Victoria’s Secret store model criticised as parent struggles

L Brands needs to revise the Victoria’s Secret store model, according to retail analyst Neil Saunders.

“The dark store environment, the conspicuous sexuality of the offer, and the brash marketing are increasingly out of step with what modern consumers want. As much as we appreciate that the heritage of Victoria’s Secret is hard to change, we think more action is needed if the brand is to recover,” said New York-based Saunders, MD of GlobalData Retail.

He was commenting after the release of L Brands’ first quarter figures which showed an 8 per cent increase in net sales to $2.626 billion. Comparable sales were up 3 per cent – but the company reported a 49 per cent decline in bottom line profit, from $94.1 million last year to $47. 5 million.

After a long run of declines, sales at Victoria’s Secret rose by 1 per cent, but it failed to impress Saunders, who believes the brand has structural issues to address.

“As good as it is that the brand is back in positive territory, it earns no applause – mainly because the increase came off the back of a 14 per cent comparable decline in the prior year. Moreover, comparable sales in physical stores fell by 5 per cent, following a 12 per cent decline last year.

“To be fair to Victoria’s Secret, the work done to reset the business has likely helped to stem the tide of decline. A rebalancing of the bra offer, for example, which now includes more options that have benefits around fit and comfort as well as the traditional fashion bras, has helped to create interest.

“Equally, there has been some growth – in terms of both sales and customer numbers – from categories like sleep and loungewear. These adjacent products are helping to lift interest in Victoria’s Secret and give the brand more firepower in terms of what it has to offer shoppers.”

Saunders says he has issues with the tone and image of the brand, especially the dark design of stores.

“We do not feel that Victoria’s Secret has made anywhere near enough effort to remedy the problems.”

Rival brands like Aerie are more subtle in their store design and marketing approach and that is resonating with consumers, delivering strong growth, he says.

“A further threat comes from the rise of specialists like Adore Me and Third Love. The latter in particular has gained a lot of ground by focusing on comfort. It is also a model that works well online because its focus on fitting means returns are low which, in turn, supports good margins. These niche players may only have a small market share compared to Victoria’s Secret, but their innovative approaches mean they are nibbling away at its market share.”

Bath & Body Works “vibrant and fun”

Although it is a sister brand, Bath & Body Works is almost entirely different from its sibling, says Saunders.

“Its proposition is welcoming, vibrant and fun. This helps to drive loyalty and repeat custom. With beauty sales still growing, BBW does operate in a more robust part of the market but it is still outperforming and growing its share on both a total and comparable basis.

“Two things underpin its success. First, its strong range development which means assortments are constantly changing. This encourages regular visits to online and stores.

Second, good marketing and promotions which help to drive volumes through the business. In our view, both of these things stem from the fact that the BBW team is much more attuned to the market and consumers than is the case at Victoria’s Secret.”

Saunders says he believes Victoria’s Secret will continue to struggle in the year ahead.

“With more investment needed in the brand and some cost pressures, we think the outlook remains soft for the L Brands group.”


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