Can Victoria’s Secret Get Its Sexy Back? The Jury Is Still Out On That

Victoria's Secret has dented parent L Brands' performance. — Victoria’s Secret sales and profit continue to decline, showing no sign of reprieve. (Photo by Bob Levey/Getty Images for Victoria’s Secret)

Getty Images for Victoria’s Secret

Victoria’s Secret’s fall from grace has little signs of easing, and the turnaround of the once hot label looks to remain a matter of if, and not when.

Comparable sales at Victoria’s Secret in the fiscal second quarter that ended Aug. 3 fell a worse-than-expected 6%, led by a 9% decline at its stores, parent L Brands reported late Wednesday. Customer visits also dropped.

That performance extended a string of mostly declines the lingerie chain has seen since 2016. Victoria’s Secret’s Pink label targeting college-age customers was another culprit as comparable sales there slumped in the low-double digits.

Increased discounts and extended semi-annual sales to clear out Victoria’s Secret’s unsold merchandise also took a toll on the companywide margin and profit. The unit, once L Brands’ biggest income generator, posted an 86% slide in second-quarter operating profit to $16.6 million—not even one tenth of the companywide total.

Sister chain Bath & Body Works continued to outperform in sharp contrast: The personal-care products chain increased operating income by 7% to $180 million after its comparable sales rose 8%.

“Our number one priority continues to be improving performance at Victoria’s Secret,” L Brands said in prepared remarks late Wednesday.

Still, what the brand long identified with sexualized images should stand for remains a big question, especially in an era where a growing crop of rivals touting size-inclusive choices and real-life untouched images of customers are increasingly resonating with today’s consumers.

Victoria’s Secret, though still No. 1, saw its share of the growing $13 billion U.S. lingerie market decline to 24% in 2018 from 32% five years earlier. American Eagle Outfitters’ Aerie label, in one poignant contrast, has doubled its U.S. underwear market share during the same period, according to Euromonitor.

Fixing brand image is just one thing on Victoria’s Secret’s to-do list. Its turnaround also depends a big part on proving it’s got the right merchandise. On the brand’s Facebook page, many customers continued to complain about a decline in product quality and customer service.

“I’ve noticed over the years the quality of clothing has went downhill,” a Facebook user named Annette White Irby said recently on Victoria’s Secret’s page. “The bra’s straps are so stretchy within a short period of time…. Definitely noticed the poorer quality throughout the store in the last 5+ years. Disappointed!”

L Brands, having admitted Victoria’s Secret has a problem, has named two new executives to lead its namesake lingerie and Pink labels respectively. The company said Wednesday they “have made significant changes” to its fall merchandise, which began to arrive in stores two weeks ago. In some comforting signs, the company said it saw some improvement in Pink results versus spring while customer response to its new namesake assortment “has been favorable.”

The company’s long-time marketing chief Ed Razek, who last year made controversial remarks about not considering using transgender models at its famous “Angels” graced fashion show before apologizing, reportedly also has announced his plan to resign. As to the brand’s over-hyped and sexualized fashion show itself, one of its “Angels” reportedly has said it won’t take place this year.

Investors are waiting for more details to emerge when the Columbus, Ohio-based company plans to host a meeting on Sept. 10. L Brands stock has lost 80% of its value since peaking in 2016.

“Victoria’s Secret is at a very critical juncture in its existence,” said John Zolidis, president of independent investor advisor Quo Vadis Capital in a note, adding he plans to travel to the meeting. I “want to see first-hand if the company has the wherewithal and courage to transform its brand image from an elitist-aspirational positioning to the body-positive approach working with women today.”

He won’t be the only one watching for that.