(Filed Under wholesale Lingerie News). Total Victoria’s Secret and Pink sales jumped to $1.554 billion in the quarter ended May 1, 2021, a gain of 74% from $893.6 million in the same period last year.
Andrew Meslow, CEO of parent company L Brands, stated the firm “delivered record first quarter earnings, driven by continued strength and exceptional performance at Bath & Body Works and Victoria’s Secret. We are pleased that the momentum in both businesses has continued, driven by positive customer responses to our assortments, which allowed us to reduce promotional activity and deliver substantial increases in our merchandise margin rates.”
The company reported “Victoria’s Secret total comparable sales for the first quarter ended May 1, 2021 increased 9 percent compared to the first quarter of 2019. Comparable U.S. and Canada store sales for the first quarter of 2021 decreased 3% compared to the first quarter of 2019. First quarter 2021 sales of $1.554 billion decreased 7 percent compared to the first quarter of 2019 and reflect the net closure of 233 company-operated stores since the first quarter of 2019. First quarter 2021 sales in the direct channel were $520.9 million, an increase of 69 percent compared to 2020 and a 44 percent increase compared to 2019.”
What stood out during the earnings call to discuss the quarter was the enthusiasm of Martin Waters, the CEO of the company’s Victoria’s Secret division, who will lead the firm (which includes Pink) once it becomes a separate public company this summer. He understands the issues that led to the brands decline in the past few years, as well as what has to be done to return it to is former prominence.
To illustrate just how far the restoration of Victoria’s Secret has already come, Waters pointed out that operating income in the first quarter “is close to our historical high for a Q1, so operating income at $245 million is about where we were in 2017. Only 2016 was higher at $280 million.”
“The Victoria’s Secret business continued its transformation with an exceptional first quarter performance,” he explained later in the call. “Customers are noticing and applauding our efforts to reposition the brand. We began that work by listening both to our customers and to our associates. We heard from them what they love about our brand, including the unmatched beauty, quality, fit and innovation in our products, and we also heard clearly what they want from us as a brand, which is all about representing and celebrating all women and being there for every moment of their lives, including supporting and advocating for things that matter most to them, and that’s exactly what we’re doing.”
“We’re committed to creating lifelong relationships with customers by reflecting them, their stories, their journey in everything we do, and you’re starting to see those changes come to life, most recently with our Mother’s Day campaign, our bombshell Because campaign, and the Pink mental health month campaign, which are all great examples of how we’re reflecting, celebrating and championing our customers and the different moments and dimensions of their lives.”
He added, “We’re also heavily focused on the great work that’s being done to rebuild a happy and healthy culture at Victoria’s. While much has already been accomplished, I’m highly energized by the opportunities that we have in front of us to reposition and grow this iconic brand as a standalone public business.”
In response to a question on the call, Waters listed some of the key points in the transformation. “What’s been really working for us to drive those comps are, firstly, better merchandise, particularly with a focus on good-better-best structures and really sharp opening price points. A second thing would be the improved brand positioning, moving from a position of, frankly, being irrelevant to being relevant, to being for him to for her, being more inclusive rather than exclusive, and the customer is really noticing it and voting with her wallet, so that’s great. I think thirdly, substantially better merchandise planning and allocation. When we’re at our best, we go into the season only 50% bought and then we chase into real-time winners, and that’s worked very well for us in the back half of ’20 and into ’21. Then finally, I would say our enhanced digital capability and our store teams really showing up to make the best of the traffic that they have. Traffic is down significantly in stores, and our store teams have made a great effort to build on dollars per footstep, so those are things that have driven comp to date and will continue to drive comp.”
To expand the business going forward, Waters will spend more on marketing. “Our intention over the long run is to get back to investing about 5% of retail sales in the Victoria’s Secret brand. If you think about us as aspiring to a $7 billion brand, we’d be spending $350 million supporting that brand across a wide range of activities. What’s different about that is the way that we spend money in the modern era is completely different than the way we spent money historically, so you should see very significant change there.” He added, “You should expect that we will start to invest in digital media more fully than we have historically. You should expect that we will have people representing for our brand who are more inclusive and more diverse, who represent our customer base in a much more inclusive way than we have done historically. I think those are the key points to know.”
He added that the number of Victoria’s Secret customers is now growing. “After several seasons of decline in the size of our customer file, in the last third of the year we’ve actually seen an increase in our customer file, so that is incredibly encouraging, proof points that our repositioning is working.”
At the end of the earnings call, Waters outlined the company’s new direction. “It starts with the notion of redefining our purpose. We have a clear reason why we exist at Victoria’s now, and that is to inspire women around the world with products and experiences that uplift them and champion them and support their journey. It’s their narrative, not ours, and so how will we accomplish that? Well, we think about it in terms of creating lifelong relationships with women by reflecting what’s important to them, what journey they’re on, what stage in their life they’re at, and perhaps more importantly creating positive change for women through the power of our products and our platform, and also our advocacy.”
“Advocacy is a big, big word for us going forward, and I have a bold ambition that Victoria’s should be the world’s biggest and best advocate for women. That’s an incredibly powerful vision and mission for us to aim towards, and it’s energizing for all of our people. It does reflect a very significant turnaround from where we’ve been, where we’re moving from what men want to what women want, we’re moving from sexy for a few to sexy for all, we’re moving from a look to a feeling. It’s about including most women rather than excluding most women, and being grounded in real life rather than mostly unattainable.”
“I couldn’t underscore how significant this turnaround and this repositioning is. It’s a very dramatic change for us, and we have significant proof points already at this early stage in our journey that this is what the customer wants from us, so expect more.”
At the start of the year, Victoria’s Secret had 703 stores in the U.S. and plans to reduce that total to 655 to 675 by the end of the year. Meanwhile, it plans to reduce the number of Pink stores by two to 141.
In Canada, the number of Victoria’s Secret stores will increase by one by the end of the year to 24, while the number of Pink shops is expected to remain the same at two. The number of Victoria’s Secret stores in China is expected to increase by two to total 28 by year end. The number of Victoria’s Secret Beauty and Accessories shops in China, which began the year at 36, is expected to end the year at 35-36 through select store openings and closings. — NM
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