Victoria’s Secret’s Near-Term Outlook Has Ample Support

by Trefis Team
+16.21%
Upside
55.03
Market
63.95
Trefis
LTD
Limited Brands
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Quick Take

  • Victoria’s Secret saw a good fiscal 2012 due to its strong brand recognition, which is likely to continue in the future.
  • The brand’s comparable sales increased by 5% in February driven by the new spring collection, marketing campaigns and seasonal discounts.
  • The spring collection features latest trends while the retailer continues with tight inventory control.
  • Marketing campaigns includes fancy catalogs and music videos featuring popular artists such as Rihanna.
  • As a result, the near-term outlook looks positive.

Limited Brands‘ (NYSE:LTD) Victoria’s Secret had a good fiscal 2012 driven by its strong brand recognition in the U.S. [1] As the brand overcomes the impact of the weak holiday season and tax increases, its growth is likely to continue in 2013. In this analysis we’ll briefly look at how Victoria’s Secret plans to boost its sales.

Victoria’s Secret continues to introduce seasonal assortments with its new spring swim collection, which reflects latest fashion trends. Moreover, its fancy swim catalogs complement its brand image well and are likely to draw significant customer attention. Along with this, it is providing seasonal discounts on various products.

Victoria’s Secret constitutes about 65% of Limited Brands’ value according to our estimates.

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New Seasonal Collection And Focus On Core Categories

During the holiday season, Victoria’s Secret launched new products such as angel fantasies bras, angel gold fragrance, the flirt bra and vintage fleece. These products received good customer response, resulting in 4% comparable store sales growth in November. For the spring season, the brand launched a new swim collection including Bandeau Bikinis, Demi Bikinis and Fabulous Push-up Bikini. [2] Additionally, it relaunched Beach Sexy Bikini Mixer, which allows customers to mix and match top and bottom from different colors, styles and prints. With tight inventory control, Victoria’s Secret added popular trends such as seductive prints, neon, embellishments and novelty fabrics to its products. [3] [4]

Apart from the new product launch, Victoria’s Secret maintained a firm focus on its core product categories such as bras and panties. [4] The brand is providing compelling seasonal discounts on products such as dresses, yoga essentials, swim suits, tops and cotton panties. [5] It is also offering free shipping for orders above $100. These aspects helped Victoria’s Secret register 5% comparable store sales growth in February, which was higher than Limited Brands’ overall comparable store sales growth of 3%. [6] What’s even interesting to see is that the brand reported solid results on top of a 10% increase in comparable store sales registered in February last year. [6] We expect these strategies to continue driving Victoria’s Secrets growth in the near future.

Boosting Brand Image Via Marketing

One of the main strengths of Victoria’s Secret is its strong brand image, which it has earned through solid marketing. The brand is looking to further revamp its identity with the new swim catalog. The catalog features popular model Candice Swanepoel in retro styled Push-up Bandeau shot by famous fashion photographer Russell James on the beaches of Turks and Caicos, and Miami. [3] It also features attractive swimsuits inspired by old Hollywood. This resonates well with the main attributes of Victoria’s Secret’s products – glamor and beauty. Additionally, well known music artists such as Rihanna featured the swim collection music videos, adding more appeal to this campaign. [2] We believe that Victoria’s Secret will continue its collection-specific marketing in the future, which will help its sales.

Our price estimate for Limited Brands Stands at $50, implying a premium of about 15% to the market price.

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Notes:
  1. Limited Brands’ SEC filings []
  2. Victoria’s Secret Celebrates The Swim 2013 Collection With Angles Alessandra Ambrosio, Candice Swanepoel And Karlie Kloss, PR Newswire, March 13 2013 [] []
  3. Victoria’s Secret Launches First Spring 2013 Swim Collection And Angels And Artists Swim Video Series, Fashion + Lifestyle, Jan 6 2013 [] []
  4. Limited Brands’ Q4 fiscal 2012 earnings transcript, Feb 28 2013 [] []
  5. Victoria’s Secret Sale & Specials []
  6. Limited Brands Hosts February Sales Conference, Seekingalpha, March 7 2013 [] []
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