Victoria's Secret

Victoria’s Secret is down, but definitely not out. In fact, recent changes such as eliminating 15 percent of its staff, closing more than 200 stores Stateside, refinancing the U.K. division of the business and planning to spin off Victoria’s Secret into a private firm have led to 52-week highs for shares in the parent company L Brands. But will consumers follow suit? 

Victoria’s Secret has fallen out of favor among many shoppers in the last few years. Critics argue that the innerwear giant was too late to adjust its marketing materials to reflect a more diverse array of models. (Victoria’s Secret is known for its super-skinny, airbrushed Angels.) It was also late to jump on the bralette trend in favor of its signature push-up styles. 

That could be why the once-fashionable Victoria’s Secret Fashion Show was canceled in 2019. (Viewership had been waning in recent years leading up to the decision to axe the spectacle.) There is also competition from a number of entrants — such as Rihanna’s Savage x Fenty, American Eagle OutfittersAerie, ThirdLove and even more established names, like Wacoal, Natori and Chico’s FAS’s Soma that have refreshed their looks as of late — all circling around, eager to take market share. 

But Victoria’s Secret, still the market-share leader in the U.S. women’s intimate apparel category, has made some meaningful changes in the last 12 months that have turned heads. To start with, the company has toned down its overtly sexy image and made way for a more diverse set of models, including hiring Ali Tate Cutler, the brand’s first plus-size model, in addition to transgender models. Even the web site seems to have embraced a softer vibe, with more natural hues and an emphasis on comfortable attire. 

“Since 2016, Victoria’s Secret has made several strategic changes intended to strengthen the business that have yet to show positive results, while their younger subbrand Pink began to struggle more recently in 2018,” Ike Boruchow, senior retail analyst at Wells Fargo, wrote in a note. “As a result, [operating] income at the business has decreased approximately 90 percent since 2015. However, things may be beginning to shift now that new leadership and ownership is in place at both VS and Pink. While brand health has been damaged, it does not appear to be irreparable given that VS remains the share leader in women’s intimates.”

Whether or not the adjustments will sway a new cohort of wannabe Angels is uncertain. But, at least for now, there have been some signs of improvement. E-commerce sales surged 65 percent last quarter year-over-year while the majority of Victoria’s Secret stores were closed, reflecting continued consumer demand. 

Merchandise margins were also up in the most recent quarter at Victoria’s Secret — which includes the lingerie, beauty and Pink divisions — and the Bath & Body Works brand, driven by fewer promotions. Now the company has its sights set on the upcoming holiday season. 

“Some of the changes one might argue are subtle so far,” Stuart Burgdoerfer, executive vice president and chief financial officer of L Brands Inc., as well as interim chief executive officer of Victoria’s Secret, said on L Brands’ most recent conference call.We’re not in any way out of touch with reality about where we are.…But we have indication that the consumer is noticing those changes, [and] those are important changes. And there’s more to come.” 

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