Victoria’s Secret is struggling, but it’s not just because of rising competition from brands like American Eagle Outfitters’ Aerie.
The top U.S. lingerie brand, famous for its “Angels” and its glittering annual fashion show, reported a 1% drop in comparable sales for the five weeks ending July 7, attributed to lower demand for its bras and the Pink label for college-aged customers. This decline continues a trend of mostly falling sales since 2016.
Even more troubling, when excluding online and direct sales, in-store comparable sales dropped 6%. Victoria’s Secret, which accounts for more than half of parent company L Brands’ revenue, had nearly 1,200 stores in the U.S. and Canada as of June’s end. By contrast, sister brand Bath & Body Works saw a 10% increase in June comparable sales.
Shares of L Brands fell 12% on Thursday, halving their value for the year.
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What spooked investors? The decline occurred despite extending Victoria’s Secret’s semi-annual sale by two weeks due to a “soft start with negative traffic levels.” The longer sale period failed to boost traffic and sales, and deeper discounts reduced profit margins significantly. Excess inventory, which increased 20% per square foot, hints at future markdowns.
What’s behind Victoria’s Secret’s fall from grace? During its peak, Victoria’s Secret was so promising that L Brands sold its other apparel chains, like Express and The Limited, to focus on Victoria’s Secret and Bath & Body Works, believing these brands were less subject to fashion trends.
However, Victoria’s Secret’s downfall can be traced to several strategic missteps. In March 2016, the company cut its “non-core” categories, such as swim and apparel, which had combined 2015 sales of $525 million. They also stopped producing their catalog, which had a circulation of nearly 250 million in 2015, and reduced direct mail promotions for panties and bras.
As consumers seek more authentic brands, Victoria’s Secret’s airbrushed images of supermodels seem out of touch. Brands like Aerie, with their unretouched images of real people, are gaining favor.
Despite being the top U.S. lingerie brand, Victoria’s Secret’s market share dropped by 2 percentage points to 28.8% over five years through 2017, while Aerie’s share grew by 0.4 points to 2.3%, according to Euromonitor.
The bigger issue may be that Victoria’s Secret has lost its edge in the fashion market. In recent store visits, I noticed the absence of popular products and salespeople questioning the logic behind replacing trendy sports bras with bland alternatives. A saleswoman pointed out that a new lace panty line with mesh panels tears easily, and subtle changes in the popular Body by Victoria line disappointed loyal customers.
One customer, Aischa Simon King, expressed her frustration on Facebook, saying, “It seems the company has gone downhill… VS used to sell the cutest clothing and shoes, and their bras were the best… I was really disappointed that I could no longer buy VS clothing, and now it seems they have drastically changed the style of my favorite bra.”
Ultimately, having the right products will be the key to Victoria’s Secret’s revival.
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