Victoria’s Secret had trouble selling merchandise in the month of June, even when it was at a discount.
Same-store sales at the retail chain were down 1% for the month, with increases in the beauty segment offset by declines in lingerie and the Pink brand.
“Semiannual sale had a soft start with negative traffic level,” said Amie Preston, chief investor relations officer for L Brands Inc. LB, -12.05%[1] on the pre-recorded monthly sales call, according to a FactSet transcript. Victoria’s Secret is part of the L Brands portfolio.
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“In response, we extended the sale time period versus last year by about two weeks and reduced pricing to drive traffic and clear inventory, which resulted in merchandise margin rates to [be] down significantly,” the transcript said.
L Brands shares sank 12% in Thursday trading after the June sales report.
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According to a Cowen report, June traffic was down 1.1% year-over-year, which was an improvement on May[4] (down 3.5%) and April[5] (down 7.3%).
“There was more inventory available for the semi-annual sale this year, which presumably would have led to upside rather than comps that were below expectations,” wrote MKM Partners analyst Roxanne Meyer. “We blame customer fatigue, an immunity to Victoria’s Secret’s ongoing promotional stance, and a still underwhelming product assortment, all of which drove a longer sale period, higher promotional levels and resulted in a mid-single digit decline in traffic and high-single digit decline in AUR [average unit revenue].”
Victoria’s Secret has had sales challenges over recent quarters, as customers shift their preference to less expensive bralettes,[6] which don’t have padding, as opposed to the higher-priced ‘constructed’ bras[7], like the Very Sexy line that the brand is known for.
Victoria’s Secret has faced competition from brands like American Eagle Outfitters Inc.’s AEO, -3.65%[8] Aerie brand in the bralette category. And Amazon.com Inc. AMZN, +2.37%[9] which has a growing roster of private labels, is selling low-cost bras.
The company’s exit from the swim category[10] has also been a challenge.
The Pink business, which targets a younger, college-aged consumer had been a bright spot[11],...