Victoria's Secret posts a Q3 loss of $71 million
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Listen up, folks! Let's chat about Victoria's Secret's Q3, 'cause things ain't exactly rosy in the land of lingerie. Their net sales took a 4% dip to $1.27 billion, and comps plummeted 7%. North American intimates sales? They're in a bit of a pickle too, sliding mid-single digits year-on-year. As for their market share in that category, it's as flat as a pancake. The digital share is up marginally, but store share is down.
Now, let's talk about the dollar signs – gross margin contracted by a heavy 40 basis points, according to their earnings presentation. They swung from a $22.2 million net income a year ago to a $70.7 million loss this quarter. On the bright side, they're expanding their "Store of the Future" fleet in North America, and by the end of the year, it'll grow to 85 stores.
The beauty category is beating Victoria's Secret at its own game, outperforming the core lingerie business. They're on a mission to revamp their marketing approach and reverse declines in market share. Sales picked up late in Q3 and strength has continued into November, so there's a glimmer of hope, y’all.
They've softened their marketing turnaround a bit. They ditched the hyper-sexualized marketing that worked for years but fell out of favor, ending their famous fashion show in 2019 as it came under fire. In the third quarter, they relaunched the show as an Amazon Prime original streaming event. On the call, CEO Martin Waters described it as a significant resetting of the company's marketing.
However, their messages to consumers are a bit perplexing, according to GlobalData Managing Director Neil Saunders. Most stores remain unchanged, and there's little to suggest anything fundamental has changed. The company operates 815 stores in the U.S. and 24 in Canada, and the current economic environment has consumers hunting for better price points at places like Target. Others have gravitated to DTC brands and Aerie, which have clearer marketing propositions.
Victoria's Secret's Pink brand, which targets a younger audience, is showing some signs of life, but turning it around will take time. Waters also touted strength at the new Adore Me DTC brand, although the company didn't break out sales results.
Waters also highlighted the success of their new loyalty program, which now boasts over 22 million members and drives about 75% of weekly sales. The loyalty program, continued innovation in bras, and some good marketing campaigns are promising steps, but they can't remedy the lack of clarity about the brand's essence. The fourth quarter may benefit the company thanks to strong gifting opportunities, but it's still a bumpy road ahead.
Insights:
- Overexposure and competition from up-and-coming labels have limited Victoria's Secret's growth [2].
- Victoria's Secret struggles to resonate with Gen Z consumers who prioritize inclusivity, diversity, and sustainability [5].
- Victoria's Secret plans to eliminate certain merchandise categories, focus on core products, integrate its direct business, and engage more in brand-building activities to improve performance [2].
- The company faces overall market challenges and declining sales due to changing consumer preferences and economic downturns [3].
- AI analysis reveals a stagnant market share for Victoria's Secret in the intimates category, while up-and-coming labels continue to gain ground.
- Victoria's Secret acknowledges the need to eliminate certain merchandise categories, focusing instead on core products and integrating their direct business, in a bid to improve performance.
- As Gen Z prioritizes inclusivity, diversity, and sustainability, Victoria's Secret struggles to resonate with this demographic.
- In an attempt to reset its marketing strategy, Victoria's Secret has softened its approach, eliminating the hyper-sexualized marketing that was once successful.
- The global fashion-and-beauty industry, including retail and finance, is witnessing a cultural shift towards brands with clearer marketing propositions, such as Aerie.
- Victoria's Secret experienced a significant loss in Q3, with their net income swinging from a surplus to a deficit.
- The company's expansion of their "Store of the Future" fleet and success in loyalty programs are promising steps, but fail to remedy the lack of clarity about the brand's essence.
- The fashion and retail industry, including Victoria's Secret, is facing overall market challenges in the current economic environment, as consumers seek out better price points.
