Victoria’s Secret’s Next Move
5th January 2021

There’s no doubt Victoria’s Secret’s recovery plans are in full swing. The lingerie giant has added a string of senior-level hires over the last few months, updated the assortment and marketing materials, sold a majority stake of Victoria’s Secret U.K. business to Next plc and closed hundreds of unprofitable stores to make way for more lucrative markets, such as Milan and Israel. 

Parent company L Brands Inc. has trimmed about $400 million in expenses by reducing the corporate headcount, and it announced plans to spin off Victoria’s Secret — including the Lingerie, Beauty and Pink divisions — into a private company, helping unlock value from the successful Bath & Body Works brand. 

Victoria’s Secret window for holiday 2020. AP

So far the plan is working. Shares of L Brands are up roughly 110 percent year-over-year. But can the momentum hold? And will Victoria’s Secret be able to continue to reinvent itself despite a history tainted with scandal and increasing competition from so many entrants to the innerwear world? 

“While brand health has been damaged, it does not appear to be irreparable given that VS remains the share leader in women’s intimates,” Ike Boruchow, senior retail analyst at Wells Fargo, wrote in a note. “Trends may be beginning to shift now that new leadership and ownership is in place at VS and Pink, and meaningful changes (right-sizing store base, cost cutting initiatives) are being made to the business. 

“Our better VS assumptions are largely driven by improved profitability as a result of VS’s cost-cutting initiatives and better execution (fewer promos and better product acceptance),” Boruchow added.  

Jay sole, equity analyst at UBS, said in a separate note, “[L Brands] much better-than-expected [third-quarter, fiscal year 2020] result caused a big jump in our [fiscal year] 2020 [earnings per share] forecast, to $2.22 from $1.23. The main driver of the [fiscal-year] 2021 and [fiscal-year] 2022 [earnings per share] estimate increases are a more bullish view of Victoria’s Secret margins, given the progress [L Brands] has made over the past three months.”

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