Jul 13, 2018
Victoria's Secret: "It's game over," says analyst
Jul 13, 2018
The Victoria's Secret angels, lavish shows and extensive promotions don't seem to be the lifeline the brand had hoped. In June, sales for the well-known lingerie brand fell by 1%, and the alarm bells started ringing: the competition is eating up market share and Victoria's Secret is losing ground, threatened by Amazon’s ultra-popular low-cost bras and by the changing tastes of women, who are ditching push-up and underwire bras in favour of simpler products.
''It’s game over,” bluntly put it Randal Konik, an analyst at New York financial services firm Jefferies. Investors have so far failed to face facts, bewitched by Victoria’s Secret’s allure, and that of its world-renowned angels. They have ignored the lingerie label’s slow-down in sales, a fact for several months, and the thrust of an increasingly aggressive competition.
In particular, they underestimated Amazon, thinking that the lingerie sector would be safe from the e-tail boom. But it now evident that Pink, the label targeting younger consumers, has managed to conceal Victoria's Secret’s decline for years. Pink’s growth phase is now over, and teenagers - according to Konick - prefer Aerie by American Eagle. The data is crystal clear: in the last 16 quarters, Aerie has always outperformed Victoria's Secret.
To complicate matters further, women’s tastes are changing. They are now looking for cheaper, less elaborate products, preferring underwire-free bras and happily doing without push-up effects, to the detriment of Very Sexy, Victoria's Secret’s most popular line.
June's unexpected sales shortfall has hit L Brands, Victoria's Secret’s parent company: its share price lost 11%, making it a 40% drop since the start of the year. ''Mid-year promotional sales got off to a weak start, with negative footfall figures,'' said Amie Preston, who is in charge of investor relations at L Brands. “In response to this, we extended the sales period by two weeks and slashed prices, to increase footfall and reduce stock, causing margins to decrease significantly,” added Preston.
What is worrying is that this trend isn’t likely to reverse, at least in the short term: until now - according to analysts - Victoria’s Secret has managed to control the market because of the difficulty many women have in picking the right bra size. Now that web services make life easier for them, buying a bra online is no longer a problem.
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