What to Watch: Victoria’s Secret’s Continued Transformation

Victoria’s Secret isn’t giving itself a makeover as a New Year’s resolution. After all, the lingerie and beauty company has been evolving its look for the last few calendar years. 

Once part of L Brands, which also owned Bath & Body Works, Victoria’s Secret began losing revenues and falling out of favor with consumers in 2017, right around the time the #MeToo Movement began to gain traction.  

A series of events — including L Brands’ founder Leslie H. Wexner’s association with registered sex offender Jeffrey Epstein; former L Brands’ chief marketing officer Ed Razek’s less-than-flattering comments regarding plus-size and transgender models in late 2018; a look that many considered outdated, and more than a few digital bra brands ready and eager to take share — didn’t help much in Victoria’s Secret’s mission to get back on track. 

After a deal to sell a majority stake of the Victoria’s Secret Lingerie, Beauty and Pink businesses to private equity firm Sycamore Partners fell through, the retailer regrouped and thought of a new plan: Spin off the more lucrative Bath & Body Works operation from the lingerie and beauty businesses in order to unlock investor value in both brands. 

Last August the plan became a reality, with Victoria’s Secret & Co. debuting on the New York Stock Exchange as an independent public company. (L Brands was also rebranded as Bath & Body Works.) 

Investors applauded the separation, with shares of the new Victoria’s Secret & Co. shooting up 29 percent on their first day of trading. 

But the spin-off wasn’t the only thing Victoria’s Secret had in its favor. In fact, the company was in complete transformation mode. The strategy included updating the board to include a majority of women (six out of seven); adding a string of executives to the C-suite; updating the assortment to include things like swimwear and sports bras, and closing unprofitable stores to make way for more lucrative markets, such as Milan, Israel and India. 

The biggest change, however, came when Victoria’s Secret updated its marketing materials and store imagery. The high-profile Victoria’s Secret Fashion Show, which served as a marketing tool for the company — but was criticized by many as culturally tone-deaf — was canceled in late 2019. 

In its place the lingerie and innerwear giant hired its first plus-size model, Ali Tate Cutler, as well as its first transgender model, Valentina Sampaio. In May 2021, Victoria’s Secret upped the ante once again, using nine-months-pregnant model Grace Elizabeth in its Mother’s Day campaign. Images of the fallen Angels were also ripped from the entire store fleet and replaced with plus-size mannequins, soft lighting and mirrors, so shoppers could quite literally see themselves reflected back in the products.  

Perhaps the most noticeable change came last summer, when Victoria’s Secret introduced the VS Collective, a group of women who are admired for their intellectual and professional accomplishments, rather than their physical beauty. The VS Collective includes model and mental health advocate Hailey Bieber; actress and entrepreneur Priyanka Chopra; world champion freestyle skier Eileen Gu; professional soccer player and LGBTQ activist Megan Rapinoe; plus-size model Paloma Elsesser, and tennis champion Naomi Osaka, among others, who share their stories by way of collaborations, campaigns and social media. 

“[It’s] moving from a position of, frankly, being irrelevant to being relevant for being — for him to for her, being more inclusive rather than exclusive,” Martin Waters, chief executive officer of Victoria’s Secret Lingerie, said in May. “We have a clear reason why we exist at Victoria’s now and that is to inspire women around the world with products and experiences that uplift them and champion them and support their journey. It’s their narrative, not ours.

“I have a bold ambition that Victoria’s [Secret] should be the world’s biggest and best advocate for women,” Waters said. “And that’s an incredibly powerful vision and mission for us to aim toward and it’s energizing for all of our people. And it does reflect a very significant turnaround from where we’ve been, where we’re moving from what men want to what women want. We’re moving from sexy for a few to sexy for all. We’re moving from a look to a feeling. It’s about including most women rather than excluding most women and being grounded in real life rather than mostly unattainable. So I couldn’t underscore how significant this turnaround and this repositioning is. It’s a very dramatic change for us and we have significant proof points already at this early stage in our journey that this is what the customer wants from us. So expect more.”

Most recently, Victoria’s Secret unveiled the VS Store of the Future in Chicago, the first of three set to open in coming months. (The other two will be in Houston and Birmingham, Ala.) The redesigned space includes an assortment of gender-neutral products, a larger size range, open flooring, a beauty bar, LED lighting and fluffy pink couches in the fitting room for relaxing or socializing.  

“This concept is all about femininity, openness and community,” Albert Gilkey, Victoria’s Secret’s senior vice president, store design and construction, told WWD in December. 

But will the transformation work? And will consumers, many of whom abandoned the brand during the height of the #MeToo Movement, return? 

So far, shoppers are “really noticing [the changes] and voting with their wallet,” Waters said earlier last year. 

“The repositioning of the brand continues to gain great momentum and that shows up in our sales,” the CEO added in November. “It shows up in the help of the [customer] file [with new customers to the brand], shows up in our social media likes and follower-ship, 71 million followers on Instagram and some really strong responses.

“Our job is to just make the best out of the assortment that we’ve got and that’s what we’re doing on a day-to-day basis,” he said.

In the most recent quarter, total company revenues were $1.4 billion, up from $1.35 billion a year earlier, helping the company log $75 million in net profits. In addition, Victoria’s Secret is anticipating full fiscal-year 2021 revenues to increase by about 25 percent. 

“We have reason to believe we might do better, but we’re not guiding to that,” Waters told analysts at the time. 

Becky Behringer, Victoria’s Secret’s executive head of stores, told WWD in December that the added technology in fitting rooms is helping the retailer attract a younger fanbase, many of them Gen Z shoppers, “because this is the language that they speak, this is how they communicate, oftentimes through their screens. So it’s more comfortable for them. This tool is a total game-changer for us from a selling experience and a service experience.”

In late December, company shares shot up about 11 percent after the company revealed a $250 million stock buyback plan while also reaffirming its fourth-quarter guidance. Waters called out strength in all categories, particularly during the all-important holiday shopping season between Thanksgiving and Christmas. 

“This is a clear positive event on one of the cheapest names under coverage,” Ike Boruchow, senior retail analyst at Wells Fargo, wrote in a note, rating the stock “overweight” and setting a price target of $85 a share. “The fact that the company called out encouraging trends in the business (particularly in stores) over key holiday periods indeed suggests their confidence headed into 2022 in lapping stimulus compares (starting in January), as well as in navigating supply chain disruption. VSCO has showed us the brand momentum remains on track and increasingly shareholder-friendly actions are yet another reason to remain positive. We don’t see anything today that changes our bullish stance on the company at current levels.”