(Filed Under wholesale Lingerie News). In its 2015 annual report, as well as in a recent investor handout, L Brands, parent company to Victoria’s Secret, Pink and La Senza, revealed how it plans to grow its lingerie brands over the next year.

L Brands, which also owns Bath & Body Works and Henri Bendel, generated a total of $12.2 billion in sales last year, of which company-owned Victoria’s Secret and Pink stores in North America contributed $6.1 billion and the direct business for those brands contributed $1.6 billion. (La Senza sales are listed separately and are lumped into an “other” category with Henri Bendel and other divisions, with the entire category sales totaling $510 million).

L Brands plans to increase the amount of Victoria’s Secret and Pink store square footage by 4% in 2016. Perhaps the most significant addition will be the opening, in November, of what is said by Vornado Realty Trust, “a 63,780 square foot flagship store” at 640 Fifth Avenue, between 51st and 52nd Streets in Manhattan, with 78 feet of frontage on Fifth Avenue and three selling levels.

Another aspect of the expansion will be the opening of “13 net new Victoria’s Secret stores primarily in the U.S.,” including the flagship in Manhattan. As of January 30, 2016 there were 990 Victoria’s Secret stores in the U.S. and 37 in Canada. There were also 12 company-owned shops in the U.K.

An overall goal for the Victoria’s Secret and Pink stores is to increase the lingerie assortments in many stores. The company noted “about 800 stores do not carry the full lingerie assortment” in the bra, panty and sport categories.

This year L Brands is also planning to “right size Pink” noting that “about 550 stores do not carry the full Pink assortment.”

Pink, launched as a brand targeting younger girls in 2002, has been a particularly successful addition for the company. Pink is sold in Victoria’s Secret stores and in free-standing Pink shops. While Victoria’s Secret stores, according to a chart in the investment handout, are generating about $850 per square foot annually (with an average size of 8,000 square feet per store), Pink stores generate $1,300 per square foot (with an average size of 3,400 square feet per store).

Said L Brands chairman and CEO Leslie Wexner in a letter appending the annual report, “Pink had an exceptional 2015. Truly “Olympic” performance across all categories of the brand and reaching a milestone of more than $2.5 billion in sales – doubling in size during the last five years.” He added, “We have been increasing square footage for Pink by expanding existing lingerie stores and opening free-standing Pink stores … and the returns have been tremendous … expansions are yielding returns of more than 25%.”

As of January 30 there were 128 Pink stores in the U.S., 9 in Canada and 2 in the U.K. The company claimed that “Pink is the leading specialty collegiate brand – More than doubled sales in the last 5 years”

An interesting note is that as of January 30, L Brands claimed that 99% of all of its full price stores that have been open a year or more are “cash flow positive on a after tax cash basis.” 2728 stores met that criteria; only 24 did not.

Overall, the company touts its “inventory discipline, lead-time reductions, open to buy and in-season agility” and its philosophy of “test, read, react and chase” that have led to “increased sales and reduced markdowns.” Elsewhere in the annual report it stated, “We emphasize rapid turnover and take markdowns as required to keep merchandise fresh and current.”

Another area of future growth for Victoria’s Secret is in the sports bra category. Wrote Wexner, “We are determined to lead the sport bra market.”

For L Brands as a whole, Wexner thinks he can come close to doubling its size. “As I said last year, best-in-world performance looks like $20 billion plus in sales at a 20% operating income rate … and I know that with our brands and our people, we will reach our goal.”

Victoria’s Secret plans significant expansion with its outside partners and internationally. In 2015 outside partners “opened 83 net new Victoria’s Secret Beauty and Accessories stores [VSBA], bringing the total to 373.” This year, the company added, “Our partners plan to open 70 to 85 net new Victoria’s Secret Beauty and Accessories stores in 2016.” The VSBA stores are usually about 1000 square feet, are located in airports and malls and carry only limited amounts of lingerie.

In 2015 L Brands “opened four company-owned Victoria’s Secret full-assortment stores in the U.K., bringing the total in the U.K. to 14. In 2016, we plan to open four additional Victoria’s Secret full-assortment stores and one Pink store in the U.K. Additionally, a partner opened three Victoria’s Secret full-assortment stores and two Pink stores in the Middle East in 2015, bringing the total to 19. Our partners plan to open 14 to 20 more stores in 2016, including four to six Pink stores.”

An interesting trend for the company is the reduction of the number of suppliers from which it buys. “During 2015, we purchased merchandise from approximately 400 suppliers located throughout the world. No supplier provided 10% or more of our merchandise purchases.” Seven years ago L Brands had more than twice as many. “During 2008, we purchased merchandise from over 1,000 suppliers located throughout the world,” it stated in that year’s annual report.

Another trend for L Brands is the modest reduction in the amount it is spending on advertising and catalogues. “Catalogue and advertising costs amounted to $502 million for 2008, $507 million for 2007 and $594 million for 2006,” it noted in its 2008 annual report. In the 2015 annual report it stated, “Advertising and catalogue costs totaled $414 million for 2015, $436 million for 2014 and $452 million for 2013.”

L Brands does not break out the amount spent on catalogues or the number it mails out. That used to be different. The company noted in the annual report for the year 1997, it had, for Victoria’s Secret, “mailed approximately 425 million catalogues.” Likewise in its 1999 annual report the company boasted of distributing “36 billion catalogue pages.”

The annual report stated of the company’s lingerie business, “We believe a large part of our success comes from frequent and innovative product launches, which include bra launches at Victoria’s Secret and La Senza.” The report added, “Our merchant, design and sourcing teams have a long history of bringing innovative products to our customers. Additionally, we believe that our sourcing function (Mast Global) has a long and deep presence in the key sourcing markets including those in the U.S. and Asia, which helps us partner with the best manufacturers and get high-quality products quickly.”

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Published 05-13-2016 by Nick Monjo