Shoppers still think Victoria's Secret is overpriced despite Wall Street's warnings about heavy discounting
- Victoria's Secret has leaned on discounts to drive traffic to its stores. Analysts are concerned that the discounts are eating into profit margins.
- But a new survey of shoppers from Cowen & Co shows that some customers still think Victoria's Secret is too expensive.
- The brand has struggled in recent years - sales have slipped, and it has been accused of failing to adapt the brand image to modern times. Its market share in the US has dropped from almost 33% two years ago to around 24% today.
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Wall Street says Victoria's Secret's heavy discounting is eating away at profit margins, but some customers don't think it's cheap enough.
A new survey from Cowen & Co showed that, of the more than 180 Victoria's Secret shoppers interviewed, 34% felt that prices at Victoria's Secret are too high and that it should run "even more" promotions.This is concerning, given that its gross margins have declined 300 basis points over the past three years and are expected to drop further in 2019, according to Cowen & Co.
Victoria's Secret has relied on heavy discounting in its stores to drive traffic in recent years as the business comes under increased pressure. This has raised concern amongst analysts.
"We believe Pink is on the precipice of collapse," Jefferies analyst Randal Konik wrote in a note to investors in March, commenting on the level of in-store promotions.
And these promotions were not reserved to last season's items but also included its core products, such as panties and bras.
In a call with investors in February, CFO Stuart Burgdoerfer addressed its discounting problem and said that it will "take a little bit of time" to reduce promotional levels. Burgdoerfer said the company is looking at all aspects of the marketing of the brand. "We are taking a fresh, hard look at everything," he said. "Everything is on the table."
As a result, Victoria's Secret, which is still the leading lingerie retailer in the US, has seen its market share in the US slip from almost 33% two years ago to around 24% today.
But analysts are hoping that they can turn it around under the leadership of new CEO John Mehas, who might bring fresh eyes to the brand.
Earlier this month, L Brands (its parent company) CEO Les Wexner informed employees in an email that it was reconsidering its annual fashion show and would be pulling it from network TV.
A representative for Victoria's Secret did not provide further comment.