Victoria Secret's Rebranding Was the Right Call

Shares of Victoria's Secret & Co VSCO rose more than 11% on Wednesday after the retailer revealed it is enjoying a strong holiday season and unveiled a stock buyback plan. After splitting from its parent company, the lingerie retailer is reducing its emphasis on sexy models and focusing on inclusion, including new categories such as maternity.

Reaffirmed Fiscal Fourth-Quarter Guidance

The lingerie retailer who owns around 1,400 stores across the globe reaffirmed its forecast for the fiscal fourth quarter, saying sales will be in the range of flat to up 3% compared to the year-ago period.

Third-Quarter Results

On November 17th, the retailer reported financial results for the quarter that ended on October 30th, 2021. It generated net sales of $1.441 billion with net income amounting to $75.2 million and an operating income of $107.9 million. CEO Martin Waters commented that the solid performance results reflect growth in all of the company's core categories.

Stock Repurchase Plan

The retailer is working with Goldman Sachs to buy back $250 million of its own stock through an accelerated share repurchase program. On December 31st, it will receive 4.1 million shares of its stock with the plan due for completion by the end of the first quarter of 2022. The stock repurchase plans reflect the company's confidence that the business has been stabilized.

Rewriting the Playbook

After years of declining sales and losing relevance, the company is trying to change its image and shift from a heavy emphasis on sexy models to a more inclusive brand for women of all sizes and shapes. It has added plus-size mannequins as well as new categories such as shapewear and maternity.

Most shockingly, it ditched its iconic fashion show that made many models such as Adriana Lima famous throughout its 20-year-old history. Although viewership of the event plummeted as the last-ever show in December 2018 suffered the worst ratings in its broadcast history, the company did say it will bring back the show one day, but for now, Angels have been replaced with brand ambassadors who represent all ages and body shapes.

The CEO is pleased with how the undergoing brand transformation is going as the company works on deepening its customer relationships and continues to improve operational fundamentals. All in all, giving up the impossible beauty standards of Barbie-like avatars for giving women more options and the opportunity to feel good in their own skin was the right call, both from a moral and business perspective. Even the 44-year-old lingerie retailer had to realize that the world has changed- and it keeps on changing.

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