs of times and what today’s consumers may value in a brand is yet another.

Victoria’s Secret will need to figure out how to strike that delicate balance fast. After all, today’s consumers are even less forgiving, and their social-media-aided voice carries even more weight.

Related on Forbes: Why L Brands Is Shuttering All Henri Bendel stores 

Related on Forbes:  Sustainability is no longer an afterthought in the fashion industry

Related on Forbes: Lululemon Founder: I want the brands to stand for something

Related on Forbes: Why Walmart just bought Bare Necessities 

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