Sizzle/Fizzle

The Gig Economy Sizzles, Autonomous Cars Fizzle And Victoria’s Secret Needs To Bring Sexy Back

Fizzle of the Week: Victoria’s Secret

The results are in for Victoria Secret’s Q1 performance, and they’re nothing to swoon over.

Following the quarterly check-in with parent firm L Brands, which also owns Bath & Body Works and the youth-oriented PINK lingerie brand, the reviews have not been kind. The brand has alternatively been described in reports as “broken,” “out of date” and “desperate-looking” by various segment watchers and analysts, who are wondering loudly if Victoria’s Secret (and the rest of L Brands) are on a collision course with the retail death spiral that has already taken out so many mall brands before it.

“The MATH doesn’t add up,” Jefferies analyst Randal Konik wrote in a note to clients.

By the numbers — including eCommerce — Victoria’s Secret’s same-store sales rose 1 percent after a 14 percent drop in the same period a year ago. However, factor out eCommerce sales, and that 1 percent gain, becomes a 7 percent loss. At its physical stores, Victoria’s Secret comps dropped 5 percent.

The announcement that alarmed investors the most, however, were the company’s diminished expectations for the rest of the year. L Brands slashed its earnings estimates by 8 percent. For fiscal 2018, L Brands now expects earnings per share to fall within a range of $2.70 and $3, down from a prior estimate of $2.95 to $3.25.

All in, L Brands’ stock prices are down 44 percent year over year.

Some of the troubles Victoria’s Secret faces are endemic to brands of its kind: Experts believe it’s highly exposed to the falling foot traffic in malls, and fewer consumers are being drawn in while passing. Moreover, while Victoria’s Secret is starting to see success by moving its customer base online, that success comes at a cost. Online, margins are aren’t as strong, and the increase in digital traffic is not yet offsetting the fall in physical traffic.

According to market watchers, the brand is out of step with its offering.

“The dark store environment, the conspicuous sexuality of the offer and the brash marketing are increasingly out of step with what modern consumers want,” GlobalData Retail Managing Director Neil Saunders told CNBC.

The market Victoria’s Secret is competing in has evolved to reach out to customers in a very different fashion: The lingerie startup brigade push hard for inclusion and personalization. The growing competition promotes more variety in models and products.

Five-year-old ThirdLove has shoppers answer a series of intimate questions about their breasts — with helpful  illustrations to help guide the process — while reassuring consumers that every woman’s body is unique. Brayloa, Adore Me, True&Co. and Everlane are taking a similar approach and advertising smart online fitting to offer a right fit for anyone, instead of the right fit for one body type.

“The way we even talk about sexiness has shifted now. The idea is sexiness isn’t something reliant on being a glamazon or having long hair; there’s lots of different kinds of sexy,” Cora Harrington, editor of the Lingerie Addict blog, told Bloomberg. “The one vision Victoria’s Secret has of sexy is out of place.”

More worrisome, perhaps, is that Victoria’s Secret may not be fully aware of the degree to which it is out of step.

“Women want to project a figure,” said L Brands CEO Les Wexner, 80, in a recent interview in the Financial Times. “You wouldn’t have to be James Bond or Dick Tracy or the head of the FBI” to know that breast augmentation is “a popular thing.”

Surely some customers appreciate that Victoria’s Secret offers a push-up sports bra.

But, as the company is learning the hard way, not every customer out there does.

Digital brands that focus on personalization and customer fit are rising and picking up millions in funding, because that is also something customers want. Mall brand and American Eagle-owned Aerie is gaining an avid following among younger consumers by focusing their marketing on diverse body types in models and pictures that are not retouched.

As it turns out, customers prefer to pick what they want, particularly when it comes to their underwear, rather than being told what they want.

Sizzle

Faster Delivery Gains, Fast Reception: Omnichannel indeed. Digital orders done through tangible means, gaining traction as per Target’s results. The latest quarter was one which showed a strong boost in digital sales, up 28 percent year over year. Brick-and-mortar retail helps the two-day delivery promise, as the stores serve as a central point for shipping.

Gig Economy Side Projects?: Now front and center. The gig economy is reaching what can only be thought of as critical mass. Recent stats from the site that is yours truly (that would be PYMNTS) and Hyperwallet show that the gig economy now counts among its members a hefty slice of the working population. Roughly 37 percent of workers garner at least 40 percent of their income from project-based work.

Lowe’s on an Upswing?: Missed headline numbers in its latest quarter, which was impacted by the weather. But drilling down, trends looked strong, as digital comps were up 20 percent, new management came on board and hedge fund heavy-hitters snapped up shares.

Fizzle

Private Label Credit Cards: Delinquency rates on private label credit cards are at their highest level since 2011, and are up 57 basis points year over year to 4.65 percent. Part of that comes as brick-and-mortar stores shutter and consumers stop paying.

Autonomous Vehicles: Fear of driverless cars are on the rise, as 73 percent of Americans say they feel less than safe with that technology on the road, up from 67 percent last year, per data from the AAA. Millennials are the most fearful of the self-driving onslaught.

No Return for Easy Returns?: Not for Amazon’s consumers. The eCommerce juggernaut has been cracking down on people who it views as being guilty of returning too many items for what it views as the wrong reasons, and banning them from the site entirely.

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