23 Jan L Brands Is Trying To Revive Victoria's Secret's Brand Appeal But It Might Need To Do More
Going by its first nine months’ results, L Brands’ ( LB ) performance has been disappointing in fiscal 2017, so far. The parent company for Victoria’s Secret (VS) and Bath & Body Works ( BBW ) has been on a slump ever since its restructuring efforts began in 2015. Victoria’s Secret’s exit from swimwear and apparel to focus solely on bras is still hurting its sales. Even though BBW continues performing well, VS Stores is the most important segment for the company as it derives close to 50% of its revenues from this segment. The weak performance in this segment is hurting the company. The VS Stores and VS Direct together make up almost 80% of our valuation of L Brands. Though VS is currently undertaking many growth initiatives to revive its performance, the brand messaging of the company might also need to be in sync with the sensibilities of its buyers in order to lure customers. We have a $60 price estimate for L Brands which is higher than its current market price.
How Is Victoria’s Secret Trying To Revive Its Performance?
The decline in traffic in the North American brick-and-mortar stores has been a major cause for concern for VS. In order to revive the performance of its lingerie segment, the company had appointed Jan Singer as the Lingerie CEO in September 2016. Ms. Singer mentioned some of the strategies that the company would be undertaking to address the weak demand in the lingerie segment, such as better understanding of the customers’ demands in order to make the products more relevant and relatable to them, providing greater freedom for the users to shop by focusing on more efficient teams, strengthening of its core bra business, and focusing on the holiday season during the end of the year. VS is also focusing on providing the most innovative and fashionable bras, in all its segments.
Does VS Need A Change In Brand Messaging?
L Brands is taking more than the expected time to recover from its ongoing slump. Analysts are constantly downgrading its share price on account of the declining prices of its bras and a weak store traffic footfall. The poor performance is likely to continue in the near future and currently companies such as American Eagle owned Aerie (in lingerie and bras segment) and Nike and Under Armour (in the sports bra category) are significantly outperforming Victoria’s Secret’s performance.
It should also be mentioned that Victoria’s Secret has come under fire several times in the past for not catering to a diverse range of body types. Lingerie makers such as New York based AdoreMe are not only poaching Victoria’s top designers to offer the same products at a more reasonable rate but they are creating lingerie catering to women of diverse body sizes . In the past, Victoria’s Secret’s ‘perfect body’ advertisement, depicting toned, slim models as the ideal body type, was not well received, and the company has been criticized for it. Hence, the fading appeal of VS lingerie might also lie in the fact that it is not listening to the demands of the women of today. VS may need to make more products catering to the sensibilities of its current crop of customers in order to draw more buyers to its products.
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