You have to give Victoria Secret credit; they have realized that angels do not sell merchandise anymore and, in today’s digital environment, stores alone often do not move enough merchandise. Looking around, Victoria Secret’s CEO Martin Waters decided to close 251 weak stores and buy the privately held digital giant Adore Me for $400 million in cash. Adore Me brings a new business model, a subscription plan and a try-before –you buy’ program, to the company.
It is a big deal but, the reality is in the post-pandemic period people do not want to shop for intimate apparel in a crowded store. They would rather spend time privately in front of the computer to find the right merchandise. In his welcoming comments, Martin Waters said, “I am absolutely delighted to be announcing the transaction, welcoming Adore Me into the VS&Co. family.” He continued, “Adore Me is a technology-led, digital first innovator in the intimate category that will help us bring differentiated experiences to Victoria’s Secret and Pink customers. This acquisition will be a significant accelerant as we pivot toward growth and modernize the foundation of our company….”
The merger is expected to be completed in January 2023, and management expects the action to be accretive for fiscal 2023 for VS&Co. The board of VS&Co. approved the purchase. After all the dust settles, VS&Co. will have 849 doors at the end fiscal 2022. Planned closures will affect 235 Victoria Secret Stores and three Pink units in the U.S., and 10 Victoria’s Secret and three Pink stores in Canada.
A VS&Co. plan for expense savings includes cost reduction through sourcing changes, a meaningful reduction of store selling costs, and a decentralization of operations to separate the lotion and candle businesses from the bra brands. It means that the company will trim the operating overhead wherever possible.
The company reported first quarter sales of $821.5 billion, a drop of 46 percent vs. 2021. Same store sales dropped 15 percent. Operating loss was $203.3 million compared to an income of $32.7 million a year ago
While there are no public figures for Adore Me, the company identified 1.2 million customers, and the NPD Group lauded the company as a leading digital native growth brand.
POSTSCRIPT: Times have changed. The customer shops with at a different mindset these days – more mindful of what to buy, how to shop for what they want, and then where.to buy it. To meet these new attitudes, many of the Victoria’s Secret stores need updating and fresh merchandise. The stores also need a friendlier, more customer-oriented sales team. Adore Me’s management knows how to speak to customers. It will be a thrill to see the overall company emerge as a digital leader by taking a few lessons from the newest brand in its portfolio.