A trend towards simplification and narrower focus is emerging in the quarterly earnings reports of some of the world's biggest brands. We've heard it from Gap, Ralph Lauren and Burberry this month, and now we're hearing it from Victoria's Secret.
The lingerie giant's first quarter earnings report (or, rather, that of its parent company L Brands) was highly anticipated thanks to a recent Buzzfeed scoop revealing that it was planning to eliminate swimwear. Indeed, the company confirmed the elimination of swim as well as shoes, accessories and apparel — basically everything that had been offered online and varied by stores. The company has also completely restructured what's left: Victoria's Secret Lingerie, Pink and Victoria's Secret Beauty are now distinct businesses with their own executive leadership. Digital will be integrated into each unit; and once remaining swim, accessory and apparel inventory is sold, the company's offering will be the same online as it is in stores. Approximately 290 people have been laid off as a result.
While it may be beneficial in the long run, these changes are going to hurt the company's bottom line in the short term. The categories being eliminated contributed about $525 million in sales last year according to the company and profits will suffer as those products get marked down (though it's good news if you're in the market for a sexy swimsuit!).
To hopefully save money, the company also plans to cut down on promotions and significantly reduce the circulation of the catalogs that most likely introduced you to Victoria's Secret back in the day. Apparently, the company tested the elimination of catalogs in several cities and it had no meaningful impact to sales.
As for how Victoria's Secret did this past quarter: well, not great. Sales at the brand were up by 2 percent while profits decreased by 7 percent, with Pink showing the strongest momentum of the "core" brands and beauty showing the weakest. Expect a major ramping up of that business as the company restructures throughout the year.