Victoria's Secret Turns Its Back on the Catalog

By Khadeeja Safdar 

First, Playboy stopped running nude photos. Now, Victoria's Secret will stop mailing out its famous catalogs of scantily clad models.

L Brands Inc., the parent company of Victoria's Secret, this week unveiled strategic changes that include "evolving how the business connects with customers through more focus on loyalty programs and brand-building engagement rather than traditional catalogues and offers."

Filled with provocative merchandise, the well-thumbed catalogs have been at the core of the Victoria's Secret brand since it started four decades ago. In past years, the retailer mailed out as many as 350 million catalogs annually, sending out up to 22 mailings a year. Customers responded and the lingerie brand expanded into hundreds of stores and televised fashion shows.

In a tough retail environment, Victoria's Secret has been faring well. Sales in the unit were $7.67 billion last year, up from $7.21 billion a year earlier. Comparable-store sales rose 5% for the year, a period when many retailers struggled with flat or falling same-store sales.

In a research note entitled, "Every Guy's Worst Nightmare," Citi retail analysts estimated the company would save about $100 million by eliminating the catalogs, but worried the move would hurt sales "as the brand may be less top of mind with male and female customers long-term."

A spokeswoman for L Brands declined to comment. Shares of L Brands fell 4.3% to $80.50 in Friday's trading.

Despite the rise of online shopping, many retailers have doubled down on direct mailings. High-end furniture retailer Restoration Hardware Holdings Inc. has made a name for itself by sending out phonebook-thick "source books" showcasing its merchandise. Even e-commerce-driven retailers such as Bonobos have made big bets on catalog mailings.

J.C. Penney Co. killed off its catalog in 2010, only to bring it back last year. Executives said they learned that many shoppers browse catalogs and then to go online to make their purchases. "We lost a lot of customers," the company's CEO Myron "Mike" Ullman told The Wall Street Journal when he reversed course.

The Direct Marketing Association says 53% of consumers purchase from a catalog at least once a year, with 17% purchasing monthly or more often. After a steep decline, catalog mailings rose in 2013 for the first time in six years.

The Victoria's Secret catalog dates back at least three decades. L Brands acquired the lingerie company in 1982 when it had a few stores and one catalog, and ramped up the marketing. But in recent years, spending on the mailings has declined. Advertising and catalog costs at L Brands totaled $414 million in 2015, down from $436 million in 2014 and $452 million in 2013.

The change comes about two months after Sharen Turney resigned as CEO of Victoria's Secret, and L Brands CEO Leslie Wexner took over her duties. Mr. Wexner said the company's new strategy, including the shift away from traditional promotions, is an effort "to accelerate our growth and to strengthen the business for the long term by narrowing our focus and simplifying our operating model."

The company also said Victoria's Secret is eliminating about 200 jobs in New York and Columbus, Ohio, where the company is based. Victoria's Secret will be reorganized into three business units -- Victoria's Secret Lingerie, Pink and Victoria's Secret Beauty -- and the leader of each will report directly to Mr. Wexner.

The company will pare back merchandise in certain categories to focus resources on core products. Victoria's Secret has shifted away from offering shoes and dresses, and is expected to cut its remaining apparel categories, excluding those within Pink, a brand that sells lingerie and loungewear targeting younger customers.

(END) Dow Jones Newswires

April 08, 2016 19:02 ET (23:02 GMT)

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