The Big Story

A Few Suggestions for Victoria’s Secret

Paul Alexander

Last week, The Wall Street Journal reported that longtime L Brands CEO Les Wexner has begun discussions to step down from his role and explore strategic options for the Victoria’s Secret brand, including a possible sale. This news prompted a flood of articles summarizing the troubles that have beset the lingerie giant over the last few years, including declining foot traffic in brick and mortar retail, unfavorable fashion trends, increased competition, and public controversies. However, a handful of observers last week also noted that Victoria’s Secret (VS) still has significant scale and brand equity (North American sales last year were around $7 billion), and more proactive steps could be taken to stabilize or possibly even turn the brand around. As potential buyers consider the challenges facing VS and the strategies that could possibly save it, we humbly offer a few suggestions.

Keep updating the brand’s image

One of VS’s worst self-inflicted wounds has been its failure the last several years to evolve its image. Even as competitors like American Eagle’s Aerie began to succeed with inclusive, body-positive messages, VS stuck to its hyper-sexualized, ideal-woman “Angels” marketing. The brand appeared increasingly out of touch as the sexual objectification of women became a national topic of discussion in late 2017 thanks to the #MeToo movement, and it suffered its arguably most tone deaf moment in late 2018 when its longtime head of marketing Ed Razek made controversial comments regarding plus-size and transgender models in a Vogue interview. Since then, the brand has made some progress toward becoming more inclusive: VS has ceased airing its fashion show, Razek retired in 2019, the brand has hired its first transgender model, and the current landing page of features two plus size models.

However, the brand should keep evolving. It will take time and likely a more obvious marketing overhaul to change the image that the brand has spent decades and hundreds of millions (maybe billions) of dollars creating. One thing VS could do is adapt its concept of Angels. It could bring a celebrity into the fold who embodies a more progressive image – think Demi Lovato, not Kendall Jenner. It might also consider tapping the playbook of mission-driven businesses and make charitable or socially conscious activism a focal point of the mission and messaging of the Angels (isn’t the notion of an Angel more compatible with this idea than with lingerie in the first place?). Once VS has put some work into updating itself, it could restart its fashion show to showcase its progress.

Reclaim technical superiority

In its heyday, VS did not solely rely on sexy marketing – it also led with a message of superior product. For years, the brand launched franchise after franchise of bras boasting technically advanced construction and materials for superior fit, support, and comfort. With names like Ipex, Bombshell, and Incredible, VS used the performance and features of these bras to convey quality and demand high prices, and they created a halo for the rest of the product assortment as well. As trends moved toward bralettes, athleisure, and less heavily constructed bras several years ago, VS got away from this franchise strategy, and its marketing focused less and less on product construction and function. But it should consider ways to rebuild and relaunch a pipeline that touts innovation. High-tech fabrics and garments are currently a strong trend, the consumer still thinks of VS as having technical prowess, and, as previously noted, one-dimensional marketing about sexiness isn’t working.

Launch a new brand

VS might also consider launching a new brand, one that would be unencumbered by past marketing campaigns and PR problems. A new brand could leverage the parent brand’s strengths in sourcing and design, serve as a testing ground for VS and Pink, and immediately compete with more culturally progressive competitors. Admittedly, sub-brands have been difficult for VS in the past: La Senza was a failure, and a partnership with Italian lingerie brand Intimissimi from 2007-2010 was unimpactful and ultimately discontinued. But, on the other hand, PINK was a home run of such proportions that its success was able to offset much of VS’s early struggles.

Ultimately, turning around a brand in decline is a daunting task, especially if the brand in question is heavily exposed to brick and mortar retail. Still, if a buyer steps in to take Victoria’s Secret off of L Brands’ hands, there are an encouragingly large number of strategies it could employ to give VS a chance.


