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current news

VS Mailing Catalog, May Return To Swim


(Filed Under Financial and General Interest News). Victoria’s Secret is again mailing a print catalog (which, in a face saving measure, it insists on calling a “magalog”). And it may bring back swimwear, a category it announced it was exiting a couple of years ago.

This and other information was contained in the recent conference call with analysts to discuss the quarterly earnings for parent company L Brands, as well as a related news report.

Striving to avoid ever mentioning the word “catalog,” the print version of which was discontinued in 2016, Jan Singer, CEO of the Victoria’s Secret division, paid strong, indirect tribute to the famous printed underwear compendium that had previously been such an important part of the company’s success. “We’re reaching new customers through brand-accretive promotions and opportunities that connect with our girl. And we’re increasing our reach and have tested and rolled a new magalog to existing, new and lapsed customers. We have seen a higher response rate to this piece, to the vehicle itself, than our traditional CRM [customer relationship management] efforts.”

Later in the call she added, “So we’re investing in the opportunity to develop a piece that she actually, we’re finding, keeps around the house a little bit longer, has longer engagement, has had a higher response for us than the traditional CRM. So as the product continues to evolve and we have stories to tell and we have connections and information to share, we want to make sure that we’re getting that information out to her as an existing customer as well as a new customer as well as a lapsed customer. So we feel really strong about the test that’s happening. We’re going to watch it, and we’re going to calendar how many and how often go forward.”

Although L Brands recently announced it will be eliminating swim from its Pink division, there may be a different future for that category at Victoria’s Secret. In answer to a question asked by Citi managing director Paul Lejuez, CFO and EVP Stuart Burgdoerfer himself asked rhetorically, “Is there ongoing dialogue from time to time out about the potential of bringing swim back per se? Yes, there is from time to time.” Part of the argument in favor of offering swimwear again is that is that it gives consumers an extra reason to come back into its physical stores. And Victoria’s Secret has suffered a serious decline in that store traffic and sales in the past two years.

A follow up article in the New York Post quoted Lejuez as saying “I believe there is some internal debate about swimwear. Several senior executives would like to bring it back.” The report noted his observation that Victoria’s Secret “has recently backtracked on previous decisions to get rid of promotional mailers.” The retailer has recently been mailing consumers brochures that contain multiple paper coupons.

Just a year ago, in a similar conference call, Burgdoerfer had declared of the 2016 decisions, “So, in terms of the significant changes that we made at Victoria’s Secret, are we considering reversing or stepping back from any of those changes? The short answer is no. We feel very good about the decisions that we made and that they are the right changes to drive focus and accelerated growth for the business.”

This May Burgdoerfer admitted, however, “the 2016 strategic changes we made in Victoria’s were significant, and we’re still dealing with the impacts, particularly in negative store traffic trends and the resulting increase in promotional activity as we work to build the customer file.”

He added, “operating income declined by 26%. Our performance was mixed. Growth in operating income at Bath & Body Works versus last year and our forecast was more than offset by a decline at Victoria’s Secret. We’re not satisfied with this result and are very focused on improving performance at Victoria’s Secret.

The conference call provided additional insights into the thinking of the L Brands executives. It is worth noting the obnoxious amount of company jargon contained in some of the remarks; it was as if the lingo was intended show mastery of the situation despite the poor results.

Denise Landman, CEO of Pink, provided an overview of her division’s “Q1 results and my thoughts about our outlook leading into Q2. Overall, Pink’s Q1 comps were down low-single digits, driven by the early portion of the quarter, with performance improving late in the quarter due to strong customer acceptance of our go-forward assortment. Decline in swims, which is a non-go-forward category, had a distorted impact on our soft performance in the quarter. Bras and panties were about flat to last year. Bra performance was dominated by Wear Everywhere, sport and our Date bra relaunch. Panties were strong across all silhouettes and collections, driven by fashion and newness. Apparel had areas of success and disappointment. Our sport apparel assortment was strong throughout the quarter, while early in the quarter, portions of our lounge top and bottom business mixed -- missed expectations. Despite the soft quarter, recent performance against our go-forward strategies give us confidence. We’re encouraged by our most recent apparel floor set and our Date relaunch. In June, we will relaunch a new and improved Wear Everywhere bra. And the brand continues to focus on growing our customer file and operating our business with speed and agility.”

