Byline: David Moin

NEW YORK — Victoria’s Secret Stores, the $1.2 billion intimate apparel giant, is protecting its turf.
The Limited Inc. division has doubled its size and earning power since 1990, and this year, is expected to grow to $1.4 billion volume, fueled by 50 new stores in the U.S., a possible launch in Europe, increased advertising, new products and product line extensions.
Victoria’s Secret reached $222 million in operating income last year, posting the highest rate of profits in the corporation. Operating income is expected to hit $240 million this year.
At the end of 1990, it posted $114 million in operating income and $600 million in sales.
According to analysts, Victoria’s Secret Stores has wrested market share from the competition – primarily department stores and mom-and-pop shops — by creating a strong brand and shopping environment, one that thrives on sex appeal, impulse shopping and colorful, fun products generally sold at upper-moderate prices.
The division has a record of successful product launches. It also has a history of creating hybrids of bestsellers, such as padded versions of its acclaimed Miracle push-up bra, or versions with lace straps.
In the past few years, the chain has moved beyond lacy underwear and seductive nighties. There are now also thermal pajama suits with a country look as well as high-cut cotton underwear, for a sexier look. The popular Second Skin Satin bra has recently been on sale for $36, with a buy-one-get-one-free offer. In basics, Victoria’s Secret is currently promoting a line called Body Blushers, including pastel bras and panties, priced around $16.
“When The Limited bought the business, it had two or three stores, and out of that it has created a great launching pad of tons of products and brand extensions,” said Steve Kernkraut, managing director Bear Sterns. But Kernkraut noted that Victoria’s Secret, as it extends its offerings, “runs the risk of cannibalizing some of the other divisions,” like with its growing fragrance and bath line, which could impact the Bath and Body Works division. At Victoria’s Secret, the decor is suggestive, with plush carpeting, dark wood display tables and racks of frilly teddies and garter belts, without being too lascivious. “There is a definite ambience about Victoria’s Secret,” said Jennifer Black Groves, executive vice president, Black & Co. “How exciting is it really when you get a bra from a department store? But if you get one from Victoria’s Secret, it’s something special.”
Fitting rooms are spacious, but need to be opened with a key, and when the store is crowded, finding a salesperson can be difficult. But generally, the stores seem to have more service than a typical department store.
While there have been some complaints from consumers about merchandise quality, the company said one of its goals this year is to upgrade quality.
Stores average 4,300 square feet in size, but are expected to be about 4,500 square feet by the end of this year, through enlargements and by opening larger units. Stores yield $457 in sales per square foot and are expected to jump to $479 this year. At the end of 1994, the division operated 601 stores. It’s projecting 650 stores at the end of 1995. “I don’t see this business falling off,” Black said. “They are totally committed to taking it to the next level. You can go out and create all kinds of lingerie, but to create a brand image take years. It’s a youthful concept, which makes people feel good.” “Lingerie was a category you found in the back of department stores, but Victoria’s Secret has made it an integral part of women’s wardrobes,” Kernkraut added. “The competition is really the department stores, but their most successful competitor is the Limited’s own Cacique division. No one has duplicated what Victoria’s Secret has accomplished. Certainly a lot of people could copy them, but it’s not easy or simple. Macy’s tried to, with Fantasies by Morgan Taylor,” a former private label program. “It bombed,” Kernkraut said.
“When a woman has a tough day, Victoria’s Secret is where she can go to feel good,” Kernkraut said. “And it’s where men who want to buy gifts for their wives or girlfriends can go. They usually get lost in a department store.”