Sportswear is fast becoming a core category for Victorias Secret

Sportswear is fast becoming a core category for Victoria's Secret

Victoria's Secret is preparing to take its fitness performance to the next level after deciding to ditch beachwear and focus on sportswear instead. Bernadette Kissane, senior analyst for apparel and footwear at Euromonitor International, looks at why it is departing a category it dominated. 

Spring break will never be the same again. Victoria's Secret has done a U-turn on swimwear. Just months after airing its Swim Special on CBS, the lingerie giant, owned by L Brands, is ditching its swimwear category altogether.

Victoria's Secret discontinues swimwear in move to simplify

The decision is puzzling, given its success: Victoria's Secret ranked first globally in swimwear during 2015, with a 2% value share, and in the US accounts for an impressive 5% of share of women's swimwear. So why, has the company decided to cut a category that generated an estimated US$500m in 2015?

Restructuring while ahead

Globally, swimwear grew at a CAGR of 4% in fixed US$ exchange rate terms over 2010-2015; however, the company has suggested growth within its own swimwear category has stagnated in recent years. Notably, swimwear sales last August were disappointing, caused by overcomplicated designs that replicated catwalk trends. Even so, discontinuing a line that accounts for 6.5% of Victoria's Secret sales and with which the brand has captured significant value share in the global swimwear market all due to a short spat of unsatisfactory growth does seem a little hasty.

Victoria's Secret reported comparable sales growth of 5% in 2015. However, despite a strong financial performance, the brand appears to be going through a tumultuous time. Longstanding CEO Sharen Jester abruptly departed in February and alongside the termination of swimwear the brand is also discontinuing its catalogue and accessories range, as well as cutting 200 jobs at its offices in Columbus and New York.

New CEO Leslie Wexner is keen to restructure operations to "accelerate growth and strengthen the business for the long-term" by streamlining to focus solely on lingerie, beauty, Pink and sportswear. Given that the expected growth in swimwear to 2020 is dwarfed by that of sportswear, the decision is not a terrible one.

#TrainLikeAnAngel

Sportswear is fast becoming a core category for Victoria's Secret, and it complements its brand image. In just two years, the brand has created a well-rounded product range that is generating significant growth and does not result in annual markdowns when the season is over. Victoria's Secret has benefitted from providing performance-led items in its VSX range and all-important sports-inspired garments in its younger sub-brand Pink. Utilising resources to grow its sports category and replacing swimwear stock in store with VSX Sport could prove lucrative as sportswear is expected to generate US$63bn in terms of absolute value growth to 2020.

Beneficiaries

Swimwear is, however, still experiencing growth as a swarm of niche labels such as Triangl and Cocodune cater to the growing demand for year-round beach-friendly wardrobes. The overall category remains heavily fragmented, which will become more prominent with the removal of Victoria's Secret. Fast-fashion brands such as H&M, Zara and Forever21 will surely find themselves in profitable positions. Additionally, American Eagle's lingerie brand Aerie is well positioned to capture significant share of swimwear in the US with its millennial target audience, competitive prices and the wildly successful AerieReal campaign celebrating positive body image.

While the termination of its catalogue business makes perfect sense given the digitalisation of the buying process, it does seem odd that Victoria's Secret has decided to depart from the swimwear category it dominated. Surely it is possible to deliver in both sportswear and swimwear, given the categories go hand in hand?

Nevertheless, as US teens scramble to get their hands on the (discounted) last season of Victoria's Secret swimwear to see them through the summer, the brand is preparing to take its fitness performance to the next level. 

About the author: Bernadette Kissane is senior analyst for apparel and footwear at Euromonitor International, where she is responsible for publishing research studies related to corporate strategies, market entries, competitive intelligence and opportunity analysis in the global apparel and footwear industry.