VICTORIA’S SECRET
WHAT’S IN STORE FOR VICTORIA & CO. UNDER THE UMBRELLA OF JONES APPAREL GROUP?

Byline: Jill Newman

Victoria & Co. climbed to the top of the fashion jewelry heap by going its own way, which meant taking some chances and staying nimble while most of the business has been floundering. Now, with new ownership in the wings, the question of what’s next for Victoria is timely.
It is also a question not yet being answered publicly by the parties involved. Officials at Victoria & Co. and Jones Apparel Group, which said in June it would acquire the former, are saying little beyond assurances that no immediate management changes are planned. The opportunities for synergies are wide open, given that both operators wield diverse collections of brands. Among the most intriguing questions is the extent to which the new owners will tinker with a strategic formula that has worked well at Victoria so far.
The deal calls for Jones Group to purchase Victoria for $90 million, including $65 million of assumed debt, from Robert Andreoli, Victoria’s chairman, and several equity partners. The acquisition will give Jones Group plenty to work with. Victoria is the dominant player in the category, with sales of around $200 million. It secured that position at a time when the fashion jewelry business overall struggled, finding itself at odds with the prevailing trend for minimal dressing and few, if any, accessories.
Though both parties have declined to lay out specific strategic plans for the future, it is clear that the acquisition marks Jones’s first entry into costume jewelry, and a solid one at that. Taken together, Victoria’s brands represents anywhere from a 20 to 45 percent market share in retail fashion jewelry departments.
Sidney Kimmel, Jones’s chairman, said the purchase “provides a new dimension to our corporate strategy of offering our customer complete head-to-toe dressing with trusted brand names. We have great respect for the businesses which Victoria has developed within the department store and specialty store channels, and look forward to capitalizing on the strengths and talents of our combined companies to maximize future growth and profitability.”
The Victoria acquisition also gives the Jones Group an even bigger presence in the accessories arena. Jones acquired the Nine West Group in 1999, and Victoria holds the license for Nine West jewelry.
“Victoria’s products target a wide audience of consumers by gender, age and income level, and very importantly, it markets its products under numerous nationally recognized brand names,” said Wesley R. Card, Jones’s chief financial officer. It’s a model the Jones Group is not unfamiliar with; Jones has a range of brands including Evan-Picone and Todd Oldham, and it holds the license for Polo Ralph Lauren apparel.
In addition to Nine West, Victoria manufactures and markets the licensed jewelry collection for Givenchy and Tommy Hilfiger and also creates jewelry under Napier and Richelieu, its own brands.
Patricia Stensrud, Victoria’s vice chairman and chief executive officer, has been the driving force behind the company’s growth. She said Victoria has more than doubled its volume in the last five years.
In the accessories arena, many businesses tend to grow by expanding into different product classifications. Victoria, however, has remained steadfast in the fashion jewelry business, choosing instead to increase its bottom line through brand launches, acquisitions and expanded private label programs.
Stensrud was one of the first in the business to recognize the need to shift direction in 1995, as the jewelry industry was spiraling downward.
“Our industry was slow to respond to the changing consumer, who had redefined what ‘dress for success’ meant,” said Stensrud. “Gone were the power suits, and in came casual Fridays. We were not offering jewelry that complemented a woman’s new style, and we suffered in the early 1990s.”
When discussing the lifestyles and needs of modern women, Stensrud could be describing herself. She said she identifies with her customers and their changing views of fashion. A youthful, blue-eyed blonde, she typically shuns traditional corporate suitings for looks such as a fashionable, black sleeveless shift dress accessorized with zebra print mules and, of course, a lot of jewelry.
After shifting the company’s product focus to lifestyle jewelry, Stensrud turned the firm’s attention to the evolution of mega-brands that had taken over the apparel industry. “Department stores became more brand-driven across all categories, yet fashion jewelry was still made up of the same old brands,” she pointed out.
Thus, Victoria’s first big brand launch was for Nine West, which debuted in stores in spring 1998. At the same time, Victoria closed its licensed Karl Lagerfeld jewelry division, saying it was too small of a niche business.
It was able to diversify its distribution channels through the establishment of numerous private label programs, including Jaclyn Smith for Kmart and the Worthington label for J.C. Penney.
“Private label has been hugely successful,” noted Stensrud. “In the early 1990s, private label was strictly about margin enhancement; but today, it’s about differentiating your store. Consumers expect to see fashion at all prices and in all retail channels.”
Not all of Victoria & Co.’s ventures of late have been successful. The firm tried to develop a sterling silver bridge collection under the Silverscape label, but it failed to take off. But Stensrud said the company will continue to explore opportunities in the fast-growing bridge jewelry market, through both brands and private label programs.
Stensrud said that a strong emphasis on product must always lie at the core of Victoria’s growth. “We are a product-focused company,” she said. “Each division is run like an independent company, led by a brand leader and a design team. This way, each brand focuses on a specific market segment with products and prices and does not cannibalize another business.”
Each brand seeks to carve out its own niche in the marketplace, she said. Nine West, for instance, is silver-tone driven with a modern attitude and innovative packaging.
“In Nine West, the packaging and marketing is almost as important as the product itself,” said Stensrud, pointing to a series of cubic zirconia tennis bracelets sold in clear plastic tubes. Nine West jewelry retails from $12 to $80.
Tommy Hilfiger’s collection, however, runs the gamut from an $11 opening price for juniors up to $125 for women’s designs, with novelty packaging that reflects the Hilfiger brand’s overall American image topped off with a bit of the rock ‘n’ roll attitude the designer is known for.
Product is the distinguishing factor; the synergies between divisions are found in sourcing, manufacturing and distribution. With about 1,000 employees, Victoria produces jewelry around the world.
With all this recent activity, how will Stensrud keep up the growth pace in the years ahead? At press time, with the completion of the Jones deal still some weeks away, Stensrud would only say, “With Jones’s acquisition, there will be a lot of opportunities. These two companies have many synergies and will make a great partnership.”

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