Things have gotten so bad at Victoria’s Secret that its parent company is tightening the purse strings, including shuttering dozens of underperforming locations.
L Brands Inc., owner of the lingerie chain, announced Wednesday plans to close about 53 Victoria’s Secrets in North America this year, more than three times the 15 it’s historically closed down in an average year. Victoria’s Secret square footage in North America will drop by about 3 percent, it said, even as it continues to grow the footprint of its more successful Bath & Body Works chain.
“Given the decline in performance at Victoria’s Secret, we have substantially pulled back on capital investment in that business versus our history,’’ the company said in written earnings commentary after reporting disappointing holiday-quarter results.
L Brands shares fell as much as 8.9 percent on Thursday, the biggest intraday drop in more than a month and erasing the year-to-date gains it had logged through Wednesday.
The rough patch isn’t new: Victoria’s Secret has been under scrutiny for years for failing to keep up with shifting consumer demands, especially involving themes of female empowerment and diversity.
But its reticence to change has been made even more pronounced with the emergence of competitors like Rihanna’s lingerie company Savage X Fenty, American Eagle Outfitters Inc.’s Aerie and ThirdLove, which aim to be more inclusive of women of different shapes, sizes and backgrounds. The road only gets harder from here: Major retailer Target Corp. announced earlier this week plans to launch three new private-label brands specializing in low-cost underwear and sleepwear.
A weak holiday quarter only heightened the need for change. Comparable sales were down 3 percent at the retailer, dragged down by a 7 percent decline from in-store sales. Its PINK brand, once a favorite of younger shoppers, saw a low-double digit same-store sales slide in the fourth quarter, while lingerie was flat in what’s normally a big gifting period. Across all categories, increased discounting intended to drive traffic meant margins took a major hit.
On the back of the tough quarter at Victoria’s Secret, L Brands said it sees total company profit, excluding some items, in a range of $2.20 to $2.60 this year. That’s well below the average estimate from analysts. Late last year, the company announced it would slash its dividend in half, a move Wall Street called surprising but prudent.