L Brands Hires Former Spanx CEO to Run Victoria's Secret
May 19 2016 - 04:00PM
Dow Jones News
L Brands Inc. said its Victoria's Secret brand would stop
selling swimwear and that the company is bringing in a new
executive to run its core lingerie business.
The company has hired Jan Singer, who was until recently chief
executive of intimate-apparel maker Spanx and is a former Nike Inc.
executive. Ms. Singer is expected to join the company in September
and report to CEO Les Wexner, who took over Victoria's Secret after
the departure of Sharen Turney in February.
Last month, the Columbus, Ohio, company announced big changes at
Victoria's Secret, including scrapping its famous catalog, cutting
jobs and paring merchandise.
"We're making these changes proactively, from a position of
strength and following a record fourth quarter and 2015 for the
brand," Stuart Burgdoerfer, the company's finance chief, said on a
conference call Thursday. On Wednesday, the company reported a 39%
drop in quarterly profit and lowered its profit outlook for the
year.
The swimwear and apparel that Victoria's Secret is dropping
accounted for about $525 million in revenue last year. Management
said roughly two-thirds of the merchandise cuts can be attributed
to the swimwear and that the rest are from shoe and apparel
categories offered only online. As part of an effort to streamline
operations, the company plans to offer the same merchandise on its
website and in stores.
Mr. Burgdoerfer said that exiting swimwear would enable
management to focus on the company's core categories such as bras,
panties and beauty. Swimwear had been a "flattish business for the
last several years," he said.
While L Brands is dropping swimwear, one of its rivals has
logged strong sales. On Wednesday, American Eagle Outfitters Inc.
reported a 32% increase in same-store sales in the first quarter at
Aerie—its lingerie and swimwear brand at the center of the
#AerieREAL advertising campaign, which uses untouched
advertisements.
"Our expanded swim shop has been extremely well received, and we
look forward to building on the success and capturing market
share," said Jennifer Foyle, brand president at Aerie, on a
conference call.
In addition to hiring Ms. Singer, L Brands has brought on former
Coach Inc. executive Greg Unis to run its Victoria's Secret Beauty
business. Mr. Unis joined the company this month.
L Brands said it plans to explore loyalty promotions instead of
using catalogs and mailed coupons. "In our collective judgment, the
right thing to do for this business is to have smarter ideas about
driving traffic versus getting a free panty and $10 off a bra," Mr.
Burgdoerfer said.
Analysts have warned that eliminating the mailings would hurt
sales. The catalogs have been at the core of the Victoria's Secret
brand since it started four decades ago. In past years, the company
has mailed out as many as 350 million catalogs annually.
Management said they tested the elimination of the catalog in
two significant markets for a year and saw little to no impact on
sales. In total, the mailings have cost between $125 million and
$150 million annually, the retailer said.
L Brands said the concept has become outdated. "If we were
starting this business today in the current context of 2016, would
you start with one of your major ideas being a catalog, a
paper-based catalog sent through the mail as one of your key, if
not your key marketing activity for a global brand?" Mr.
Burgdoerfer said.
The company had reported first-quarter sales this month and
indicated that comparable-store sales growth was slowing. On
Wednesday, the retailer gave further indication of a slowdown,
saying the metric in May would be down in the low- to mid-single
digits on a percentage basis versus last year.
For the quarter ended April 30, the company reported a profit of
$152.3 million down from $250.5 million a year earlier. That result
included severance charges and other expenses stemming from the
changes at Victoria's Secret. Among those were also "fabric
cancellations," a possible indication of how swiftly the company
has changed course at the lingerie brand.
(END) Dow Jones Newswires
May 19, 2016 15:45 ET (19:45 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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