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Victoria’s Secret Fashion Show Reboot in the Works

VS&Co.’s ongoing makeover leans into the company’s off-mall ambitions, but there’s plenty more where that came from. At the global lingerie giant’s investor day on Thursday, executives also delved into how the company is developing its own “market collection” with complementary third-party brands, accelerating international growth and prioritizing capital reinvestment.

The “store of the future” initiative has driven positive results for the retailer, with 21 remodeled stores seeing high-single-digit sales increases compared to a control group. Eight of these stores are located in the U.S.

But the company expects to ramp up its renovations for the duration of 2022. VS&Co. forecasts 58 of these locations in total to be remodeled this year, including 31 in the U.S. These stores are characterized by more video screens in storefront windows and the removal of previously oversexualized imagery and decorative lighting. Going forward, stores will increase their use of RFID-powered Crave fitting room technology, a digital bra menu and newer imagery.

By 2025, the company anticipates remodeling 240 stores, or about 30 percent of its fleet.

The “store of the future” is just one of four strategies in VS&Co.’s brick-and-mortar overhaul. The company is diversifying real estate away from “B” and “C” malls in favor of “outdoor power centers” and also is reducing total square footage across the fleet. The final prong is expanding its store count outside the U.S.

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On the whole, VS&Co. has improved brick-and-mortar cost efficiencies since its breakup with Bath & Body Works. Ninety-five percent of VS stores in North America are profitable, compared to just 79 percent in 2019.

‘Market collection” expands Victoria’s Secret beyond its core

Beyond the store, Victoria’s Secret has begun to extend itself into new white space with the summer launch of VS&Co-Lab, a microsite curating third-party, women-owned brands on

Just don’t call it a marketplace, said VS&Co. CEO Martin Waters, who emphasized the term “market collection” to describe the partnering stable of brands, which include intimates labels Mindd and Freya and shapewear brand Leonisa among others.

“We deliberately didn’t use the term ‘marketplace,’” Waters said. “We are not turning Victoria’s Secret into an aggregator of everybody else’s content, I don’t think that makes sense. But with 500 million people coming to our site every year, we believe there is significant opportunity to sell those customers other merchandise that is close to our core, where maybe we don’t want Victoria’s Secret and Pink to go.”

In tandem with the market collection, VS&Co. is focusing on investing in more third-party brands complement the intimates seller’s core offerings, according to Greg Unis, chief growth officer. Two examples Unis highlighted included swimwear seller Frankies Bikinis and For Love & Lemons, both of which have secured Victoria’s Secret investments and are sold on VS&Co-Lab. The company is looking to add new brands to portfolio through strategic investments, and even acquisitions.

Victoria’s Secret is a dominant player in a highly fragmented landscape,” Unis said. “When you think about how the customer shops, they are shopping by occasion. They have needs, they’re looking for solutions, and those come in lots of different things. It could be the right fashion, it could be the right size. It could be a specialized product that has specialized functionality.”

International growth still ‘underpenetrated’

Another major “growth igniter,” as VS&Co. framed it in the call, will come from international sales, which currently represent 15 percent of the company’s total sales. Unis said the company has aspirations to double that percentage to 30 percent. If a compound annual growth rate (CAGR) of 18 percent is achieved in five years, total international sales will more than double from $1.3 billion to $3 billion.

Unis indicated that VS is underpenetrated worldwide when compared to other popular global brands. While fiscal 2021 sales outside of North America represented 15 percent of the Victoria’s Secret business, they represented as much as 50 percent at both Ralph Lauren and Levi Strauss & Co., whileTapestry generated 30 percent of sales outside the U.S. in that period.

At the global lingerie giant's investor day on Thursday, VS&Co. execs delved into how the brand is developing its own “market collection” with complementary third-party brands, accelerating its international growth and prioritizing capital reinvestment.
Photo by Justin Sullivan/Getty Images

“The two biggest markets outside of the U.S. are China and Western Europe,” Unis said. “In Western Europe, we are just at the beginning, and in China, we’re also a relative newcomer. This is our ‘go where the customer is’ strategy.”

In China, the company has a current goal to grow from approximately 1 percent market share to 5 percent, which would equate to a nearly $3 billion business, Unis said.

VS&Co. freed from ‘capital jail’

Chief financial and administrative officer Timothy Johnson told investors that the company will take advantage of its cash position to reinvest in the business, which is something he said was a rarity before he came aboard in May last year.

“We were in capital jail, so to speak, until performance turned, which was a self-fulfilling prophecy,” Johnson said. “We do not want to be in the place of never reinvesting in the business.”

More investments will come in areas including its stores of the future, and a reboot of the Victoria’s Secret Fashion Show, which the company scrapped in 2019. Amy Hauk, CEO of the Victoria’s Secret and Pink brands, would not reveal any details of the revived runway show, but said it “has to align with our values and our commitment to welcome and champion all women.”

VS&Co. now expects third-quarter operating income to be towards the high end of its previously communicated guidance range of $10 million to $40 million, and earnings are estimated to be towards the high end of the previously communicated guidance range of $0.00 to 25 cents per diluted share.

The updated operating income and earnings per diluted share guidance is based on a net sales decline in the high-single-digit range compared to last year, which is consistent with the company’s previously communicated guidance.

For 2025, the intimates retailer is setting a goal to reach $7.3 billion in annual sales, with adjusted EBITDA reaching $1.5 billion, or 20 percent of total sales. Over the past 12 months through the second quarter, sales were $6.6 billion, with adjusted EBITDA coming in at $1 billion, or 15 percent of sales.

The company’s longer-term goals include mid-single-digit sales growth of 4 percent to 6 percent, operating margin of approximately 15 percent of total sales and free cash flow of more than $500 million. Current operating margin is 9 percent.