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Les Wexner on What Went Wrong at Victoria’s Secret, Markdowns and Retail

L Brands Inc.’s chairman and chief executive officer Les Wexner thinks he know what went wrong at the struggling Victoria’s Secret brand.

The biggest mistake, the chairman said speaking at the company’s Investor Day presentation Tuesday, was an err at the executive level.

“The fashion business has to have leaders that are curious. What happened at Victoria’s Secret and Pink, I would say, is a lack of curiosity at the leader level and [then] going back and repeating things that have worked,” Wexner said.

Fashion retailers have to be curious, he said, and though certain things may work, relying on the status quo can be a death trap in retail today.

According to Wexner, it can be hard to determine if a certain mix that’s not working is the result of bad timing, leadership or execution. And one question is always whether a new mix is relevant to both the brand and the customer.

“One of the third rails I stepped on, and I got roundly criticized, was when we went out of swim,” he said, noting that from a mix standpoint, lounge, at the time, was the bigger opportunity. The brand has since reintroduced swim, but only online. Victoria’s Secret chief executive officer John Mehas said at the event that there are no plans now to include swim in the in-store merchandise mix, a move that he said would be a distraction while the company is still refocusing its bra assortment.

Markdowns Prove Bigger Cost Than Tariffs

When a business is not what it should be, Wexner said, waiting to do markdowns is one of the “dumbest thing to do.” Instead, the focus should be on clearing inventory to move the goods in order to bring in new merchandise, he said.

“Markdowns is the largest expense we have,” the chairman noted, explaining, “Our biggest cost isn’t tariffs and it’s not transportation. The biggest cost for most fashion and retail businesses is markdowns.”

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The more companies know their customers, Wexner said, the fewer markdowns they’re likely to have to do because their quantities would be right.

“When markdowns go up or turns slow down–they generally work together–it means we’re not tracking our customer,” he said. And when there are too many errors, it means the team needs to get out into the stores to see real people. There’s information that can’t be gleaned using data analytics because that doesn’t give a full picture of what the customer wants, he said, referring to a sixth sense that comes from touching merchandise and connecting with the customer for an accurate forecast of what they’re really seeking.

The best way to maximize volume is the speed of a company’s reaction time, Wexner said. That, of course, goes back to quickly marking down goods that aren’t resonating with consumers, as well as the ability to anticipate changes in the market and having the agility and flexibility in the supply chain to bring in what’s working.

When asked about adding third-party brands to the merchandise assortment at Victoria’s Secret, Wexner said L Brands has done it in the past and that he’s flexible about the opportunities.

“I’m not stubborn [about how] everything has to be our brand,” noting that in the current retail environment where the customer is “so smart,” the future will likely bring in more third-party collaborations.

As for where the company is headed now, Wexner said the quality of the leadership team “has never been better.”