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Victoria's Secret can't even sell its merchandise at a discount

MarketWatch logo MarketWatch 7/12/2018 Tonya Garcia

Video by CNBC

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) on the pre-recorded monthly sales call, according to a FactSet transcript. Victoria’s Secret is part of the L Brands portfolio.

“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 10.4% in Thursday trading after the June sales report.

According to a Cowen report, June traffic was down 1.1% year-over-year, which was an improvement on May (down 3.5%) and April (down 7.3%).

Victoria’s Secret has had sales challenges over recent quarters, as customers shift their preference to less expensive bralettes, which don’t have padding, as opposed to the higher-priced ‘constructed’ bras, like the Very Sexy line that the brand is known for.

a woman holding a birthday cake: Victoria’s Secret is struggling to sell lingerie even during its semiannual sale© Provided by Dow Jones & Company, Inc. Victoria’s Secret is struggling to sell lingerie even during its semiannual sale

Victoria’s Secret has faced competition from brands like American Eagle Outfitters Inc.’s (AEO) Aerie brand in the bralette category. And Inc. (AMZN) which has a growing roster of private labels, is selling low-cost bras.

The company’s exit from the swim category has also been a challenge.

The Pink business, which targets a younger, college-aged consumer had been a bright spot, but seems to be faltering now as well.

Also: Victoria’s Secret runway show is out of step with the #MeToo movement and it’s hurting business

L Brands reported net sales of $1.28 billion for the five weeks ending July 7, 2018 up from $1.21 billion for the five weeks ending July 1, 2017.

Same-store sales at Bath & Body Works were up 10% driven by that brand’s semiannual sale, Preston said.

L Brands shares are down more than 45% for the year so far, while the S&P 500 index is up 4.3% for the period.

Tonya Garcia is a MarketWatch reporter covering retail and consumer-oriented companies. You can follow her on Twitter @tgarcianyc. She is based in New York.


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