Sales at stores open at least a year fell 7% during Victoria's Secret's most recent quarter, parent company L Brands said Wednesday. The company's other flagship brand, Bath and Body Works, did well.
Other retailers, including Walmart and Best Buy, have performed strongly in recent months. And the economy is strong. But Victoria's Secret and its teen brand PINK have struggled.
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Victoria's Secret has failed to adapt to consumer demand for more custom-fitted bras and inclusive messaging and advertisements. Although marketing trends in lingerie have changed, Victoria's Secret has mostly stuck to the same playbook that helped it dominate the industry: push-up bras and celebrity models.
Victoria's Secret relied on heavy promotions to draw customers to its stores during the holidays - the types of discounts that generally hurt margins. L Brands CEO Stuart Burgdoefer said the company has been "more promotional than we would like over the last several years" in a call with analysts Thursday.
The difficult holiday period and planned store closures are the latest turmoil for the brand. In November, Victoria's Secret's CEO resigned. In December, its annual fashion show sunk to its worst ratings ever. The company closed 30 stores last year as it tried to escape weak malls.
The company has lost 3.8 million customers over the two past years to rivals like Amazon and American Eagle's Aerie, according to an estimate from Neil Saunders, analyst at GlobalData Retail.
Victoria's Secret's path to a turnaround looks challenging, too. L Brands' forecast for 2019 disappointed Wall Street, sending its stock down 7% in early trading Thursday. It has plunged more than 40% in the past year.
"We are taking a fresh, hard look at everything in the business," Burgdoefer said of planned changes to fix Victoria's Secret. Victoria's Secret still has more than 950 stores in the United States.
Competition in the lingerie industry has increased in recent years. Startups like Adore Me and ThirdLove have broken Victoria's Secret's grip on the industry by selling better-fitting bras and using everyday women, not models, in advertising.
"It's an attractive category," Burgdoefer said of the lingerie business.
Big retailers also threaten Victoria's Secret. Target launched a new bra and underwear brand for women and teenage girls called Auden on Monday. Auden bras will cost $22 and under. Lululemon and Walmart have also expanded their efforts in the space.
The company did not rule out ending the fashion show or using more inclusive marketing. But shifting its identity could prove difficult, said Janine Stichter, analyst at Jefferies.
"People identify Victoria's Secret with what's it been for the last 20 years - very sexy and airbrushed models," she said. "If they were going to pivot now, I don't think it would come off as authentic. They don't have a great option."
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