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current news

Victoria’s Secret, Pink February Comps +2%


(Filed Under Financial and General Interest News). Victoria’s Secret and Pink North American comparable store sales fell 6% in February. However, when the brands’ strong direct business is added to the store results, there was a 2% total increase.

Amie Preston, chief investor relations officer at parent company L Brands, explained that in February the two brands registered “growth in lingerie and beauty. Pink comps were about flat. The merchandise margin rate was down significantly to last year driven by additional promotional activity in order to drive traffic.”

Looking back at the fourth quarter 2017, Victoria’s Secret and Pink North American comparable store and direct sales fell 1%. They were down 8% for the full year 2017.

Total sales for Victoria’s Secret and Pink stores in North America were $5.879 billion for the 53 week fiscal year ended February 3, 2018, compared to $6.199 billion for the 52 week fiscal year ended January 28, 2017. Direct sales for the two brands fell from $1.582 billion in 2016 to $1.508 billion in 2017.

Parent company L Brands earnings in 2017 fell to $982.986 million on total sales of $12.632 billion compared to $1.158 billion on sales of $12.574 billion in 2016. L Brands also owns Bath & Body Works, La Senza and Henri Bendel.

In the conference call with stock analysts to discuss the fourth quarter, Jan Singer, CEO of Victoria Secret, declared, “While results overall were down, we improved sales and margin throughout the year from down high single-digits in Q1 to down mid-single-digits in Q4. This progress was led by a deep focus on the customer and products, starting with the core, our bra business. Based on continued engagement with the customer, we continue to rebalance the bra mix, offering her choices of bras with benefits, balanced with high-fashion in constructed and unconstructed. This was led by launches of Illusion, Angel Max, T-Shirt, and the results here were sales growth in our constructed bra business.”

Singer listed various areas of improvement, including resetting the brand’s panty business, growth in the “sport business,” success in attracting new customers with “casual sleep and lounge” and “progressive growth” in the digital arena.

She concluded, “We’re proud of the progress, but also recognize there’s much more for us to do, as we continue to reset this business.”

Looking forward at the rest of 2018 Singer explained “we’re focused on continuing to strengthen the core with bras with benefits, balancing with fashion, and we feel optimistic.” She cited the “fashion pipeline,” improvements in the panty business and a new marketing team as factors that will lead to success this year.

Answering a question from an analyst about the “decline in the unstructured bras,” Singer noted that bralette sales were strong in the first two quarters of last year, and that the company is working on “balancing our mix.” She added, “I would say the more velocity we have on constructed, the faster we can get there, but we’re still in a balancing mode and the bralettes are still part of our mix. But I’m very confident in the bras that we are launching and those driving a rebalance in the time needed.”

In the same conference call, Denise Landman, CEO of the Pink brand, said, in the fourth quarter, “bras and panties, both drove mid to high single-digit growth versus last year, while expanding margin rates. Bra sales and unit growth were driven principally by our Wear Everywhere and sports franchises, driven by a strong fashion offering. Panties were also strong across all silhouettes and collections, driven by continued newness.”

Commenting on the holiday season she said “gifting collections” drove “strong double-digit growth versus last year on an expanded margin rate.”

“Apparel had areas of success and disappointment. Therefore, we would characterize our apparel performance as mixed. Key packages related to opulence, cozy and bling,” she continued, “performed very well and experienced high sell-throughs. The balance of the apparel assortment, however, disappointed our self-purchaser, and we’re applying those learnings to our go-forward assortment architecture. Therefore, in aggregate, Pink’s Q4 comps were up slightly and category performance, as mentioned, was mixed. Despite this result, we continue to feel positive about the strength of the brand and our ability to serve and emotionally engage our customer.”

Martin Waters, president and CEO of international operations at L Brands, spoke during the call about expansion outside of the U.S. “We continue to invest in China, which we believe will be a significant market for us. VSBA [Victoria’s Secret Beauty and Accessories] stores and e-commerce through the Tmall platform are both doing well. And the seven full assortment [Victoria’s Secret] stores, five of which were opened in the fourth quarter, are progressing pretty much as we expected.”

He noted that “the UK business was very challenging for us in 2017.” The company has five Pink stores in the U.K. as well as 19 Victoria’s Secret stores there and in Ireland.

Waters continued, “In 2018, our priorities with respect to international are: firstly, continuing to scale in China, where we’ll open another 10 to 11 stores; secondly, improving our performance in the UK; and finally, continuing to build on the success of our partner-owned stores globally.” In all, L Brands lists 813 partner-owned stores around the world.

Waters explained that the company’s China expansion is “anchored with three flagships that enhance the presence of Victoria’s in China, in Hong Kong, in Shanghai, in Beijing, and then opening smaller mall-based stores at sort of 5,000 to 7,000 square feet in all of the major tier 1 to tier 2 cities.”

There “will be significant growth year-over-year,” in 2018, he predicted. “We’ll read through the early part of Q1, Q2 and then make commitments for 2019 beyond that.”

Waters emphasized Victoria’s Secret moved cautiously into the country. “When we opened the lingerie business in China, we started with two stores deliberately, just two stores, in different geographies, so we could get a read on what was happening with the sizing. As you would expect, we anticipated that the customer would come up smaller than in other parts of the world and we distorted merchandise accordingly. Well, as soon as we opened, we realized that we hadn’t distorted anywhere near enough. The customers’ significantly smaller than we see anywhere else in the world, and that shows up particularly in 32 band bras.”

He said that the five Victoria’s Secret stores most recently opened in China, “opened with at least 50% of their bra inventory in 32 band or smaller.”

The company’s online business in China has gone through three phases, he continued. Initially it was shipping from the U.S. with a 14 day lead time. “We then morphed to Tmall Local, which is shipping on a next-day basis and business has been growing very rapidly. It is now more than our largest store, as one might expect, and we’re seeing growth day-on-day, week-on-week, and a really, really good response to that. We’ll, also, this year, be adding a China.cn site so that we can direct customers directly from all social media platforms to our own site.”

Also during the conference call, L Brands CFO Stuart Burgdoerfer revealed “we’re making substantial investments in what I’ll call the core technology platform for the Victoria’s Secret digital business. It’s a platform we’ve been running with for a long time that needs to be updated, and we’re in the process of updating that. And it will provide the foundation to do a lot of things from a customer standpoint that we’ll look to do over the next several years.” He added the improvements will “give us a foundation for global business over time on that same platform, but 2018’s investment is a significant one, but I would describe it as foundational.”— NM

The complete conference call can be found here:

https://seekingalpha.com/article/4152489-l-brands-lb-q4-2017-results-earnings-call-transcript?page=1


more Financial and General Interest News >>

Published 03-08-2018 by Nick Monjo

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