Victoria's Secret Misses Out on Retail Surge -- 2nd Update
August 23 2018 - 4:53PM
Dow Jones News
By Khadeeja Safdar
Count Victoria's Secret as a retailer that hasn't sparkled in
the booming economy.
The lingerie brand reported lower comparable sales for the
latest quarter, dragging down results at its parent company, L
Brands Inc. The company also said comparable sales declined at teen
brand Pink, which is part of Victoria's Secret, and that Pink's
leader would be leaving at the end of the year.
Analysts on a conference call Thursday peppered executives with
questions about the Victoria's Secret marketing message, softness
in the Pink business and the company's heavy use of discounts.
Jan Singer, who is head of the Victoria's Secret lingerie
business, defended the company's strategy, saying that the
most-recent additions to the product lines are performing well.
"What's new in the assortment is what's working, and we are very
focused on leveraging these learnings to accelerate our progress
going forward," she said.
Shares in L Brands fell 11% to close at $28.25 on Thursday.
Since she joined Victoria's Secret, Ms. Singer has launched bra
styles emphasizing comfort and fit, in an attempt to appeal to
shoppers looking for more natural looks. But the company has
continued to struggle. The latest results come as a robust U.S.
economy is spurring more people to open their wallets, boosting
retailers as diverse as Home Depot Inc. and Nordstrom Inc. Walmart
Inc. and Target Corp. both had their best quarterly performances in
years.
Victoria's Secret was once a top performer in the retail
industry, powering years of growth with images of busty models at
its more than 1,000 largely mall-based stores. Two years ago, L
Brands CEO Leslie Wexner took charge of the brand and announced
changes that were intended to ensure it didn't suffer the same fate
as other specialty brands.
He shifted away from catalog mailings, exited the lingerie
brand's well-known swimsuit business and doubled down on sports
bras to address the rise of the so-called athleisure trend. Mr.
Wexner later hired Ms. Singer to help execute the strategy.
The brand is still struggling as young consumers now prefer more
authentic marketing and garments that resemble crop tops, with
simple sizing and lower prices. It is also facing new competition
from niche competitors and entrants such as American Eagle
Outfitters Inc.'s Aerie brand, which uses more natural-looking
models.
Despite resorting to heavy promotions, Victoria's Secret has
struggled to draw customers to its stores. Recently, those troubles
have spilled over into Pink, once a bright spot that drew in
younger customers before they transitioned to Victoria's
Secret.
Analysts say the company has had plenty of time to execute on
its strategy and it has become more apparent that its plans haven't
played out. "The biggest surprise is Pink, which was once a quiet
but powerful driver," said Simeon Siegel, an analyst at Nomura
Instinet. "We're now seeing it hitting a ceiling."
L Brands said longtime Pink CEO Denise Landman will leave the
company later this year and be succeeded by Amy Hauk, a
merchandising executive at Bath & Body Works. On Thursday, Ms.
Landman said the brand is still popular among college-age women. "I
do not think, nor do I think anyone in this room believes, that
Pink has lost its ability to connect with customers," she said.
Comparable sales at Victoria's Secret declined 1% in the second
quarter from a year earlier, and the brand's merchandise margin
rate also fell significantly across all major categories as the
company used promotions to drive traffic and clear inventory.
Nearly half of the stores run by L Brands, which also owns Bath
& Body Works, are also in second- and third-tier malls. In an
interview earlier this year, Mr. Wexner defended the large fleet of
mall-based stores, saying that the demise of brick-and-mortar
locations has been overstated.
For the year, L Brands lowered its earnings-per-share guidance
from between $2.70 and $3 to between $2.45 and $2.70. It predicted
third-quarter earnings per share between zero and five cents.
Write to Khadeeja Safdar at khadeeja.safdar@wsj.com
(END) Dow Jones Newswires
August 23, 2018 16:38 ET (20:38 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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