Dive Brief:

• In its first earnings period since splitting from L Brands this year, Victoria's Secret on Wednesday reported that third quarter sales rose 6.5% to $1.4 billion year over year, according to a company press release. Sales fell 9% compared to nearly $1.6 billion in the third quarter of 2019, reflecting the closure of around 260 stores since that time. 
• Net income was $75.2 million, down from $143.3 million in the year prior. In-store sales for the quarter in North America were up nearly 22% to $920.3 million, compared to last year's $755.2 million, while direct sales were down 13.5% to $406.3 million. Comparable sales for stores were up 7%, while comp sales for stores and direct channels were flat for the quarter. 
• Going into the season, the company ordered around 200 million units of product, and 90 million units are held up, according to CEO Martin Waters. "That's 45% of our purchase requirements for the fall season delayed," Waters said on a call with analysts.

Dive Insight:

Like most retailers, Victoria's Secret is experiencing supply chain disruptions. 

On an earnings call with analysts, Waters went further into detail about that friction, stating that delays are between two and nine weeks. "In some cases, we won't get the merchandise at all. So all of our plans are being reworked. Ninety percent of our merchandise will come by air. And that won't be super quick because air in the old days — meaning a year ago — used to be two days is now more like nine days." 

Martin also said that the company had 100 vessels currently anchored that are not coming ashore. Categories like pajamas are being impacted — 25% of that product category is late. 

"Today we have 30% less PJ's in our system than we had a year ago. That is clearly bad for business. And so it impacts the consumer in that she doesn't see the array of newness that she's used to seeing this time of year," Waters said. 

That means more buying forward with longer lead times and less agility in the supply chain. It also means reworking plans on a daily basis to work with the products the company does have on hand. "With all of that said, the customer doesn't care," Waters said. "She doesn't come into our shops and say 'Oh I see they've got some delays.' So our job is to just make the best out of the assortment that we've gotten." 

In August, the company realized that some product may not make it in and canceled around 10 million units. But, Waters said, the retailer is confident that holiday merchandise will come in on time, even if it has some carry over product like pajamas, robes and slippers, into January. The CEO said he wasn't "overly stressed" about markdowns. 

Waters this summer said the company knew it lost relevance with modern women, and outlined a plan to transform its marketing and branding elements of the past to be more focused on empowering women. The company launched its VS Collective to replace its infamous angels as part of those efforts. The collective includes a number of powerful and influential figures that are meant to help shape the brand's merchandising and messaging. They include Megan Rapinoe, Priyanka Chopra Jonas, Adut Akech and others, with the addition of tennis star Naomi Osaka announced this week. 

"What's clear is there's a lot of energy in the organization to evolve product, marketing, and culture, and management has demonstrated meaningful progress already in an early stage," Roxanne Meyer, managing director of MKM Partners, said in an emailed statement. 

The refocus on empowerment is resonating with consumers, according to the company. For the third quarter, about 46% of its customers were new to the business. "That shows that we're speaking to a new community. And, as you know, speaking to millennials and Gen Z is our target, rather than necessarily winning back consumers," Waters said.