The viral TikTok video “Victoria’s Secret” accusing a lingerie salesman of “making money from body problems” has led Martin Waters, the CEO of the retail giant of the same name, to reveal the “smart” lyrics to the “catchy” song.
“We totally agree with what Jax is picking up and that’s why 18 months ago we were talking about revolutionizing our brand and going in a different direction,” Waters told Wall Street analysts on Thursday of the TikTok creator’s viral hit that gained momentum. 40.6 million views since she posted the song on her @jaxwritessongs account on June 7th and again on June 30th.
He went on to say that the company is “thankful” to Jax for “bringing up the subject” of girls and women struggling with body image. In the viral video, the singer says: “I know Victoria’s Secret / he’s an old man who lives in Ohio / makes money from girls like me / makes money from body problems / sells skin and bones with big boobs.”
Waters doesn’t see the pop culture phenomenon as “badly reflecting” on the year-long public company.
“I think this is an adequate and appropriate reflection of the industry as a whole as it has been consistently featured over the past decade or so,” he said, noting that the retailer responded to Jax in an open letter. “So we want to be at the forefront of change, not represent the past, and we’re grateful for this opportunity.”
Waters also dismissed a Hulu docu-series exploring Jeffrey Epstein’s financial ties to Victoria’s Secret founder Les Wexner, calling it “kind of a non-essential event.” He stated, without citing sources, that the three-episode Victoria’s Secret: Angels and Demons drew “very, very few viewers” and even fewer people watched the entire series.
“And a very relatively small number of people who actually made it to the end of the series had a stronger perception of the brand coming out of it and they’re in,” Waters said.
In a nutshell: On the financial front, the company had its ups and downs in the second quarter.
“Bras were our highest-grossing business, followed by other intimate products,” Waters said, adding that his cosmetics business was also resilient despite headwinds due to lower semi-annual sales. “Our most challenging category continues to be the apparel business, which makes up about 25% of our sales, and has declined to adolescence in the quarter,” he added.
Platform VS&Co-Lab recently launched Elomi Lingerie, expanding the size offering on the VS website to over 100.
“We expect inflationary headwinds and consumer pressure to continue and our business will continue to experience sales and margin volatility,” he said. “We are confident in our ability to navigate this changing consumer landscape by aggressively pursuing our share of traffic and managing costs and inventory extremely diligently.”
Last month, the company named Amy Hawk as CEO of the combined Victoria’s Secret, Pink and Beauty organization.
Waters said bras remain the company’s most important category, and end-of-quarter sales were unchanged from last year. The panty trade was close to stable, with low single digits.
However, the voyage was mixed. “Victoria had a disappointing swimming season and Pink had a very, very strong swimming season,” Waters said. “When you think about it, in Victoria’s first season in the swimming business, we were probably a little primitive. And in the second season, when we were still swimming, we swung the pendulum too much, were too advanced in fashion and knew little about the basics.
He said the company will be “very cautious about our purchases in the next half year. So we took some money from our opening to buy like [apparel] it’s harder, and we’re just going to be a lot tougher with our loved ones and with sleep.”
Waters said Victoria’s Secret delivers 25 percent of its goods by air, up from 90 percent last year. “We all hope that macroeconomic trends will recede somewhat, then we will be able to convert part of this planned goods for the sea plan into the air and deliver goods faster, which gives us the opportunity to pursue,” he said.
Meanwhile, the slowdown in foot traffic was “broadly in line with what the mall saw,” CFO Timothy Johnson said.
One of the challenges ahead will be how to re-engage buyers when they run out of money to spend. The company ended the quarter with 829 owned stores in the US and 26 in Canada. He opened one store and closed six in the US.
Investment bank Jefferies thinks Victoria’s Secret is in good shape overall.
“Faced with constant headwinds, we believe VS is well positioned for the robust opportunities that exist in the intimate service industry,” Jefferies analyst Cory Tarlow wrote in a research note. He added that brand sentiment is improving and the company’s long-term capabilities remain unchanged.
Wells Fargo retail analyst Ike Borukhov said Pink is likely lagging behind VS, largely because sales of clothing and logo-printed clothing are lagging behind more fashionable options. “Trends [are] clearly disappointing, but the story remains understated, the turn can continue,” he said.
Net sales: In the second quarter ended July 30, net sales fell 6 percent to $1.52 billion from $1.61 billion. Like-for-like sales fell 7 percent in stores alone and 8 percent in stores and direct sales.
Across the business segment, North American store sales for the quarter fell 6.6% to $968.5 million, while direct sales declined 11.8% to $413.7 million. International sales rose 28.6% to $139.0 million.
In six months, net sales fell 5 percent to $3.01 billion from $3.17 billion.
Income: Net income fell 56 percent to $69.9 million, or 83 cents per diluted share, from $151.1 million, or $1.71, a year ago.
In the third quarter, the company expects net sales to decline in the high single digits range, with earnings ranging between $0.00 and $0.25. For all of 2022, net sales should have declined in the mid-to-high single digit range.
In six months, net income fell 51% to $150.7 million from $325.1 million last year.
CEO’s perspective: “In the next three to four years, we plan to open up to 100 new stores, especially outside of shopping centers, where we are currently under-represented. So it’s a thing in itself,” Waters said. “But more important to me are the clues he gives us to get back to the 850 existing locations that we have. And this may be due to the use of some technologies that are being tested in the future. We have a great fitting room and we are very excited that it has the potential to launch. There are other elements of how we communicate pricing and promotion that may eventually be implemented.
“So we don’t have anything concrete at the moment as we only have six stores, but I’m pretty sure there will be ‘Store of the Future’ components that will be distributed more widely throughout the chain, which will help us with our relevance.” he continued. “Sometimes when I think about Future Store, I wish we could call it something else, because that kind of implies it’s from outer space, and definitely not from outer space. It’s a refined version of what we’ve been doing for years. And in a way it is about what is not like what is, and what it is not is not frightening. It’s not overwhelming. It does not dominate the product. This allows the product to be a hero. This makes the client feel welcome and involved. And that’s the key to change.”