Leslie Wexner knows which brands are clicking with consumers today and which aren’t — and he isn’t afraid to name names.
“Most fashion brands live about 10 years successfully,” the L Brands chairman and chief executive officer said Tuesday at the company’s investors’ day, which was mainly designed to pump up confidence in the retailer’s Victoria’s Secret division, which he admitted had grown stale.
He called out Starbucks, Nike and Louis Vuitton as the brands, outside the L Brands portfolio, that connect with consumers. “People will go the extra mile, walk a few extra yards, go past a Dunkin’ Donuts to go to a Starbucks,” he said.
Those missing the mark? Gap, Abercrombie & Fitch, Ann Taylor and J. Crew, the retail legend said, pointing to the difficulties they face in renewing their businesses.
“Fashion retailing is one of change,” he said. “When you catch the wind, the cycles last eight or 10 years and then you have to constantly say, ‘How do I change this?’” he said.
That is the process Victoria’s Secret is undergoing now. He said L Brands is at an “inflection point” (it’s now looking for sales growth of 7 percent to 10 percent starting in the second half of next year) and that the Victoria’s Secret brand is now on the right path.
“We had to make changes and in hindsight, the changes that we have made I wish we had taken those actions two years ago, or three,” he said. “In hindsight, there was ample opportunity to change things dramatically.”
Wexner took the reins of Victoria’s Secret in February when the chain’s ceo Sharen Turney left and has since moved to exit the brand’s apparel and swimwear businesses, focusing in on its core. The company will continue to feel the pinch of that decision through the first quarter.
“The brand just got older with the customer,” Wexner said of Victoria’s Secret.
That’s changing, he said, noting that younger women who come to the store to buy a bralette are spending more than their mothers. Victoria’s Secret has cut its promotions and is looking to grow faster from a tighter base.
But investors remained skeptical. Shares of the company ended the day down 7.9 percent to $66.50 after L Brands said before the meeting that Victoria’s Secret’s comparable sales fell 2 percent last month and that third-quarter earnings would total about 40 cents a share, instead of the 40 to 45 cents the firm previously projected.
The 79-year-old Wexner seemed unfazed and at ease dispensing retail wisdom and cracking jokes even as he acknowledged that it was an important meeting to explain to investors where the company was going.
“What we value and what we work hard to create are great fashion brands and I contrast that with some store brands…there was a time when Gap was a great brand and the emotional content that went to the brand, giving it premium value and premium margin,” he said. “Abercrombie had that at some point in time.”
Never one to avoid controversy or a delicate subject, Wexner also waded into the craziness of the presidential election, the virtues of Alibaba, how most U.S. mall developers want to build “dinosaurs” and human nature.
And that was just at the fringes (where he said shoppers were distracted by the “peculiar” election where, “You can choose someone who’s absolutely nuts or someone who’s selfish and dishonest.”)
International expansion is a big part of how L Brands plans to keep moving forward and grow its businesses in the Middle East, Western Europe and China to all be as big as its U.S. operations.
Wexner said the company has been measured in its approach.
“We weren’t the first adopters to move into international; we weren’t in a stampede to build flagships all over the world. We deliberately wanted to be a patient second or a slow third,” he said.
But that’s not to say the ceo doesn’t feel the pressure to move.
“We can’t tarry and we can’t do things that would have been appropriate three, five or 10 years ago,” he said. “The world is moving too fast.”
The company is building something of a second home in China to grab the potential of that market.
“If you screw up Singapore, that would be embarrassing,” Wexner said. “If we screw up in China that would be, ‘Oh s–t.’ We’re not going to screw that up.”
And L Brands is getting some help navigating the digital market in China.
“Our new best friend is Alibaba,” Wexner said. “I think they know more than anyone else (and we have more than one best friend). They encourage us, we encourage them. Maybe next year we’ll have the [Victoria’s Secret] fashion show in Shanghai, maybe because we’re a global brand and we want to bring the brand around the world.
“There’s an enormous market,” he said of China. “So we’re going slow and carefully and a lot of people are spending a lot of time in [Alibaba’s home city of] Hangzhou to get close to the guys who really know, and they also know about India and Southeast Asia.”
When Wexner’s attention returned back to the U.S. scene, he left no quarter.
After years of predicting that department stores would perish, he said, “They died, they just haven’t buried them yet.”
He also said the best malls would keep getting better, but that the overall mall universe would shrink, adding, “Most developers still want to build multilevel air-conditioned dinosaurs” instead of outdoor centers.
While L Brands is most definitely betting on continued digital growth, Wexner said brick-and-mortar stores would remain important.
“Human nature is we like to go to the marketplace and see other people,” he said. “What we buy there may change.”
Right now, people aren’t buying very much and Wexner likened the wind up to the presidential election as a long distraction.
“We’ve had Halloween for the last four months in terms of the events in the world,” he said. “We have Nero and Caligula arguing about the future of Rome and like fools we’re listening to it.”
Besides that, he described the general economic conditions as “pretty good.”
“We’ve got to go to work every day and do what we do,” he said. “The stuff that happens in the environment, we’re aware of it. I just don’t spend a lot of time thinking about it, it’s just there.”