Here’s an odd measure of success: Intimate apparel marketer Victoria’s Secret has covered itself. As a result, the company will be able to cut down its online promotion days.
“The merchandise margin rate was up significantly to last year on the strength of our assortment, which allowed us to reduce promotional activity,” said Sharen Turney, CEO of Victoria’s Secret, about its direct operations.
The company anticipates its inventory levels will be down in the low- to mid-single digits this quarter, and plans to throttle back on its discounting-based promotional activity, as it won’t need to clear merchandise out. As a result, the direct aspect of the company’s semiannual sale will be shortened by five days. Its retail element will not be affected during the semiannual sale, but its Memorial Day sale will be shorter and smaller, Turney, who spoke during an earnings call, added.
This doesn’t mean the company is pulling back on promotions, period. In fact, it is publishing a new catalog exclusively focusing on the Victoria’s Secret Pink line, which will be published to take advantage of back-to-school shopping, Turney said.
Why is Victoria’s Secret so sure it can throttle back on its promotions during its second quarter? Because during the first quarter parent company Limited Brands reduced its cost of goods sold, buying and occupancy to 64% of sales, compared with 68% in first-quarter 2009. That reflects well for Victoria’s Secret, which makes up the lion’s share of Limited Brands’ sales and income. Limited’s Bath & Body Works line accounts for the rest.
This was all part of a good quarter for the company. Limited Brands generated $1.93 billion in net sales during first-quarter 2010, up from $1.73 billion in first-quarter 2009. Its net income rose as well, from $2.6 million a year ago to $112.5 million, largely due to its cost containment. The quarter ended May 1.
While the company did not break out what each segment contributed to the top line, Victoria’s Secret generated $167.3 million in operating income while Bath & Body Works added $33.8 million in operating income.
