(Filed Under Financial and General Interest News). Victoria’s Secret and Pink comparable store and direct sales in North America fell 4% in the 13 weeks ended October 28, and were down 11% for the first 39 weeks of the fiscal year.
Total sales for Victoria’s Secret and Pink stores in North America fell from $1.286 billion in the third quarter last year to $1.243 billion this year. Meanwhile, sales in the first three quarters fell from $4.136 billion in 2016 to $3.841 billion for the first 39 weeks of fiscal 2017.
Victoria’s Secret and Pink direct sales were $295.9 million in the latest quarter, compared to $298.2 million in the third quarter last year. Direct sales for the brands in the first 39 weeks of fiscal 2016 were $1.056 billion compared to $878 million during the same period this year.
The company explained that “For the third quarter ended October 28, 2017, the exit of the swim and apparel categories had a negative impact of about two percentage points to both total company and Victoria’s Secret comparable sales.”
Parent company L Brands net income in the third quarter fell sharply to $85.985 million on slightly higher sales of $2.618 billion compared to a profit of $121.640 million on sales of $2.581 for the thirteen weeks ended October 29, 2016. L Brands also owns Bath & Body Works, La Senza and Henri Bendel.
In the conference call with analysts, Jan Singer, CEO of Victoria’s Secret lingerie discussed the progress made in the third quarter. “We are focused and continue to be focused on the core of the business, our best act which is bras and bras balancing our portfolio with choices on sexy. Unlined, lightly-lined and push-up are all in the portfolio. The strength of the core is constructing bras with benefits, balanced with fashion and emotional content and that’s working for us. In Q3, we launched Illusion. Illusion is a constructed bra that comes in three choices.” She noted the new bra offers “sexy smoothing and it has high emotional content. The bra exceeded unit launch and continues to sustain at a higher rate than our previously constructed bra launches. It’s working and we will stay on that offense. In addition, in the bra category, Dream Angels, a very important portfolio for us, has been up double-digits on three constructed bras as well, romance, lace, embellishment, all working. We are going to continue to offer her choices in the bra category.”
Singer noted that the company is “resetting” its pantie programs explaining that “we’re very excited to see the progress on this reset already happening.” She said there has been progress in the sleep category where there are two initiatives. “One we’ve been testing for six months in the Mix-and-Match and one that we do every year called Packaged Goods. Mix-and-Match is an incremental business. It has rolled to the chain and it is working. We are excited that she can make her own solutions of sleepwear. She’s attaching it to bras in the box as well as panties, and we are seeing a high penetration of new customers. In addition, in Sleep, we have a Sexy Sleep business which is 100% on trend.” She claimed, “It’s been up double-digits for us in the last quarter and we see that continuing as we head into holiday and spring.”
Singer moved on to sport, stating that it is a “growth driver for us, up double-digits as well. The base business is also growing and it’s a new customer. The anchor to that in Q3 was the launch of the Angel Max Bra. The Angel Max Bra launch was strong. In the first single day did more than our best sport bra launch did in one full week. We continue to see that build. It’s attaching to tights, multiple tights and tops. A very simple sport construct, a new customer, and we’re excited to see that business continue to grow.”
Elsewhere in the call, Singer said the store’s “loyalty program, Angel Card, has been reactivated and reengaged and we’re seeing momentum in that space.”
Asked about Victoria’s Secret’s latest promotional efforts, Singer explained, “first and foremost, our job is to protect the core and strengthen the core of the business. We feel good about that and the margins are strong there. We have brand accretive promotions which enable us to do three things. Number one, introduce the new customer to the store and the new product; I feel good about that. Number two, we are reengaging with customers we haven’t seen in about 12 months. That feels also very strong. We’ve had great success there. And we will always surprise and delight an existing customer, things like giving her a lip product when she tries an Illusion bra, feels good for both of us and the customer. That is what we’re talking about when we are talking about promotions. We are doing both direct mail and digital. Direct mail has a very strong flow through for us. She’s spending time with that piece and she’s coming in.”
Discussing competition in the marketplace, Singer emphasized some of Victoria’s Secret’s key strengths. “What I love about our business is, we have a 1,000 stores and a strong digital flagship store. We are able to offer choices for her. Coming into the store and being fit for a bra is a unique experience with – I think we have five bra associates per store that have an average tenure of 10 years. So having that engagement and having been a person that did that for three months, eight hours a day, six days a week, there is nothing that can replace that engagement with the customer.” — NM
The complete conference call transcript can be found here: https://seekingalpha.com/article/4125508-l-brands-lb-q3-2017-results-earnings-call-transcript
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