L Brands Inc. CEO Les Wexner said he decided to make drastic changes at Victoria's Secret to ensure the chain didn't suffer the same fate as many other specialty retail brands.

"Most fashion brands live about 10 years successfully because they cannot renew," said Mr. Wexner, who acquired the brand in 1982 and built it into a bra juggernaut with images of busty models and fashion shows.

Earlier this year, Mr. Wexner took charge of Victoria's Secret and announced big changes, including shifting away from catalog mailings and getting out of the swimwear business.

"I thought the brand had stalled out in beauty, in lingerie and the direct channel," Mr. Wexner said Tuesday at a meeting with investors and financial analysts. "I wish we had taken those actions two years ago or three."

The athleisure trend, including a shift toward bralettes, has forced the company to adjust its lingerie assortment to fend off competitors. Mr. Wexner said bralettes—bras without underwire and padding—can be a substitute for bras and customers aren't as particular about quality and technical expertise. "It's easy for someone in the apparel business to sell them," he said.

"You always worry about competitors and it's tough to see sometimes," Mr. Wexner said. "When BlackBerry owned the market, they didn't see Apple coming."

He also highlighted concerns over an aging customer and the diminishing benefit of the company's previous promotional strategy. "We abused our brands at Victoria's Secret by promoting endlessly and endlessly," he said, such as constantly offering a coupon for free panties.

Instead of coupons, the company has been using aggressive markdowns to attract customers to items like sports bras and bralettes. The discounts have also put pressure on margins. "It's going to cost a few bucks to eat someone else's lunch," he said.

On Monday, L Brands warned its third-quarter earnings would come in at the lower end of its previous forecast range. It now expects to earn about 40 cents a share, well short of the 55 cents a share it made last year. Analysts were expecting 46 cents a share.

Shares, which are down more than 30% over the year, fell 8% to $66.50 in 4 p.m. trading on Tuesday, after the company cut its forecast.

The company will face pressure from its restructuring efforts this fall and into next spring and will be in a position to deliver sales growth in the range of 7% to 10% by the back half of 2017, said finance chief Stuart Burgdoerfer. "We are very clear minded about why we are making those changes—that is, to accelerate growth."

Executives are bullish about the future of brick-and-mortar stores. Victoria's Secret and Bath & Body Works are "best experienced in person," said Mr. Burgdoerfer, highlighting growth of the businesses in malls of all types across the country.

The company has been focusing on opening stores abroad, particularly in China, and plans to sell products on Alibaba's Tmall, a Chinese e-commerce marketplace. Mr. Wexner said that millions of dollars worth of volume is already being done by resellers of Victoria's Secret products in China. "We look at China as a second home office and we see potential there equal to the United States," he said.

Victoria's Secret is holding its famous fashion show in Paris this holiday as it explores opportunities for growth in Western Europe. Mr. Wexner hinted at the possibility of holding the show in Shanghai next year.

Write to Khadeeja Safdar at khadeeja.safdar@wsj.com

 

(END) Dow Jones Newswires

November 01, 2016 18:45 ET (22:45 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
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