Dive Brief:
-
L Brands on Thursday posted surprisingly weak preliminary first quarter results at its lingerie brand Victoria’s Secret, sending shares plummeting.
-
In Q1 through April, Victoria’s Secret same-store sales dropped 1%, while analysts surveyed by Retail Metrics estimated a 4% increase, according to Bloomberg.
-
Earnings in the period came in at the top of L Brands' own estimates of 50 cents to 55 cents per share, but analysts expected an average of 58 cents.
Dive Insight:
L. Brands' stable of brands also includes PINK, Bath & Body Works La Senza, and Henri Bendel, but Victoria’s Secret is its de facto flagship, and has been a dependable brand for years.
Until now, that is. In fact, Wall Street was so shaken by L Brands' Thursday report in part because Victoria’s Secret in particular seems vulnerable. Shares fell 12% late Thursday afternoon to $70.85, a 52-week low. That was L Brands' worst tumble in six years, according to Bloomberg.
“Comparable sales misses at L Brands are rare,” Guggenheim Securities analyst Howard Tubin said in a note Thursday, according to Bloomberg. “Softer beauty and core lingerie sales dragged down overall Victoria’s Secret comparable sales.”
In February, longtime Victoria's Secret CEO Sharen Jester Turney stepped down, and L Brands CEO and chairman Leslie Wexner took the reins. Victoria's Secret subsequently announced job cuts, a shift away from its longstanding print catalog and major merchandising changes in an effort to restructure.
The Wall Street Journal reports that Citi analysts warn Victoria’s Secret sales could remain weak throughout 2016, but noted that others consider its recent restructuring moves necessary for a turnaround, despite their negative short-term effects.
Wexner needs that kind of patience, considering the major adjustments being made at Victoria’s Secret as well as upheaval in the lingerie space as a whole.
The athleisure trend that has transformed athletic gear into an all-around fashion choice has extended to underwear, with comfort and fit as much a consideration as slinkiness. That brands like Jockey and Lululemon are increasingly adding pretty touches to their well-fitting pieces only undermines frillier brands like Victoria’s Secret all the more.
And while Victoria’s Secret catalog has emphasized the effect on its lingerie on the male gaze, those athleisure brands plus others are actively running against that mindset. Plus-size apparel retailer Lane Bryant, for example, runs the “I’m no Angel” campaign to combat Victoria’s Secret's skinny-model “Angel” approach, and American Eagle Outfitters' Aerie brand has eschewed photoshopping any images in its marketing materials, an approach it says has resonated with customers.
Then there are upstarts like Adore Me, whose brand development director has said it’s gunning for Victoria’s Secret, although that brand is getting some pushback regarding its controversial “VIP” membership model. In any case, it will take some time for Victoria’s Secret to figure out where it fits in this evolving environment.