GO
Loading...

Victoria's Secret Hopes to Rekindle Desire for Lingerie

The Victoria's Secret Fashion Show, with its flashing lights and hip-hop music, attracts a big TV audience every year as millions tune in to gawk at leggy blondes strutting down the runway in lingerie.

Photo by Oliver Quallia for CNBC.com

But this year, the show—which was shot Thursday in New York and will air nationally in December—may take on even more importance. Analysts say the TV spectacle will play a critical role in rekindling consumers' desire to spend on lingerie, which was hit hard during last year's recession.

"In these times the show becomes more important," said Marshal Cohen, chief industry analyst at NPD Group research firm. "They do a great job of bringing attention, excitement, fanfare, desire and passion into the equation."

Intimate apparel sales plunged nearly 7 percent at their lowest point during the recession, as battered consumers cut discretionary spending out of their budgets, Cohen said.

After women's suiting, lingerie was the hardest-hit sub sector of apparel because it made sense for women to cut back on items that are seen by so few people, said Kimberly Greenberger, an analyst at Citigroup.

"I think that intimate apparel got hurt because some of the more fun, seasonal, flirty intimate apparel just felt a little frivolous for the time that we were in," she said.

But frugal fatigue has started to set in, and paired with product innovation and lower inventory levels, intimate apparel retailers should post flat sales this holiday, Cohen said.

Victoria's Secret parent Limited Brands said it expects to earn between 71 cents and 79 cents in the fourth quarter, a significant increase from its 1 cent profit in the third quarter. The retailer also raised its fiscal year guidance to between 93 cents and $1.08 from 75 cents to 90 cents.

"A lot of people like a little gift to feel good," said Monica Mitro, Victoria's Secret executive vice president of public relations. "When you have a lot of people with that mentality, then the sales add up."

Although there will still be deals, better controlled inventory levels mean consumers will see nothing like the 70-percent-off sales they did last season, Cohen said. But with less drastic price reductions, some retailers will only need to push half the amount of inventory that they did in 2008 to break even.

"Even with less inventory they're going to do more business," Cohen said.

Although there will be lesser quantities in stores, Victoria's Secret has expanded on its more affordable product lines, with some of its bras selling at two for $32. Because of this, the brand maintained its market share even as consumers were trading down, Greenberger said.

The company also recently introduced the more expensive Miraculous bra — designed to add two cup sizes to a woman's bust — and relaunched one of its previous best-sellers, the seven-way bra. Bra sales are crucial to intimate apparel retailers — as consumers shop for fit, functionality and style — and these two items will be hot buys over the holidays, Greenberger said.

Photo by Oliver Quallia for CNBC.com

Citigroup has placed a $24 12-month price target on Limited Brands, up from its current level of about $18. Greenberger said she expects Victoria's Secret to continue to be one of the company's best-performing brands, and while it's hard to gauge a sales spike following the fashion show, it puts a "longterm halo" over the brand, she said.

But regardless of an improved outlook, lingerie sales — and apparel sales in general — still face strong headwinds from a rising unemployment rate and beaten-down consumers. The National Retail Federation is one of many groups forecasting holiday sales will drop in 2009, estimating retail spending will fall 3.2 percent.

"The consumer has to think twice, or even three times before they make a purchase today," Cohen said.

The Victoria's Secret Fashion Show airs Tuesday, Dec. 1 at 10 p.m. Eastern on CBS .

More from Consumer Nation:

Questions? Comments? Email us at consumernation@cnbc.com

Symbol
Price
 
Change
%Change
CBS
---
LB
---

Featured

Retail