5 issues L Manufacturers is doing to speed up Victoria’s Secret’s turnaround

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Victoria’s Secret is breaking new ground that will phase out its iconic Angels images.

Dimitrios Kambouris | Getty Images Entertainment | Getty Images

Prior to the spin-off of Victoria’s Secret from Bath and Body Works later this summer, L Brands announced further steps to revamp its brand image.

The lingerie brand has been criticized in recent years for its lack of inclusivity and its slow response to changing consumer attitudes. Les Wexner, the company’s former CEO, also came under fire for his ties to the late Jeffrey Epstein, who killed himself in prison on sexual charges. Wexner has since resigned from the company he founded and is no longer on the board.

Victoria’s Secret reported a 25% increase in revenue for the first quarter of its fiscal year this year. L Brands has raised its financial forecast several times, citing the increased sales momentum at Victoria’s Secret as a factor. Buyers have responded “positively” to new products and marketing efforts, including the very first Mother’s Day campaign with a pregnant model, the company said.

But L Brands shares fell more than 4% on Thursday as they were sold in the broader market after outlining next steps. L Brands stock is up about 70% this year, bringing the company’s market cap close to more than $ 17 billion.

UBS analyst Jay Sole predicted in a research report that Victoria’s Secret’s comeback would be sustainable. He predicts U.S. sales next year will soar to a peak of $ 7.8 billion in 2016. The consensus estimate puts next year’s sales at around $ 6.7 billion, he said.

Aside from failing to evolve the brand to keep up with consumer tastes, Sole said that Victoria’s Secret made other missteps between 2016 and 2019, such as: Exited the swimwear business and overly focused on price promotions as sales slowed. Since then, the company has cut promotions and got back into the swimwear business.

In the next stage of its strategy, the company needs to strike a balance between retaining existing customers and attracting new customers, which can involve some risk.

Here are five steps L Brands announced late Wednesday that aim to further fuel its growth:

Out with supermodels, in with experienced brand ambassadors

Victoria’s Secret was notorious for its “angels” who posed throughout the brand’s marketing and featured at the annual fashion show. It all goes away as it runs out of all the images of its angels. He will be replaced by new brand ambassadors chosen by the company for their activism and achievements.

The retailer starts the so-called VS Collective with partnerships with seven women who appear in advertisements, advertise their products on Instagram and advise the brand on products and messages. Some of these women are soccer star Megan Rapinoe, actress Priyanka Chopra Jonas and ski champion Eileen Gu.

What they all have in common is how open they are to empowering women. In this way, Victoria’s Secret tries to signal that it has changed.

A new management team

The company installed a new top officer last year and appointed three more new executives to help turn the lingerie brand inside out.

Martin Waters has been CEO of Victoria’s Secret since November. He will be joined by a new Chief Human Resources Officer, Executive Vice President of North America Store Sales and Operations, and Chief Design Officer of Victoria’s Secret Lingerie.

Prior to his appointment, Waters had been Head of the company’s international operations since 2008.

A predominantly female board of directors

When Victoria’s Secret becomes its own publicly traded company later this year, it will be run by a board of directors that has six of the seven directors who are women, including the chairman.

The board of directors will also be very independent as there are only two members from the ranks of L Brands.

Some of the directors are in the retail and consumer sectors, including Irene Chang Britt, former President of Pepperidge Farm and Senior Vice President, Global Baking and Cnacking at Campbell Soup, and Lauren Peters, former CFO at Foot Locker.

Other members include Anne Sheehan, former Chair of the Investor Advisory Committee of the Securities and Exchange Commission; Sarah Davis, former president of Loblaw; and Jacqueline Hernandez, former Chief Marketing Officer of Hispanic Business and Content at NBCUniversal.

Donna James, Managing Director at Lardon & Associates, will become Chairman of the Board.

The only man on Victoria’s Secret’s board of directors will be Waters, its CEO.

First, ask what women want

The biggest change of all is the shift from a business that is tailored to the needs of both men and women. This in and of itself has been one of the biggest reviews the company has received.

New models that are more like the dealer’s customers are a start, but Victoria’s Secret has a lot to prove to buyers in order to regain its market share. The company will work to make its messages more inclusive.

It will start a podcast with its new brand ambassadors to give them the opportunity to share their experiences and partnership with the brand.

The company also works with Pelotonia, an organization that raises funds for cancer research, as it launches the VS Global Fund for Women’s Cancers to advance research into women’s cancer.

New products such as mastectomy, nursing and maternity bras

The brand’s first Mother’s Day campaign this year featured their first pregnant model. According to the New York Times, this is just the beginning. The company plans to develop products for mothers to expand the scope of what is considered “sexy”.

Victoria’s Secret will also begin selling nursing bras, maternity bras and mastectomy bras. This was a segment of the market that Victoria’s Secret had missed because it didn’t match the brand’s previous images, Waters told the New York Times.

According to the Times report, Rapinoe and Chopra Jonas are working on new product lines that will hit the market next spring.

A greater variety of sizes is also on the way. Paloma Elsesser, one of the new brand ambassadors, was the first plus-size model to appear on the cover of Vogue. She will work to have the company increase its size to XXXXXL, she told the New York Times. The company currently stocks up to 42G in bras and XXL in sleepwear.

L Brands did not immediately respond to CNBC’s request for comment.

Disclosure: Comcast is the parent company of NBCUniversal and CNBC.

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