NEW YORK — Victoria's Secret is poised to keep its sizzle going in 2006.
The innerwear powerhouse — with $4.23 billion in annual sales — should again strut its main attribute as a refreshing alternative to department store sameness, as the chain carries forward its "Very Sexy" image.
However, an uncertain retail environment created some challenges for the lingerie specialist's parent, Limited Brands Inc. In the three months ended Oct. 29, the company's apparel division, including Express and The Limited stores, dragged down overall results. Third-quarter losses totaled $12.3 million, or 3 cents a share, against net income of $78.3 million, or 16 cents, in the same year-ago quarter.
Emme Kozloff, an analyst at Bernstein Research, wrote in a research note that the apparel division "has accumulated year-to-date losses of nearly $150 million, wiping out 25 percent of the profits of the Victoria's Secret and Bath & Body Works divisions, and management seems unprepared to comment on when the division might begin making money again."
But Victoria's Secret remains the most well-known destination for lingerie. In the July edition of the WWD 100 survey of most-recognizable fashion brands, Victoria's Secret claimed the eighth spot, while consumers overwhelmingly continued to choose Victoria's Secret as their favorite lingerie outlet in 2005, according to NPD Fashionworld. The lingerie giant beat every other store, gaining a 21 percent share with its annual $1.1 billion e-commerce and catalogue business, and its 1,001 specialty stores nationwide that generate annual sales of $3.11 billion.
Victoria's Secret returned to its steamy fashion show Nov. 9 and the $10 million extravaganza will be broadcast Tuesday on CBS-TV after a one-year hiatus. The company also appears to be on a roll with its subbrand, Pink, aimed at women 18 to 22 years old, which bowed in 2001 as a fragrance and has expanded into sleepwear, daywear, loungewear and casual apparel.
Some critics said the concept of Pink — playful items with pink-and-white dots and stripes, and doggie motifs — needs a fresh spin and could turn off an older consumer base.
In a research note by analyst Kimberly Greenberger of Citigroup, the expanded Pink assortment was cited as "the clear standout in our view in terms of compelling 2006 initiatives." But she cautioned, "Longer term, we are concerned with the direction of the brand, as we believe that management's strategies are skewing towards appealing exclusively to young consumers and may alienate VS' older customer."However, Charles Nesbit, executive vice president and chief operating officer of Chico's, said, "I think Victoria's Secret will continue to be successful in intimate apparel. Victoria's Secret has taken its [bra] price points up to the $30s, with less promotionality and semiannual sales. I'm sure Federated would love to sell a bra every day for $30 and not have to promote it. Victoria's Secret can do that."
Victoria's Secret officials could not be reached for comment.
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