(Filed Under wholesale Lingerie News). September sales rose 4% at Victoria’s Secret stores in the U.S. and Canada, while sales at Victoria’s Secret direct rose 5%. Parent company L Brands, Inc., which also owns Bath & Body Works, La Senza and Henri Bendel, “reported net sales of $853.5 million for the five weeks ended Oct. 4, 2014, an increase of 9 percent, compared to net sales of $786.0 million for the five weeks ended Oct. 5, 2013.”

Beyond the sales numbers, two recent company presentations provide much more detail as to where and how continued growth in the lingerie sector has been achieved by L Brands. And what has been working for Victoria’s Secret can provide potential insights for the rest of the industry.

In the earnings call for Q2 2014 on August 21, Victoria’s Secret CEO Sharen Turney discussed several successful aspects of her business. One area is sports bras. “I’m very excited about sport,” she said in answer to an analyst question. “The full assortment will be in—go from 118 to, I believe, about 180 stores this year, so we are very excited.” Citing the new zip and click front closure system the company recently introduced, she added, “all of the technology that we have going into our sport bras are very, very important. We are performance-based. Everything we do is performance-based and in all the innovation as we go forward as well, really looking at owning that from a patent perspective. Excited about the growth opportunity that we have in sport, both in the store and the direct channel.”

About the recent addition of swimwear to its stores, which had previously only been offered in its direct channels, Turney noted, “We have not seen a deterioration of swim by expanding it into the store, and in fact it’s really been a one-plus-one-equals-two, or two and a half, being able to use the direct channel as advertising.”

Another major improvement Turney pointed to was Victoria’s Secret’s ability to jump on trends by getting new merchandise into stores more quickly. “We worked very hard, whether it’s your raw materials partners or your manufacturing partners, to really set up something which I think is a very unique proposition. We probably have cut all of our manufacturing and lead times in half and continue to see opportunities. Panties is obviously our fastest category of growth – we’ve been able to get bras anywhere, if it’s a basic bra, fashion bra, down anywhere from three to seven weeks. So there’s always more and more opportunity as we look at supply base because we really try to think about it, as Charlie McGuigan [COO if L Brands] likes to say, is that as they were manufacturing right next door to us. It takes a lot of coordination between all of our merchants, planners and our supply base to be able to do this, and we really believe it is a competitive advantage for us.”

Another area of its lingerie business that has proved particularly profitable is the PINK division (whose sales numbers are sometimes combined into Victoria’s Secret). So far this year L Brands has added only a net two Victoria’s Secret stores in the U.S. (raising the total to 979 as of October 4), but it has opened a net 25 PINK stores in the U.S. (raising the total to 108 during the same period) and another 10 PINK stores in Canada. According to documents presented at The Deutsche Bank 22nd Annual Leveraged Finance Conference in late September, “PINK freestanding store productivity is more than $1,100 per square foot” for the stores opened so far, compared to productivity of “about $800 per square foot” at Victoria’s Secret.

PINK has a younger focus than Victoria’s Secret, and is defined on the L Brands website as “the dominant aspirational lifestyle brand celebrating college women and campus life. The assortment includes sleepwear, loungewear and bras and panties designed to appeal to the spirit, humor, optimism and self-confidence of the girl who wears, loves and lives PINK.”

Although company executives insist the primary focus of the company is on its U.S. business, interesting growth is taking place internationally. During the August earnings call, Martin Waters, president of the international division, noted that in his sector, “Sales increased by 71% to $79.3 million and operating income more than doubled to $16.9 million.” He added that these results include both the company’s wholly owned business in the U.K. and franchised business in other regions.

L Brands started the year with five Victoria’s Secret stores in the U.K. and will end the year with 10, according to the Deutsche Bank presentation document. It started the year with four Victoria’s Secret International stores (operated by a franchise partner) and plans to end the year with “13-15.” It started the year with 198 Victoria’s Secret Beauty and Accessories (VSBA) shops (operated by other franchise partners, and often located in airports) and plans to end 2014 with “287-297.”

The only lingerie segment where the number of stores is declining is La Senza. In Canada the firm started with 157 stores and plans to end the year with 144; in other parts of the world it had 331 locations at the end of 2013, but plans to end this year with “257-264.”

“Sales and operating income growth was achieved across all of our formats,” said Waters. “At Victoria’s Secret International, we continued to be pleased with performance of our full assortment stores. In the U.K., our London flagship store on Bond Street continues its exceptional performance, and we’ve begun construction to expand this store. Our six mall locations are also doing well and we’ll be opening another three stores this calendar year in the U.K., with one store having slipped from our prior forecast to spring 2015.”

“Elsewhere in the world, we opened another two stores in the quarter under our partnership with Alshaya, bringing the total to eight. These stores continue to do very well and we’ll be opening another five to seven this year across the Middle East and Turkey.” He continued that “Our Victoria’s Secret beauty and accessories (VSBA) business continues to progress well...We are on track to open nine VSBA stores in China at the end of this year.”

Referring to the international market, Waters added in the August conference call, “we see a ton of opportunity in the regions that we’re already in...so with the Alshaya business across the whole of the Middle East and Turkey, we see potential over the next few years to get to 40 or 50 stores. So again, rather than look at other geographies, I’d rather build out where we are right now. The same would be true in the U.K. where we own the stores.” Later in the call he added, “With that said, we get some incredibly positive responses from the VSBA business around the world that indicate that there will be great business for us in the full assortment, so the two areas that I’m thinking about in the years ahead, one would be China obviously as we open the VSBA business later this year. I think that bodes well for full assortment in ’15 or ’16, and similarly in western Europe this year, we’ll open our first off-airport VSBA stores in western Europe, and that could well be a lead indicator for the full assortment business in the future.”

Completing its report on September, 2014 sales, L Brands reported that for all divisions, “Comparable store sales increased 6 percent for the five weeks ended Oct. 4, 2014.” In addition, for the 35 weeks ended Oct. 4, 2014, the company reported sales of $6.685 billion, “an increase of 7 percent compared to net sales of $6.275 billion for the 35 weeks ended Oct. 5, 2013. Comparable store sales increased 4 percent for the 35 weeks ended Oct. 4, 2014.”

[The full conference call transcript can be found here: http://seekingalpha.com/article/2442135-l-brands-lb-on-q2-2014-results-earnings-call-transcript?page=1]

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Published 10-09-2014 by -