Analysts declared ‘game over’ for lingerie brand as L Brands Inc reported an unexpected drop in June sales
Victoria’s Secret’s angel wings aren’t beating as energetically as they once did, but you wouldn’t know that from the company’s flagship store in New York Herald Square – a superstore of underwear, bras, bralettes, giant screens of smiling winged models and whole floors of pink-colored products, including a $55 perfume called Eau So Sexy.
What could go wrong selling sexy lingerie to millions of women? A lot, it seems.
Last week, Victoria’s Secret’s Ohio-based parent L Brands reported an unexpected drop in June comparable sales for its lingerie brand, despite a lengthy semi-annual sale and deep price cuts.
Apparel and retail analysts pounced. “It’s game over” for Victoria’s Secret and Pink, Jefferies analyst Randal Konik said in a note. Consumers have moved on to more conventional brands like American Eagles’ Aerie brand, while Victoria’s Secret has seen “massive traffic declines, zero pricing power and market share losses mounting”, Konik continued.
Konik concluded that investors have been ignoring the facts and L Brands stock dropped 11%. It is now down 40% for the year. It suddenly seemed the company secret, masked by growth in the company’s teen-focused Pink line, was no longer well hidden. Victoria’s Secret is still the No 1 US lingerie brand, but its share of the market is slipping.
To make matters worse, many of Victoria’s Secret 1,200 stores in the US and Canada are located in America’s beleaugured mall system, widely seen as on the decline.
“I used to come here for the Pink line but now I go to Macy’s,” confided Yvonne Rayder, 32, from New Jersey, pulling out underwear items in the Herald Square store as she prepared for a hen party she was attending. “Their bras are ridiculously expensive, along with the rest of the lingerie.”
Rayder’s comments conform to industry surveys. A September 2017 consumer study conducted by Wells Fargo found that of 48% of customers who had shopped at Victoria’s Secret in the past year, 58% said prices were too high.
Crucially, the study found, Victoria’s Secret also “may be falling out of favor”, with 68% of respondents saying they like the brand less than they used to. More than half of those said the brand feels “forced” or “fake”. Analysts worried that sports bras and bralettes may be alienating its core customers.
“Brand imagery is now leaning toward more natural looks and relatable beauty,” analysts wrote. “However, given how fundamental the ‘sexy’ image is to the Victoria’s Secret brand, we believe a full-brand pivot to catch up with current trends may be challenging to execute.”