How Do We See Victoria’s Secret’s Direct Business Growing?
Victoria’s Secret Direct currently contributes to around 13% of L Brands’ revenues and ~ 20% of our stock price valuation for the company. We expect the revenues in this segment to grow from around $1.6 billion in 2016 to around $2.8 billion by 2023, reflecting a CAGR of over 8%. Below, we outline some of the reasons for our forecast.
Reasons Behind The Expected Growth
- Victoria’s Secret’s direct-to-consumer business was faltering in 2013 and 2014 because of the underperformance of its apparel division and absence of shipping and handling revenues. As a remedial measure, the company started categorizing its products into “go forward” and “non go forward” categories and started clearance sales for the latter category. This helped the growth of the direct-to-consumer business.
- L Brands is focused on developing other channels of direct businesses such as m-commerce and e-commerce.
The mobile channel currently contributes a substantial amount to Victoria’s Secret direct sales and with increasing smartphone penetration we expect this trend to continue going forward. - Additionally, Victoria’s Secret is one of the most followed brands on Facebook with around 30 million fans. This should translate into an increase in Victoria’s Secret direct revenues going forward.
Have more questions on L Brands? See the links below.
- What Is L Brands’ Revenue And EBITDA Breakdown?
- How Has L Brands’ Revenue And EBITDA Composition Changed Over 2012-2016E?
- L Brands Q4 2015 Pre-Earnings Report
- L Brands 2015 Year In Review
- How Was L Brand’s Monthly Performance In February 2016?
- How Was L Brand’s Monthly Performance In March 2016?
- What Is L Brands’ Fundamental Value Based On 2016 Estimated Numbers?
- How Did L Brands’ Different Segments Perform Over The Last 5 Years?
- What Are The Key Takeaways From L Brands Q1 FY2016 Earnings Results?
- Why Is Victoria’s Secret Undergoing Restructuring Changes?
- Key Takeaways From L Brands May 16 Performance Report
- Why Has L Brands’ Stock Price Declined By Around 30% Year-To-Date?
- Which Is The Most Important Segment For L Brands’ Future Growth?
- How Was L Brands’ Monthly Performance In June 2016?
- L Brands Q2 FY16 Earnings Preview
- L Brands Delivered A Moderate Q2, Restructuring Activities Progressing On Track
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Notes:
1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for L Brands