Jan Singer of Victoria’s Secret, referred to the “significant changes” in her division’s business in 2016 (which, in addition to the elimination of the print catalog and announcing the exit of swim, included the abrupt departure of CEO Sharen Jester Turney and a curtailment of promotions such as coupons and free panty giveaways). “Those changes resulted in challenging performance and a loss of high-value dual-channel customers. And while we have made progress, we have much more work to do to deliver VSL growth and profitability.”

She pointed to success with two products: “We launched the Illusion bra, which is a significant incremental collection and has met or beat its plans since launch. It’s the highest-AUR [average unit retail] constructed bra, and it’s margin accretive. We reset T-Shirt Bra by reducing the frame choices by half, improving the fit, and continue to see sales almost double from the original collection. We have taken price up twice since the launch due to demand and continue to watch that franchise closely. In addition to bringing innovation, we’ve delivered fashion through new product introductions in Dream Angels, which is up double digits for the quarter with positive margin dollar contribution.”

Singer continued, “We’re encouraged by this progress on bras. But again, we recognize it’s not sufficient. We have a full pipeline in play, and we’ll continue to evolve the business of bras, creating long-term profitable growth and new loyals. In panties, the total panty sales for the quarter are up mid-single-digit for the second consecutive quarter. The largest book of business in the ‘five for’ panty has been reset, as we discussed last call. We reduced the number of fits by 50%, have delivered two quarters of double-digit top line and bottom line growth. And we’re using the ‘five for’ learnings to reset now the ‘3 for’ business using speed and agility as our offense.”

Singer explained elsewhere that “sleep and lounge is now a 12-month business, with casual sleep up high double digits for the quarter in sales and margin. Sport apparel has been reset and continues to grow mid-single digits and continues to bring new customers. Sport bra sales were softer in this quarter. We are now balancing the innovation of those bras with more fashion choices go forward.” Another improvement: “We’ve increased our Angel Card acquisition in the quarter single digits and continue to build back high-value dual-channel customers.”

Martin Waters, president of L Brands International, made three observations about his division, which includes Victoria’s Secret Beauty and Accessories (VSBA) stores, as well as full line Victoria’s Secret stores in China. “Firstly, the partner-based businesses are doing well, with good sales and operating income growth. Secondly, we continue to invest in China, which we believe will be a very significant market for us. VSBA stores and e-commerce are doing well. And the seven full-assortment stores, five of which opened in the fourth quarter, are progressing about in line with our initial expectations. And thirdly, the U.K. business continues to be very challenged, and we have a lot of work to do there to fix it.”

Later he added, “as it relates to the U.K., the decline has been significant. As a reminder, it’s in three areas. Firstly, the same pattern as we see in the domestic business. Secondly, I think you will have read about the very poor market that there is in the U.K., and we’ve certainly been exposed to that with reductions in traffic all across the U.K. And thirdly, there’s an element of our own execution where we need to do much better. So no hiding from the fact that it’s a very significant reduction in the U.K.”

Near the end of the call, Singer responded to questions from analysts about “losing that high-value dual-channel customer,” and “why you lost them and where they went and how you’re going to get them back.” She declared, “I mean, the high-value dual channel customer, we look at age. And yes, some of them have been with us, and some of them have just left the brand by natural attrition. Some folks have left the brand due to the categories that we exited and the categories that we slowed down. And so we want to make sure that we bring in a new customer. And we’re doing that quite aggressively.”

She is relying on more promotions and the new bras attract new consumers, and revealed that many of the newcomers have been “much younger, younger than we anticipated.”

And in Singer’s efforts to understand that younger shopper “the social channels are critical for us, and we’re seeing incredible improvement from our engagement, which means not just ‘likes’ but actually commentary and conversion. We’re happy about that. The tone and manner of that channel is evolving. And I make it my personal business at 4 a.m. to be reading each one of them, so I stay pretty close to social as the world is, and I feel good about the direction it’s going in.” — NM

The full earnings call transcript can be found here: https://seekingalpha.com/article/4176910-l-brands-inc-lb-ceo-martin-waters-q1-2018-results-earnings-call-transcript


more Financial and General Interest News >>

Published 05-30-2018 by Nick Monjo

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VS Mailing Catalog, May Return To Swim
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Victoria’s Secret, Pink January Comps Up 4%
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