Dive Brief:
- With sales softening particularly in North American stores, Victoria’s Secret & Co. on Wednesday reported Q1 net sales of $1.4 billion, a decrease of 5.2% year over year. Total comparable sales were down 11%.
- Gross margin missed the company’s own expectations, contracting 10 basis points to 36.5%. Net income plunged 95% to $3.8 million.
- On a rolling twelve-month basis, the company’s domestic market share in bras was flat to last year, while its market share in panties was down, according to a quarterly commentary. The company said its merchandise remains a domestic market share leader in intimates.
Dive Insight:
Victoria’s Secret was prepared for a “challenging macro environment” as the company entered the year, according to CEO Martin Waters.
While the retailer saw business grow internationally, particularly in China, sales in North America sales were “more promotional than planned,” Waters said on an earnings call regarding the quarter.
Victoria’s Secret may “be better served to sell less and charge more to earn more,” BMO Capital Markets Managing Director Simeon Sigel wrote in an analyst note. Additionally, DTC player Adore Me, which Victoria’s Secret recently acquired, likely lifted gross margins “suggesting an even greater underlying disappointment,” Simeon said.
Adore Me represented around 5 percentage points of sales growth in Q1. The brand is positioned to have an impact on the company’s overarching tech goals.
“We’re about to kick off a test of having Adore Me product on vs.com,” which will begin later in June, Waters said.
Additionally, Pink is preparing for a relaunch, which “required a complete overhaul,” Waters said. The brand ended the quarter down low double-digits compared to a year ago, with casual sleep and intimates outperforming apparel. The upcoming relaunch will focus more on outerwear, which needs to be “dramatically refreshed” after being heavily reliant on a logo-forward approach. New merchandise for the brand will drop at the end of Q2.
The company merged its Victoria’s Secret and Pink brands last year, naming longtime Pink chief Amy Hauk to lead the operation. Hauk left in March after less than a year.
The retailer expanded its new loyalty program, The VS & Pink Collective, nationwide on Thursday. The pilot of the refreshed marketing strategy was introduced in February and offers rewards, member exclusives, digital community features and added benefits for cardholders.
