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Weak Sales at Victoria's Secret Lead to Drop in L Brands (LB) Stock

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After L Brands (LB - Free Report) announced weak sales for the month of June at Victoria’s Secret, the stock dropped nearly 10%. The VS parent company said it saw disappointing sales during the store’s Semi-Annual Sale.

Looking more specifically, in a monthly sales call with chief investor relations officer Amie Preston, L Brands said the Semi-Annual Sale had a soft start with negative traffic level.

Over The Years   

It’s clear that VS hasn’t been doing the best over the past couple of years. Along with posting weak sales in four consecutive quarters, there has also been a decline in customers. According to Business Insider, almost 58% of customers have stopped shopping at VS due to high prices.

Customers are now looking for comfort over appeal and VS has had trouble keeping up with that trend. Since taking its swimsuit and apparel collections off the shelves, Victoria’s Secret has been seen as the underdog as compared to other stores selling similar products.

Aerie vs. Victoria’s Secret

Victoria’s Secret has faced continuous competition from American Eagle’s (AEO - Free Report) Aerie brand. In its first quarter report for 2018, Aerie reported a 38% increase in comparable sales, whereas VS a 1% fall in comparable sales during the period.

Aerie seems to attract more customers because of its brand and image. The company has created a positive image around its products, seeing as they enforce body positivity. In part of its most recent Aerie Real campaign, the company used models with disabilities and chronic illnesses. This enforces a positive image for the company and makes customers feel good about themselves when buying Aerie’s products.

Meanwhile, when you think of Victoria’s Secret, you think about the sex appeal and the models that are shown in its campaigns and fashion shows. It’s a stigma that has been created that you have to look like the models from VS in order to wear their products. Not only does this present a bad image for the company, but it also turns away customers from shopping with such a brand.

Current Situation

Currently LB is a #5 (Strong Sell) on the Zacks Rank. It hasn’t been doing so well amongst investors and has lost over 45% of its value over the past year. Although Victoria’s Secret is a well-known brand, its parent company is still struggling to keep up.

Outlook

It seems as though the trend of buying Victoria’s Secret and PINK products is slowly dying. Customers are looking for products that VS is simply not delivering, and therefore, it is becoming a ‘broken’ brand. It’s clear to customers and even investors now that this a strong sell stock, and it could easily continue on like this if things aren’t solved.

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