Spilling the Tea on Victoria's Secret's Q3 Bump and Beyond
Straight Up Facts:
- Victoria's Secret tanked its Q3 net sales by 4%, settling at $1.27 billion. Comp store sales plummeted a chunky 7%. The intimates department in North America slumped mid-single digits YOY.
- The company's gross margin plunged 40 basis points to 34.3%, as per their earnings presentation. They flipped from a $22.2 million net income a year back to a $70.7 million loss.
- They tossed 71 more "Store of the Future" shops into North America, aiming to smash 85 by the end of this year.
Insights on the Beauty Beat:
Victoria's Secret experiences a substantial net loss of $71 million during Q3.
While Victoria's Secret's core lingerie game is stumbling, the beauty category is slaying it. The retail powerhouse continues its bid to revamp its marketing approach and halt declines in market share. Sales climbed late in Q3, and the mojo's kept pumpin' into November, according to CEO Martin Waters.
The Storm Before the Calm:
Victoria's Secret took a beat to soften its marketing turnaround, stepping away from hyper-sexualized advertising, which had its day but lost favor. The brand tossed its iconic fashion show in 2019 as it faced increasing criticism and the #MeToo movement, and they rebooted the show as an Amazon Prime original streaming event in the third quarter.
Waters shared his thoughts on the rebranded event, stating, "We smashed the media circuit – mission accomplished. We're part of the conversation shaping popular culture now, where we were previously off the map." Yet, consumers might find the brand's messaging a bit perplexing, with stores still looking the same, suggesting little's changed.
Mixing Up Messages:
GlobalData Managing Director Neil Saunders noted that Victoria's Secret's messages to consumers are somewhat muddled. "All this just creates confusion and chaos, hurting sales," Saunders said. The company operates 815 stores in the U.S. and 24 in Canada, with store counts rising due to the expansion of the "Store of the Future" fleet.
Victoria's Secret's continuing loss of market share partly results from the current economic environment, where consumers prefer cheaper options, like Target, and more direct-to-consumer (DTC) brands. Brands like Aerie appeal to consumers because of their clear marketing proposition.
Dish on the Dish:
The company's Pink brand, targeting a younger audience, is bouncing back but has a long road to travel toward healing the business. Waters cited the new loyalty program, strong returns on bras, and fresh marketing campaigns as steps in the right direction, though they're small strides that can't mend the brand's bigger issue – a lack of a clear, defining essence.
The fourth quarter is expected to shine for the company due to strong gifting opportunities, as per Saunders.
As the company wrestles with its identity, competition, and economic headwinds, it takes strategic steps, including leadership reshuffles, inventory management, and store expansion plans. They've also approved a share-repurchase program to buy back up to $250 million in shares over the next 12 to 24 months.
- Amidst Victoria's Secret's Q3 sales drop, the beauty category is thriving, with sales improving in November as per CEO Martin Waters.
- The brand, known for its hyper-sexualized advertising, took a break from its iconic fashion show in 2019, facing criticism, and rebooted it as an Amazon Prime event in Q3 this year.
- globaldata Managing Director Neil Saunders stated that Victoria's Secret's messages to consumers are somewhat confusing, leading to decreased sales.
- With consumers preferring cheaper alternatives like Target and direct-to-consumer brands, brands like Aerie have found success due to their clear marketing propositions.
- The company's Pink brand, targeting a younger audience, is making progress but has a long way to go in healing the business, according to Waters.
- In an effort to address its challenges, Victoria's Secret is planning strategic steps, including leadership reshuffles, inventory management, store expansion, and a share-repurchase program.
- In contrast to its previous struggles, the fourth quarter is expected to be strong for Victoria's Secret, with Saunders predicting strong gifting opportunities.