Headlines of the Week

Forever 21 reaches $81 million deal to sell its retail business to US mall owners and Authentic Brands

Forever 21 has reached an $81 million deal to sell its retail business to a group that includes Simon Property Group, Brookfield Property Partners and Authentic Brands. Forever 21 said in a bankruptcy court filing it is seeking approval to name the three as the lead, stalking-horse bidders in an auction. Rival bidders have until Friday to make any counteroffers, the filing said. If other bids are made, an auction will be held on Feb. 10. Forever 21 is planning to seek approval of the sale by Feb. 11. Forever 21 filed for Chapter 11 bankruptcy protection in September. The mall-based apparel chain, which caters to younger customers, got into trouble by expanding too quickly inside and outside the United States. Forever 21 has shuttered more than 100 locations since its bankruptcy filing. It still had more than 800 stores globally in September. The fear for many of America’s mall owners has been that a liquidation of Forever 21 would leave them with too much vacant space. Simon and Brookfield are two of Forever 21′s biggest landlords.

Casper prices IPO around $768 million, loses unicorn status   

Casper expects its initial public offering of 9.6 million shares to be priced between $17 and $19 per share. At the top end of this range, this would raise $182.4 million and give the firm a valuation of $768 million. In Casper’s last fundraising round – in March 2019 – the company was valued at $1.1 billion. Founded in 2014, Casper generated revenue of $312.3 million for the nine months ended September 30th, up 20% from a year earlier. During this same nine-month period, Casper posted a net loss of $67.3 million, slightly higher than the prior year period.



Apparel & Footwear

  1. Crew hires former head of Victoria’s Secret as its new CEO
  2. Crew has turned to an executive from another struggling brand, Victoria’s Secret, to lead its turnaround. Jan Singer will become J. Crew’s new CEO, the company said Tuesday. Singer became Victoria’s Secret chief executive in 2016, but she left the company in 2018 amid a sales slump and competition from online lingerie brands. Singer, 55, also was CEO of Spanx and worked in executive roles at Nike (NKE) and other retailers. J. Crew has been searching for a permanent chief executive since 2018, when former CEO Jim Brett, who came from West Elm, resigned less than two years into the role. Brett left the company because of a disagreement with the board of directors over how to “evolve” J. Crew.

La Senza suppliers file to put it in Ch. 7 bankruptcy

Multiple suppliers to the Canadian lingerie retailer La Senza filed papers on Friday asking that the company be put in Chapter 7 bankruptcy. The suppliers had claims totaling more than $9.3 million, according to papers filed in a federal bankruptcy court in Delaware. L Brands sold La Senza in 2018 to private equity firm Regent LP. According to one of La Senza’s suppliers, L Brands agreed to guarantee millions of dollars worth of payments during a period ending May of this year. MGF Sourcing, one of the suppliers to file the involuntary bankruptcy papers against La Senza, said it was central to L Brands’ deal to sell La Senza. Specifically, L Brands was to guarantee $20 million worth of orders placed between June 2019 and May 2020, according to MGF.

Stage Stores hires financial advisers amid off-price conversion

Stage Stores has brought on the investment bank and financial services firm Peter J Solomon and law firm Kirkland & Ellis as it looks to refinance its bank debt, according to an emailed Debtwire report that cited anonymous sources. The report follows Stage Stores’ release of its holiday performance, which included a comparable sales increase of 1.4% for the nine weeks ending Jan. 4, a figure below the company’s expectations. The sales miss, and reduced earnings guidance for the year, prompted “liquidity concerns” around the company. Citing the holiday results and “meaningful deterioration in vendor payment trends,” retail-focused credit analysis firm Pulse Ratings downgraded its rating for Stage Stores. Stage Stores’ financial struggles come at a critical, and unique, time for the retailer. The company is in the middle of a massive, ambitious plan to transform itself from a department store chain to an off-pricer via its Gordmans banner, which Stage Stores purchased from bankruptcy in 2017.

