Victoria's Secret CEO: 'The haters have gone away'

Dive Brief:

Victoria's Secret on Wednesday reported that fourth quarter net sales rose 3.6% to $2.2 billion, with comps up 1% (and up 12% in brick-and-mortar stores).
Net income dropped 12.9% to $246.1 million, according to a company press release.
The lingerie maker is set to release a new digital-first brand aimed at tweens dubbed "Happy Nation" that will feature "undies, first bras, comfy clothing, and body care that parents and tweens can feel good about," according to its earnings presentation.

Dive Insight:

In a conference call with analysts Thursday morning, Victoria's Secret CEO Martin Waters declared victory in the company's effort to catch up to the times by moving away from the highly sexualized marketing and merchandising that had so many customers shopping elsewhere in recent years.

"The haters have gone away," he said.

Waters brushed aside the idea that the brand's about-face lost it any customers, despite early warnings from some quarters that it would be too drastic. While Victoria's Secret experienced falling sales and loss of market share in recent years, it has retained its position as the global leader in the lingerie segment.

"When we first announced our repositioning, we got a significant amount of mail from people who said, 'This is terrible, you're scorching the earth, you're spoiling your brand. We love the way it was before. Why are you changing it?'" he said, adding that those critics tended to be men and "people who don't subscribe to the values that we subscribe to."

When it comes to merchandising, however, the brand may be holding on to its past to a meaningful degree, even as it becomes more inclusive and responsive to consumer demand, according to Jane Hali & Associates analysts. Victoria's Secret now offers period underwear, maternity and mastectomy bras, and is focusing on trends like activewear, loungewear and shapewear, according to Jane Hali research.

"As [Victoria's Secret] evolves their brand image and product assortment, the assortment has improved, but we are not seeing consistency," they wrote in emailed comments. "We are noting most of the assortment in-store and online still leans to an overly sexy look."

Changes to its brick-and-mortar strategy are also substantial. Victoria's Secret plans to incorporate some elements of a new store concept introduced last year into stores this year and next and continue its move away from the mall. All 15 of the new stores planned for this year will be off-mall locations of about 5,000 square feet, compared to its traditional 8,000- to 10,000-square foot mall stores, Waters said.

"We have a very high penetration of our store portfolio in malls right now, and we have a low penetration off malls, and that gives us opportunity," he said.

The company promised more information on its tween line in April. It remains to be seen whether the new brand cannibalizes its Pink banner, but it's poised to appeal to an under-served customer and its messages could compete with American Eagle's successful Aerie brand, according to Jane Hali & Associates retail research analyst Jessica Ramírez.

"We will have to wait and see what the assortment and messaging of the brand look like," she said by email. "However, the Pink brand speaks to a teen/ older teen consumer. The tween market is usually missed by brands due to sizing across products and messaging. A lot of Aerie's success outside of product, has been due to the messaging and feel of the brand."