TikTok’s viral “Victoria’s Secret” video accusing the lingerie seller of “cashing in on body issues” got Martin Waters, CEO of the same-named retail giant, to speak up about the “catchy” song’s “clever” lyrics.
“We agree wholeheartedly with what Jax is raising, and that’s why 18 months ago, we talked about the revolution in our brand and going in a different direction,” Waters told Wall Street analysts Thursday about the TikTok creator’s viral hit, which has racked up 40.6 million views since she posted the song to her @jaxwritessongs account on June 7 with a follow-up on June 30.
He went on to say the company is “grateful” to Jax for “raising the subject” of girls and women struggling with body image. In the viral video, the singer says “I know Victoria’s Secret / he’s an old man who lives in Ohio / Making money off of girls like me / Cashing in on body issues / Selling skin and bones with big boobs.”
Waters doesn’t believe the pop-culture phenomenon “reflects negatively” on the one-year-old public company.
“I think it’s an adequate and appropriate reflection of the industry at large as it has been represented consistently over the last decade or so,” he said, noting that the retailer responded to Jax with an open letter. “So, we want to be at the forefront of the change rather than representative of the past, and we are grateful for that opportunity.”
Waters also dismissed Hulu’s documentary series chronicling Jeffrey Epstein’s financial ties to Victoria’s Secret founder Les Wexner as “kind of a non-event.” He claimed, without citing sources, that the three-episode “Victoria’s Secret: Angels and Demons” event drew “very, very low viewing figures” and even fewer people finished the entire series.
“And the very relatively few people that did actually make it all the way through to the end of the series had a stronger perception of the brand coming out of it and they are going in,” Waters said.
In a Nutshell: On the financial front, the company had its ups and down in the second quarter.
“Bras were our best-performing business, followed by other intimates,” Waters said, adding that its beauty business was solid too, despite headwinds from lower semi-annual sales. “Our most challenged category continues to be the apparel business, which represents about 25 percent% of our sales and it was down in the high-teens for the quarter,” he added.
The VS&Co-Lab platform recently onboarded Elomi Lingerie, expanding the size offerings on the VS website to over 100.
“We anticipate inflationary headwinds and pressure on the consumer will persist and our business will continue to experience sales and margin volatility,” he said. “We are confident in our ability to navigate this shifting consumer landscape by aggressively pursuing our share of traffic and being extremely diligent on cost and inventory management.”
Waters said the bras remains the company’s most important category, ending the quarter with sales flat year-over-year. The panty business was close to flat, down low single-digits.
Swim has been a mixed bag, however. “Victoria had a disappointing season in swim and Pink had a very, very strong season in swim,” Waters said. “On reflection, the first season of Victoria back in the swim business we were probably a little basic. And in the second season back in the swim business, we swung the pendulum a little too hard and we were a little too fashion forward and a little light on basic.”
He said that company will be “very prudent on our purchases for the back half of the year. So we’ve taken some money out of our open to buy as [apparel] is more difficult, and we will just lead in much harder on intimates and on sleep.”
Waters said Victoria’s Secret is shipping 25 percent of goods by air, versus 90 percent last year. “We all hope that the macroeconomic trends recede somewhat, then we can convert some of that planned merchandise plan for sea to air and get goods in more quickly, which gives us opportunity to chase,” he said.
Meanwhile, slowing foot traffic “aligned generally with what the mall was seeing,” chief financial officer Timothy Johnson said.
One of the challenges ahead will be how to re-engage shoppers when they’re running out of money to spend. The company ended the quarter with 829 company-operated stores in the U.S. and 26 in Canada. It opened one store and closed six in the U.S.
Jefferies, the investment bank, believes Victoria’s Secret is in good shape overall.
“While faced with persistent headwinds, we believe VS is well-positioned for the robust opportunity that exists in the intimates space,” Jefferies analyst Corey Tarlowe wrote in a research note. Brand sentiment is improving and the company’s long-term opportunity remains unchanged, eh added.
Wells Fargo retail analyst Ike Boruchow said Pink likely underperformed VS, mostly because apparel and logo-wear sales have lagged more fashion-forward options. “Trends [are] clearly disappointing, but story remains undervalued, turnaround can continue to unfold,” he said.
Net Sales: For the second quarter ended July 30, net sales fell 6 percent to $1.52 billion from $1.61 billion. Comparable sales fell 7 percent on a stores-only basis and were down 8 percent for stores and direct sales.
By business segment, sales at North American stores in the quarter fell 6.6 percent to $968.5 million, while direct sales declined 11.8 percent to $413.7 million. International sales rose 28.6 percent to $139.0 million.
For the six months, net sales fell 5 percent to $3.01 billion from $3.17 billion.
Earnings: Net income dropped 56 percent to $69.9 million, or 83 cents a diluted share, from $151.1 million, or $1.71, a year ago.
For the third quarter, the company expects net sales to decline in the high single digit range and earnings between $0.00 and $0.25. For the full year 2022, net sales were guided to a decline in the mid- to high-single digit range.
For the six months, net income dropped 51 percent to $150.7 million from $325.1 million in the year-ago period.
CEO’s Take: “We see up to 100 new locations of stores over the coming three or four years, particularly in off-mall locations where we’re currently underrepresented. So that’s a thing in and of itself,” Waters said. “But more important to me is the clues that it gives us to back into the 850 existing locations that we have. And that might be around using some of the technology that’s being tested in store of the future. We have an excellent fitting room experience that we’re super excited about that has potential to be launched. There are other elements of the way that we communicate price and promotion that may end up being rolled out.
“So we haven’t got anything specific at this point with only six stores under our belt, but I’m pretty confident that there will be components of Store of the Future that will go more broadly through the chain that will help us with our relevance,” he continued. “Sometimes when I think about Store of the Future, I wish we’d have called it something else because it sort of implies that it’s from outer space, and it definitely is not from outer space. It’s a cleaned-up version of what we have been doing for years. And in some ways, it’s about what is not as much as what it is and what it’s not is it’s not intimidating. It’s not overwhelming. It’s not dominating the product. It’s allowing the product to be the hero. It’s allowing the customer to feel welcome and included. And so that’s a key driver of the change”