VICTORIA’S SECRET GIVES HOLDERS UPBEAT REPORT

Byline: Karyn Monget

NEW YORK — Victoria’s Secret shared a special afternoon with several dozen analysts Thursday, providing an overview of Victoria’s Secret Beauty and Intimate Beauty Corp., as well as a live Webcast on a jumbo screen of the Victoria’s Secret Cannes 2000 Fashion Show.
The overall mood at the presentation in The New York Palace hotel was bullish, following a report by investment firm Gerard Klauer Mattison on parent Intimate Brands Inc. The report said April and first-quarter comp sales for Victoria’s Secret stores were up 26 percent and 14 percent, respectively.
The above-plan increases were fueled by a new strapless Body by Victoria bra, a continued demand for Body by Victoria seamless lingerie, and the blockbuster launches of the prestige Halo fragrance and the Pure Reflection Ultra-Shine Lipstick.
The Victoria’s Secret catalog and e-commerce businesses reported April and first-quarter comp sales gains of 1 percent and 5 percent, respectively.
Additionally, GKM noted “there were exciting times ahead,” citing comp sales for Victoria’s Secret stores in May are expected to rise 6 to 8 percent, led by silk lingerie, the Dream Angels fragrance franchise, the fashion show in Cannes, and the launch of Bodyflex bras featuring a titanium underwire that molds to the body.
In June, Victoria’s Secret will continue to build its lingerie-beauty connection when it previews a line of Body by Victoria body care products to the media.
The eclectic mix of beauty and lingerie clicked on screen, featuring a batallion of supermodels such as Tyra Banks, Heidi Klum and Daniela Pestova wearing a shimmer body lotion by Victoria’s Secret with cire-finish bikinis, bodysuits and micro-mini half-slips. Swimwear by Victoria’s Secret — a limited number of which have been sold in the catalogs — was showcased for the first time on the runway.
The show was co-hosted by AmFAR founding national chairwoman Elizabeth Taylor, who told the audience: “We are approaching $2 million. That’s a lot of dough, folks.”
Occasionally, the camera’s would catch a candid moment in the audience, one of which was of Gina Lollobrigida fanning Gregory Peck as models paraded by in sequined thong-back bikinis the size of a postage stamp.
Before the Webcast aired, Robin Burns, president and chief executive officer of Intimate Beauty and and Victoria’s Secret Beauty, said, “We’ve increased the capacity of the Webcast tenfold. Microsoft and Yahoo continue to improve the technology. This Webcast is going to give the Victoria’s Secret brand an awareness worldwide.”
She noted that for the first time consumers had the option of buying Victoria’s Secret lingerie and beauty products on a split screen as the show was being aired on victoriassecret.com.
“E-commerce is a very powerful tool for us, and it was very profitable straight out of the gate because we already had the infrastructure through the Victoria’s Secret catalog and stores,” said Burns.
Meanwhile, Burns told analysts, the “potential for a portfolio of unique, prestige beauty brands is huge,” noting that market share of Victoria’s Secret Beauty rang up $495 million of the 1999 U.S. beauty market. She would not, however, discuss ideas of future brands and possible licenses.
“Globally, it’s an $80 billion dollar [beauty] market. We believe our [beauty] retail sales can easily reach over $1 billion in the next three years,” said Burns.
So far, over 90 percent of the company’s beauty business is being fueled by its women’s fragrances. Two of the newest prestige names are under the banner of the Victoria’s Secret lingerie brand, Dream Angels — Heavenly, which was introduced last fall and posted retail sales of $42 million the first three months of its launch in October, and Halo, unveiled in a second blockbuster launch in April.
She added that the company spent $2 million on the Heavenly launch, as apposed to the sum of $15 million to $20 million that is spent on a traditional department store launch. The marketing message was accomplished primarily through window visuals and a scent strip in the Christmas edition of the Victoria’s Secret catalog.
Burns said a third fragrance, called Divine, will be introduced at retail in November under the Dream Angels franchise.
“We are competing with the entire industry, whether it’s prestige or mass,” insisted Burns. “Certainly in shopping malls, we are competing with Sephora, and online with dot-com companies.”
She further noted that the company will initiate a new store design for the Victoria’s Secret retail operation this summer. Currently, cosmetics such as Pure-Reflection Ultra-Shine Lipstick, are sold at 180 of the 450 Victoria’s Secret doors that carry the beauty products; 50 are freestanding units. A Victoria’s Secret lingerie store here at West Broadway and Prince Street will be transformed into the first freestanding Victoria’s Secret beauty store in spring 2001.
Jill Granoff, chief financial officer and chief planning officer, said fragrance is expected to comprise between 70 and 75 percent of overall beauty sales by 2003; by 2005, “maybe 50 percent.” She added that the Dream Angels fragrance franchise “is currently penetrating at 30 percent of shops.”
Granoff said beauty sales-per-square-foot are “slightly higher” in freestanding stores.
“We plan to open 50 to 55 new stores each year,” said Granoff. She added that the company is “looking at a few locations” that would house lingerie, hosiery and beauty under one roof.