Millennials love Victoria’s Secret — but they sure aren’t shopping there
The Condé Nast “It Girl,” that fashion-forward, Instagram-obsessed, app-loving millennial shopper, who is rapidly nearing her peak spending age, is a surprising fan of an ailing brand.
That’s according to the Goldman Sachs Condé Nast “Love List,” an annual survey of the changing shopping behavior and brand preferences of the millennial consumer. The survey found that so-called It Girls’ favorite brand is Victoria’s Secret, the lingerie store known for the supermodel angels that front its runway shows.
It Girls may love Victoria’s Secret, but they sure aren’t buying much at its stores, which have been struggling with weak sales, shrinking margins and falling profits, even as consumers overall appear willing to spend, despite a recent downturn in consumer sentiment, as gauged by the University of Michigan.
Victoria’s Secret, a unit of L Brands Inc.LB, +1.62% , is having trouble selling merchandise even at a discount, as MarketWatch has reported. The stock has fallen 55% in 2018, underperforming the SPDR S&P Retail ETF XRT, +1.36% which is up 14%, and the S&P 500 SPX, +0.10% which has gained 8%.
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August sales numbers released earlier Thursday showed that trend continuing, with same-store sales at Victoria’s Secret falling 5% from the year-earlier period, despite increased promotional activity.
“Victoria’s Secret remains broken, with no signs of comparables or margins inflecting,” said Jefferies analysts led by Randal Konik in a note. Jefferies is not expecting any quick fix for the brand, and advised investors to sell the stock, which they expect is headed to $20 or lower.
The survey found athletic brands, notably Nike Inc.NKE, +0.49%and Adidas AGADS, +0.44% , are growing in popularity, not just in their core category, but increasingly in clothing, shoes and bags, where more formal brands used to reign. Nike is fast becoming a favorite of It Girls, the survey found, and remains the top athletic brand for all of the groups surveyed, which include millennials, defined as 23- to 38-year-olds, Generation Z, defined as teenagers through 23-year-olds, and the “Condé Nast Man,” the fashionable male consumer.
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“Our surveyed consumers indicated a rising preference for active and athletic brands this year across all cohorts and in several categories,” Goldman analysts wrote. “In clothing, Nike rose several slots to the [No. 4] position among our national survey of women, and we saw a similar response among men as Nike gained several points of share within its top rank.”
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Amazon.com Inc.AMZN, +0.49%is becoming increasingly dominant in every retail category except one: Fashion-forward consumers are still resisting its siren call, spending more of their money in-store than mainstream shoppers. They also give less “mindshare” to Amazon, according to the survey.
Shopping platforms are losing out to social media and its many millennial “influencers.” Consumers from all the groups surveyed name apps such as Facebook-ownedFB, +0.80%Instagram as favorites.
“Men have the highest affinity towards Facebook in our sample, while Gen-Z overindexes to SnapchatSNAP, +2.76% ,” said the report.
The top 10 ranked brands and retailers among It Girls after Victoria’s Secret are Sephora, Nike, UltaULTA, +3.84% , NordstromJWN, +1.63% , Kate SpadeTPR, -0.31% , Michael KorsKORS, +0.34% , Adidas, Gucci KER, +2.98%and Coach.
Smaller brands that are growing in influence include Rihanna’s lingerie and beauty line Fenty, and the cosmetics line Glossier and Tarte.
Investors eager to take advantage of the survey’s findings are advised to look at stocks, including Tapestry Inc., the renamed Coach; Nordstrom; Amazon; Adidas; Gucci parent Kering SA; and Estée LauderEL, -0.39% , all of which are buy-rated at Goldman.
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