Troubled Toms Shoes Switches CEOs After Debt Deal

In the midst of restructuring, Magnus Wedhammar, who most recently was a senior executive at footwear brand Sanuk, has joined Toms Shoes as CEO, replacing Jim Alling. Magnus brings more than 25 years of experience in the footwear, apparel, and accessories industry in the U.S. and European markets. The CEO switch comes a month after Toms announced an agreement to cede control to creditors in exchange for a debt restructuring plan. Reuters reported that Toms Shoes LLC will now be jointly owned by Jefferies Financial Group Inc., Nexus Capital Management LP and Brookfield Asset Management Inc. Previously, brand ownership was split between founder Blake Mycoskie and Bain Capital, which acquired a 50 percent stake in the company in 2014, valuing Toms at $625 million. The move to hand over ownership came after Toms was reportedly unable to repay a $300 million loan due this year without renegotiating with its creditors.


Athletic & Sporting Goods

GSM Acquires Hunters Specialties

GSM Outdoors, a multi-brand manufacturer of hunting gear, announced that the company has completed the acquisition of outdoor accessory and gear manufacturer Hunters Specialties.  This acquisition represents one of the largest merging of brands ever in the hunting industry, the company said.  Hunters Specialties has incorporated some of the biggest names in game calls into its portfolio, such as Johnny Stewart predator calls and Carlton’s Calls elk calls.

Fitness Holdings North America Completes Minority Recapitalization and Growth Financing

Fitness Holdings North America, LLC, one of the largest independent Crunch Fitness franchisees, announced that it has completed a minority recapitalization and growth financing with Seacoast Capital a leading non-control growth capital investor, and E2 Venture Partners, an independent sponsor with deep domain expertise in the health & wellness and active lifestyle sectors.  Founded in 1989, Crunch is one of the fastest-growing high-value, low-price fitness club concepts in the U.S. FHNA currently owns and operates 22 Crunch clubs in MA, PA, NJ and NY.

Cosmetics & Pharmacy

Equicapita Acquires Canadian Visage Cosmetics

Equicapita Income Trust and Equicapita Investment Corp. (Equicapita) has acquired Toronto-based Visage Cosmetics, a franchisor of retail beauty and cosmetic services and products. Founded in 1969 by Caryl Baker, Visage Cosmetics is the leading franchisor of retail beauty and cosmetics services and products in Ontario. With 31 locations throughout Ontario and one in Alberta, Visage Cosmetics has established enduring franchisee relationships and a reputation for outstanding guest service. Founded in 2013, Equicapita is a private company buyout fund with offices in Calgary, Alberta, and Burlington, Ontario, with over $300 million in AUM focused on acquiring private Canadian businesses with enterprise values ranging from $5 million to $50+ million.

Walmart opens stand-alone health clinic

Walmart is opening its second Walmart health stand-alone clinic. The company on Wednesday opened the clinic adjacent to a newly remodeled Walmart Supercenter in Calhoun, Ga. Walmart opened its first standalone clinic in September next to a Supercenter in Dallas, Ga. The Walmart Health clinic will offer health care services that include primary and urgent care, labs, x-rays and diagnostic services, counseling, dental, optical and hearing services in a single facility through partnerships with local health providers.


Discounters & Department Stores

Macy’s reportedly to open a new kind of store in Texas

Macy’s is reportedly about to open a new kind of store, which could be a test with a larger rollout to come. The department store chain is opening a new space in Southlake, Texas, with a focus on selling apothecary beauty and hair-care items, and with a cafe inside, according to Women’s Wear Daily, citing people familiar with the plans. The report said the project is being spearheaded by Story founder Rachel Shechtman. Macy’s acquired Story in 2018 and has since added Story’s themed, pop-up marketplaces in more than a dozen of its own stores.

