Victoria’s Secret sees opportunities in maternity merchandise and fashion show revival

Currently, both Victoria’s Secret and Bath & Body Works are under the L Brands Inc.
LB,
+1.75%
umbrella. Bath & Body Works will become Bath & Body Works Inc. trading under the ticker “BBWI.”

See: Victoria’s Secret shows how reluctance to embrace the plus-size market can hurt an apparel business

“[W]e’ve redefined the vision and the purpose and the mission of the company. And our vision is pretty ambitious. It is to be the world’s leading advocate for women,” said Martin Waters, chief executive of Victoria’s Secret Lingerie, according to the FactSet transcript of the virtual Victoria’s Secret investor meeting that took place this week. Bath & Body Works also hosted an event.

Victoria’s Secret has already announced the launch of a women-focused brand ambassador panel, VS Collective, that includes names like U.S. soccer player Megan Rapinoe and actor, producer and author Priyanka Chopra Jonas.

The company has also remade the board to include more women.

Now the company is looking to its merchandise lineup to correct errors that led to the brand’s “lost relevance with the modern woman,” Waters said.

“There’s maternity, a business that we’ve not previously been in, because in defining the business as being solely about sexy, maternity wasn’t appropriate,” he said. “When we define the business about being about advocacy for women, of course, maternity is an important part of the business.”

Also: Lululemon sets itself up for growth with moves into menswear, shoes and Mirror home fitness: Goldman Sachs

The company is also looking into opportunities in shapewear and bridal.

The re-evaluation also extends to the in-store imagery, which has led to the “removal of images that no longer reflect the positioning of the brand.”

Still, the company says it could revive its fashion shows. The Victoria’s Secret Fashion Show saw its ratings slide before the event was eliminated. The shows would be a different spectacle from the previous version.

“[W]e have historically had a very significant amount of our marketing spend that was around the fashion show, and we saved that money in the last two years,” Waters said. “Our intent is to get back into the fashion show business.”

Another hurdle for the brand has been its mall-based fleet of stores. Malls experienced traffic declines even before the COVID-19 pandemic.

Now the brand sees opportunities in “off-mall” stores, 10 of which will be tested in 2022.

During 2020, Victoria’s Secret closed 241 stores, and renegotiated leases for many others.

According to its most recent monthly sales announcement, L Brands operates 2,684 company-operated stores in the U.S., Canada and Greater China with 700 more franchised around the world.

One thing that is working for the brand are fragrances. Victoria’s Secret is the top fragrance brand in the U.S., according to Waters.

“Our main takeaway from L Brand’s Bath & Body Works (BBW) and Victoria’s Secret (VS) analyst events is both brands have more top-line drivers than we appreciated,” wrote UBS analysts in a note. “This reinforces our view the market will increasingly see both brands as having better long-term growth prospects than currently believed.”

UBS rates L Brands shares a buy with a $111 price target.

Read: Estee Lauder upgraded as department store sales sink but e-commerce jumps

“Key focus areas for both brands include optimization of the store fleet, digital growth, international expansion, and product newness and relevance,” wrote Cowen analysts in a note.

“As two brands separate as public companies, we view that each brand will be able to acutely focus on driving topline and bottom-line growth, but management execution will be critical to increasing shareholder value.”

Cowen rates L Brands stock at market perform with a $70 price target.

L Brands stock has more than doubled, soaring 103%, for the year to date. The S&P 500 index
SPX,
+0.82%
has gained nearly 16% for the period.