Victoria’s Secret ‘needs to reinvent’ after L Brands loss revealed

Lingerie brand Victoria’s Secret needs to reinvent itself, says retail analyst Neil Saunders, commenting in the wake of a US$42.8 million loss by its parent L Brands.

“The brand is simply not connecting and resonating with consumers in the way that it once did. Its overt sexuality, its focus on airbrushed glamour, and its dark-and-moody stores are completely out of step with the mood of most modern consumers,” said Saunders, MD of GlobalData Retail.

“However, this is not a new phenomenon, Victoria’s Secret has been out of kilter for a long period of time – and has seemingly done very little to bring itself back into line.”

Sales at Victoria’s Secret have fallen in seven out of the last eight quarters, mainly due to its weak diffusion brand Pink, launched in 2002 and aimed at college-aged women.

“In Pink, fashion errors in loungewear have driven a recent deceleration in performance,” the company admitted in its earnings statement.

L Brands’ third-quarter results showed an increase in same-store sales of 4 per cent across the group, to $2.77 billion, but Victoria’s Secret store sales fell by 2 per cent.  

The top line was boosted by L Brands’ Bath & Body Works brand. But one-off costs from the closure of Henri Bendel, impairments at Victoria’s Secret and ongoing losses in the La Senza business drove the net loss.

Saunders described the Victoria’s Secret performance as disappointing, “not only with the sales numbers but by the inertia within the business”.

He said much of the brand’s failure to change came down to embedded attitudes within management.

“The recent insensitive comments about transsexuals from chief marketing officer, Ed Razek, in a Vogue interview characterise the problems. Not only are such remarks bad for the brand’s image, but it also earned a sharp public rebuke from the CEO of more incisive rival ThirdLove which has been stealing share from Victoria’s Secret for some time.

“In theory, the departure of Jan Singer as CEO should help herald in changes someone coming in will have fresh ideas about reviving the fortunes of Victoria’s Secret.”

L Brands has appointed John Mehas from lifestyle brand Tory Burch as the new CEO of Victoria’s Secret. He will take up the role early next year.

Pink CEO Denise Landman retired after the release of the L Brands half-year results and she was replaced on October 1 by former Bath & Body Works president for merchandising and product development, Amy Hauk.

“Our new leaders are coming in with a fresh perspective and looking at everything … our marketing, brand positioning, internal talent, real estate portfolio and cost structure,” said CEO Leslie Wexner.

Saunders said Bath & Body Works was a stark contrast to the core brand.  

“The company’s wholesome brand image and its focus on small indulgences are paying real dividends – especially in a consumer economy where shoppers have more money to treat themselves. Its strong range development which means assortments are constantly changing encourages regular visits to online and stores. It also means that the company is good at jumping on trends like aromatherapy-based scents and the ongoing popularity of candles. Second, good marketing and promotions help to drive volumes through the business,” said Saunders.

“Both of these things stem from the fact that the BBW team is much more attuned to the market and consumer trends than is the case at Victoria’s Secret. Indeed, the cultures at the two divisions could not be more different, and we believe that Victoria’s Secret should take a leaf out of its sister brand’s playbook as it looks to reinvent itself.”

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