Walmart is raising starting hourly wage to $12 at 500 stores to lure workers, aid service

Walmart says it’s testing higher wages for new hourly positions at 500 of its U.S. stores as part of an overall strategy to better empower its staff. The nation’s largest private employer, which operates roughly 4,700 namesake stores in the U.S., says it will be raising the starting hourly wages to $12 from $11 for these new roles. These workers will be trained and empowered to develop broader retail skills. For example, they’ll help solve problems like inventory issues instead of only completing tasks given to them by managers, according to Jami Lamontagne, a Walmart spokeswoman.

Nordstrom launches resale shop ‘See You Tomorrow’

At its New York City flagship and online, Nordstrom on Friday will launch “See You Tomorrow,” an apparel resale shop curated by Olivia Kim, vice president of creative projects, according to a company press release emailed to Retail Dive. ​The assortment will include women’s apparel, shoes and handbags; men’s apparel, accessories and shoes; children’s wear; and jewelry and watches.



Emerging Consumer Companies

Pattern launches Open Spaces, its second brand

Pattern, the Gin Lane creative agency-turned brand holding company, announced the launch of its second product line, Open Spaces – a brand focused on home organization that sells products centered around baskets and bins. Pattern’s first brand, Equal Parts, is a cookware brand that launched in September.

Crown Affair, founded by Away and Glossier alum, raises $1.7 million

Crown Affair, a clean hair basics company launched by Dianna Cohen, former head of partnerships at Away, announced a $1.7 million investment round with participation from a number of notable consumer execs, including Heidi Zak, cofounder of ThirdLove, Jaclyn Johnson from Create & Cultivate, and Bonobos and TrunkClub cofounder Brian Spaly. The products are simple, everyday products – The Brush, The Comb, The Towel and The Oil – and are to be used post-shower with little fuss.



Grocery & Restaurants

Memphis Meats raises $161 million in funding round

Memphis Meats closed a $161 million Series B funding round, the largest to date for the cell-based meat industry. Existing investors including Tyson Foods and Cargill participated in the round, which was led by SoftBank Group, Norwest and Temasek. Memphis Meats will use the funds to build a pilot production facility and bring its first products to market. The company has yet to announce a date for product launch, but said it is working with regulatory agencies to ensure a “timely and safe” market entry.


Fiesta Restaurant Group’s shares rise with AREX Capital interest

Fiesta Restaurant Group Inc.’s stock edge higher Friday after a hedge fund said it had acquired about 8.5% of the company’s shares. AREX Capital Management L.P. of New York, in Securities and Exchange Commission documents filed Friday, said its entities had acquired more than 2.3 million shares of the restaurant company and speaking or would seek to speak with Fiesta’s management. AREX said it considered Fiesta shares “undervalued.”

Home & Road

Twin Star Home acquires outdoor furniture producer, TK Classics

Twin Star Home, a producer of home furnishings and in-home electric fireplaces, has announced the acquisition of TK Classics, a designer and manufacturer of design-rich outdoor furniture, including upholstered seating, dining tables, bars and accessories.

TK Classics is headquartered in West Sacramento, Calif., with manufacturing capabilities in China and it exclusively sells to customers via retailers and direct-to-consumer e-commerce. The acquisition of TK Classics significantly increases Twin Star’s positioning as a market-leading home furnishing platform throughout North America and expands its leadership and lifestyle product portfolio to outdoor living. The combined company leverages a powerful distribution network with unique capabilities to serve and scale the e-commerce channel, according to a release from Twin Star.

In spite of net loss, Flexsteel says it’s back on track

Full-line furniture manufacturer and importer Flexsteel Inds. posted a net sales decrease of 13% or $102.9 million in the second quarter of fiscal 2020, which ended on Dec. 31, compared with net sales of $118.4 million in the second quarter of fiscal 2019. The company reported a net loss of $5.4 million or 68 cents per diluted share for the second quarter compared with net income of $1.6 million or 20 cents per diluted share in the prior-year quarter. The planned exit of the commercial office and custom-designed hospitality products accounted for $7.3 million of the decline, according to a company statement. Following two quarters of solid sequential growth in e-commerce sales, the company said momentum continued with a breakout fiscal second quarter of e-commerce net sales at 30.1% of year-over-year growth due to robust holiday demand and strong execution.

