Victoria's Secret

Victoria's Secret & Co. sells bras, underwear, sleepwear, swim and beauty through about 1,400 stores and its own websites, under two brands: Victoria's Secret for the woman, and Pink for the student. Since the 2021 spin-off from L Brands it has also owned Adore Me, a digitally native intimates brand bought in 2022 for around $400M. Product is made by contract manufacturers; the company owns the design, the stores, the catalogue-turned-app and, above all, the imagery.

The imagery is the business model, or was. From 1995 the company ran a fashion show, from 1997 a named group of models called Angels, and from 2001 a network television broadcast that at its peak drew over twelve million viewers. None of this was an advertisement in the ordinary sense. It was content that manufactured the meaning of the product — a specific, narrow definition of what a desirable woman looked like — and the stores then sold that meaning back to her at $60 a bra. It was extraordinarily effective. At the mid-2010s peak the Victoria's Secret segment of L Brands was doing roughly $7.7B a year and, by outside estimates, held about a third of the American intimates market.

The economics today are those of a promotional mall retailer with a debt load. FY2025 net sales were $6.55B, up 5%, the first real growth in years; the operating margin was 4.1% as reported and 6.1% adjusted. North American stores are 54% of sales, direct 31%, and international — franchise and company-owned stores abroad, plus the growing China business — 15% and rising fastest. The margin is thin because the category is now contested by Aerie, Skims and Savage X Fenty, each of which took a piece of the meaning the company used to own, and because the company promotes heavily to hold volume.

For twenty years this was the best brand moat in mass retail. Victoria's Secret owned the definition of sexy in America — a very narrow definition, but an owned one — and because the fashion show was content rather than advertising, the company did not pay for the attention; the networks paid for the right to broadcast it. A rival could copy a bra. It could not book Gisele, Heidi Klum and Tyra Banks on the same runway with a fifteen-million-dollar set of wings and put it on ABC.

That moat did not erode from the outside so much as get argued away. Between about 2014 and 2019 the customer's definition of desirability broadened — American Eagle's Aerie stopped retouching its models in 2014 and grew comps at 20–30% a year; Rihanna's Savage X Fenty launched in 2018 with every body on the runway; Kim Kardashian's Skims followed in 2019 — and Victoria's Secret held to the old one. When its chief marketing officer told Vogue in November 2018 that the show was 'a fantasy' and that it should not cast transgender models, he was not misstating the strategy. He was stating it, out loud, at the exact moment the customer had stopped agreeing with it.

What is left is still substantial: the largest store fleet in the category, a scale in bra manufacturing and fit that a start-up cannot match, a beauty business with genuine habit, and a name that everybody knows. The 2024 return of the fashion show with a broader cast drew a very large audience and a lot of goodwill, and the FY2025 numbers suggest the customer is willing to be re-approached. But a moat that has to be rebuilt by apologising for itself is, by definition, eroding rather than wide, and I would call it that until the share numbers say otherwise.

The record has to be split between two owners. Under Les Wexner and L Brands, Victoria's Secret was the group's cash machine for thirty years, and for most of that time the allocation was excellent: the catalogue, then the fashion show, then the television deal, each of which was content that paid for itself in attention. What went wrong at the end was not spending but refusal — the money kept going into the same show, the same Angels and the same imagery after 2014, when the customer had moved, and the segment lost roughly $2B of revenue and a third of its margin before the show was cancelled in 2019. In February 2020 Wexner agreed to sell a 55% stake to Sycamore Partners at a valuation of $1.1B; the pandemic gave Sycamore a reason to walk away three months later, and in hindsight the failed sale was the best thing that happened to shareholders.

Since the August 2021 spin-off the allocation has been that of a company trying to buy its way back into relevance while paying down debt. The Adore Me acquisition in 2022, at about $400M, bought a digital model and a younger customer and has been, on the evidence, worth it. The store fleet has been remodelled rather than expanded. The show was brought back in 2024 with a new cast as a marketing investment, which I think was correct. Buybacks were used in the first two years and then paused as the balance sheet demanded. The 2025–2026 fight with BBRC cost real money and management attention, and the board's decision to reject Brett Blundy as a director over governance concerns — twice — is a bet that the current plan needs time more than it needs an outside operator.