L Brands Inc. isn’t worrying about trade tensions or supply chain issues at its Victoria’s Secret business, and it doesn’t have concerns about sourcing either.
Stuart Bergdoerfer, executive vice president and chief financial officer, was the go-to guy at the company’s second-quarter conference call to investors Thursday morning. John Mehas, chief executive officer of Victoria’s Secret Lingerie, and Amy Hauk, CEO of Pink, are slated to provide updates at the company’s Investor Day presentation on Sept. 10.
According to Bergdoerfer, the company has been focused on speed and agility in the supply chain since the late 1970s and 1980s, and about seven to eight years ago, renewed work in the area for the intimate apparel side of the business. “So it’s something we have renewed our capabilities in and today we would judge our capabilities in that areas in terms of speed and agility in our supply chain as among the best in retailing based on what we know,” he said, a point that means the company’s not worried about volatility on the sourcing side from trade tensions between the U.S. and China.
The company airfreights “substantially everything that we have produced outside of the United States,” Bergdoerfer said, explaining that it’s the company’s view that the “economic value of that far outstrips the incremental cost of moving stuff on a boat” because “you can’t sell it if it’s on a boat.”
Overall sourcing activity in China for Victoria’s Secret, is less than 20 percent of the total.
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After the equity markets closed their trading sessions Wednesday, L Brands said net income fell 62 percent to $37.6 million, or 14 cents a diluted share, on a revenue decline of 2.8 percent to $2.90 billion. On an adjusted basis, earnings per share was 24 cents. And while its Bath & Body Works business was healthy, Victoria’s Secret was another story. Same-store sales fell 9 percent, on top of the 5 percent decline a year ago.
Bergdoerfer said consumers have been “reacting well” to the new lingerie assortment, but that it “hasn’t been, to date, sufficient to overcome weakness in the balance of the lingerie assortment, including the effect of heavy promotions from a year ago, that will continue through the Fall season.”
The company expects additional new merchandise to flow through the Fall season, meaning that the full line wasn’t yet in stores for the first few weeks of August, which was the start of the third quarter.
Victoria’s Secret is working to maintain as much flexibility as possible with respect to its lingerie inventory by reducing lead times, and ordering frequently and adjusting regularly.
“John Mehas and his team are working the assortment literally almost every week, in terms of adjusting the on-order. We are making important investments in the new parts of the assortment,” Bergdoerfer said, adding that flexibility in the fourth quarter allows for the ability to read and react to the overall trend and adjust the on-order to “maximize our chase and pursuit of the items that are doing best [and] to cancel or adjust out of items that aren’t doing as well.”