Jewelry & Luxury

Tiffany, Pandora, Swarovski Named Most Desirable Jewelry Brands in New Study

The habits and motivations of self-purchasing females who buy luxury goods were put under a microscope for a recent study by data analytics firm MVI Marketing. The research report, released this week, focused on four product segments: jewelry, handbags, travel, and lab-grown diamonds. Last year’s MVI report on self-purchasing females found that the top two reason women self-purchase luxury goods were “so they can get exactly what they want” and “to celebrate a milestone.”

Following Exposé, De Grisogono Files for Bankruptcy

High-end jeweler de Grisogono has filed for bankruptcy in Switzerland, shortly after reports linked it to shell companies controlled by Isabel dos Santos, the daughter of Angola’s former president, and her husband, Sindika Dokolo. In a statement, the company told JCK that it has been up for sale for “several months now. Despite important progress, the transaction did not go through,” it said. “Without financial support from the current shareholders and without a new investor, unfortunately, the company cannot continue as a going concern.”

Blue Nile Chief Financial Officer Bill Koefoed Departs

Bill Koefoed, who joined Blue Nile as chief financial officer in March 2018, has left the jewelry e-tailer to become CFO for OneStream Software. Allen Hsieh is currently serving as Blue Nile’s interim CFO. According to LinkedIn, Hsieh was the former CFO of website A Place for Mom. Blue Nile chief executive officer Sean Kell formerly headed that site.


Office & Leisure

Penn National invests in Barstool Sports, valuing the media company at $450 million

The buzzy and controversial millennial media brand Barstool Sports is selling a stake to a regional casino company in a deal that values the media company at $450 million.  Penn National, the casino company, agreed to buy a 36% stake in Barstool for $163 million, the companies announced.  Penn, which operates casinos in many of the US states where sports betting is legal and online, will become Barstool’s exclusive gaming partner as part of the deal. The companies plan to launch a Barstool-branded sportsbook in its retail casinos in the coming months and a betting app in August. Penn also will be able to use the Barstool brand in its casinos and betting properties, and launch Barstool sports bars or restaurants.

A New Toy Story: Inside the CAMP Game Plan

When Ben Kaufman opened the first CAMP toy store in the Flatiron district of Manhattan a year ago, he already knew he wanted to make CAMP a national player. Kaufman saw an opportunity to fill a need in the New York neighborhood where he lived, by creating a store that not only sold toys but gave kids and parents a fun place to spend time. CAMP recently made the leap from single store to retail chain with the opening of four new CAMP stores at the end of 2019. Kaufman, 33, co-founded CAMP with his wife, Nikki, in 2018. He had previous experience as chief marketing officer at media company Buzzfeed, and as an entrepreneur. He helped create the Mophie phone charger brand, and founded invention startup Quirky, which sold consumer products to Target, Walmart and other big box retailers.

Fender Announces Ownership Change, with Servco Buying TPG Growth’s Shares

Longtime investor Servco will acquire a majority stake in Fender Musical Instruments Corporation (FMIC), after entering into a sale agreement to purchase TPG Growth’s shares in the company. The purchase is set to be completed in February. The brand had previously operated under joint ownership by both Servco and TPG Growth. Fender CEO Andy Mooney noted the milestones Fender had reached under the joint ownership, saying: “We thank TPG Growth for their contribution on multiple levels, both strategic and tactical, and for their support to expand into digital products and services.” Mooney also made it clear that the change in ownership won’t affect the makeup of Fender’s current management. “On an operational level, all will remain the same,” he said.

