22 October 2018
Victoria's Secret holds a hugely successful fashion show in Shanghai on Monday. Photo:Xinhua
Victoria's Secret holds a hugely successful fashion show in Shanghai on Monday. Photo:Xinhua

Victoria’s Secret wows glitterati at Shanghai catwalk

Victoria’s Secret easily became one of the hottest topics on China’s social media when it held its annual fashion show in Shanghai’s Mercedes-Benz Arena on Monday night.

Around 3,000 invited guests attended the glittery affair. A front seat admission ticket is said to have fetched more than 300,000 yuan (US$45,400).

American businessman Roy Raymond opened the first Victoria’s Secret store at the Stanford Shopping Center in California in 1977.

Victoria’s Secret has positioned itself as a premium brand, selling its lingerie products as designer items. Women acquire them to indulge themselves, and men buy them as gifts to the objects of their desire.

The brand made a huge success amid the internet boom in Silicon Valley in 1970s. Revenue hit US$500,000 in the first year. Following rapid expansion, Victoria’s Secret raised its turnover to US$7 million by 1982, and was acquired by Limited Stores, a.k.a. L Brands, in the same year.

The company started its annual fashion show in 1995 to promote the brand, with a dozen of supermodels showcasing the latest collection of luxury underwear.

This much-awaited event has taken place outside the United States only thrice since its inception. That the brand chose a Chinese venue for this year underscores the company’s recognition of the vast potential of the mainland market.

In recent years, the brand has been struggling amid intense competition with e-commerce and fast fashion brands.

Office ladies used to splurge on one or two sets of expensive lingerie every year or their partners may send them as gifts for Valentine’s Day or Christmas. However, for the same price of one set of Victoria’s Secret lingerie one could buy three sets of lingerie of the same quality on internet shopping sites or fast fashion brands.

L Brands also operates the cosmetic brand Bath & Body Works, but it is Victoria’s Secret that contributes over 60 percent of its revenue.

Last year, the situation was different.  L Brands saw its revenue rise 2 percent to US$12.5 billion, but BBW was the major contributor. Soaring marketing costs for Victoria’s Secret has dragged the overall net profit down by 8 percent to US$116 million.

In the first three quarters this year, Victoria’s Secret sales revenue fell by 11 percent from the year before. L Brands’s total revenue dropped by 6 percent in the same period, despite a 4 percent growth in BBW.

As a result, the company’s share price has slumped nearly 50 percent since last year, and it’s trading at a forward P/E multiple of 16 times.

Victoria’s Secret has 1,229 stores worldwide by the end of October, of which 993 are in the US and most of the rest are in Canada and Europe.

It has only two shops in China. The company has reportedly franchised a dozen shops to sell perfume and accessories in Beijing, Shanghai and Shenzhen.

While the fashion show in Shanghai turned out to be a huge success, Victoria’s Secret is in fact going through a difficult period.

Perhaps it can consider live streaming its fashion shows or licensing game developers to sell the brand’s virtual underwear products online to open up new income streams.

This article appeared in the Hong Kong Economic Journal on Nov. 22

Translation by Julie Zhu

[Chinese version 中文版]

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Hong Kong Economic Journal columnist

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