Victoria’s Secret makeover is more than deep skin
After years of declining sales and closeness to scandals, Victoria’s Secret is losing her modeling wings and hiking solo. Good news for investors: its stocks do not appear to have peaked.
Victoria’s Secret officially started operating as a stand-alone company last Tuesday after it split from L Brands. Its shares have jumped 25% since their public debut, giving the company a market cap of around $ 5 billion. Yet they are recovering a modest eight times the anticipated profits over 12 months. This is a significant discount from Hanesbrands and American Eagle Outfitters, which have the second and third largest women’s underwear market share in North America, according to Euromonitor International. Victoria’s Secret is # 1.
The brand made two dazzling announcements in June, including a list of brand ambassadors filled with activists instead of its scantily clad angels. He also set up a new board of directors of seven members, including six women. But it’s the behind-the-scenes work that deserves the spotlight. The company has been quietly going to work for some time, changing its outdated marketing message, reducing inventory and halting promotions. He also brought back his popular swimwear business and closed less productive stores. Maternity and shapewear, which were strictly prohibited in Victoria’s Secret past, are now also sold.
For those wondering if these efforts are bringing customers back, the answer is an unequivocal yes. The company sold more in its first fiscal quarter than it did in the same period before the 2019 pandemic, an impressive reversal from a decline it had seen in the years leading up to the 2019 pandemic. pandemic. This was despite the permanent closure of 241 stores in 2020 and the withholding of marketing dollars. Its operating margins, on an adjusted basis, fell from 1% in 2019 to 15% in the first fiscal quarter, a return to profitability levels last seen in 2016, its last year of growth. This is only slightly below the operating margins of Nike and Lululemon in their last quarters.
Much has been said about a growing pool of competitors like ThirdLove, Lively, Negative and Cupp, all of whom embraced comfort and inclusiveness long before Victoria’s Secret. While such a message was new and fresh a decade ago, it is now a prerequisite for brands, not a distinguishing feature. A social media marketing war – a common occurrence among new direct-to-consumer brands – could well lead to losses among so-called anti-Victoria’s Secret brands.