MoviePass is shutting down permanently and liquidating in bankruptcy

The curtain has come down on MoviePass after the company filed for bankruptcy protection on Tuesday. MoviePass was once a revolutionary ticketing service that let people see an unlimited amount of movies for cheap. The company said in a regulatory filing Wednesday that it considered “strategic alternatives,” but couldn’t find any. Helios and Matheson (HMNY), MoviePass’ parent company, also filed for bankruptcy this week. Both businesses will liquidate their assets. Helios and Matheson’s stock, which was once worth $5,100 (adjusted for stock splits) is now at zero. MoviePass essentially went belly-up in September 2019, although at the time, the company said its shutdown could be temporary.

Technology & Internet

Amazon’s 2019 sales rise 20.5% Inc. generated $280.52 billion in revenue across all business segments during 2019, up 20.5% from $232.89 billion the prior year. For the fourth quarter ended Dec. 31, sales rose 20.8% over the prior year to $87.44 billion from $72.38 billion. The rollout of 1-day shipping impacted profit, but income still rose 15.0% for the year to $11.59 billion from $10.07 billion in 2018. Amazon’s online stores—product and digital sales—contributed $141.25 billion to 2019’s sales, up 14.8% from $122.99 billion in 2018. The segment reached similar growth in Q4, with a 14.7% year-over-year jump in sales, to $45.66 billion from $39.82 billion the prior year. Sales through physical stores—Whole Foods, Amazon Bookstores, Amazon Go, etc.—generated $17.19 billion, down 0.2% from $17.22 billion the previous year. In Q4, sales dipped 0.9%, to $4.36 billion from $4.40 billion the prior year. Third-party seller services, which include commissions from third-party marketplace sales, added $53.76 billion to consolidated revenue in 2019, up 25.8% from $42.75 billion the previous year. The segment grew even faster during the holiday-focused Q4, when shoppers increasingly turned to third-party sellers, and revenue increased 30.4% to $17.45 billion from $13.38 billion the prior year.


EBay’s US sales decline 6.3%

EBay reported gross merchandise volume, the value of all goods sold on its platforms, of $90.21 billion for all of 2019, down 4.6% from $94.58 billion in 2018. In the U.S., that contraction was much larger, with GMV down 6.3% to $35.16 billion from $37.52 billion the prior year. EBay’s interim CEO Scott Schenkel partially blamed its results on some states now charging sales tax to internet orders after the ruling in South Dakota vs. Wayfair. During the fourth quarter, ended Dec. 31, sales tax laws in two of the nation’s most populous states, Texas and California, took effect, along with nine others. Schenkel also said eBay reduced its marketing spend, which also led to decreased GMV.


Finance & Economy

Consumer confidence jumps as job-market outlook improves

Consumer confidence in the U.S. grew more than expected in January as the outlook around the labor market improved, data released by The Conference Board showed.  Lynn Franco, senior director of economic indicators at The Conference Board said consumers felt more confident about their job prospects moving forward, lifting the overall index. “Optimism about the labor market should continue to support confidence in the short-term and, as a result, consumers will continue driving growth and prevent the economy from slowing in early 2020,” Franco said in a statement.

U.S. Consumer Spending Eased Last Month, Inflation Picked Up

U.S. consumer spending decelerated in December, indicating the economy’s main engine lost some momentum heading into 2020. The Federal Reserve’s preferred underlying inflation gauge picked up, backing Chairman Jerome Powell’s view that price gains are moving toward the central bank’s goal.  Consumer outlays for goods and services, which account for about 70% of gross domestic product, increased 0.3% from the prior month after an unrevised 0.4% advance in November, Commerce Department data showed.


Business survey suggests US labor market may have peaked

There is an even balance in the share of U.S. businesses reporting decreases and increases in employment for the first time in a decade, a survey showed, the latest suggestion that the labor market has likely peaked and job growth could slow this year.  The findings of the National Association for Business Economics’ (NABE) fourth-quarter business conditions survey followed on the heels of a government report this month showing job openings falling by the most in more than four years in November.