By Andria Cheng
At the Victoria's Secret annual fashion show in New York's Lexington Armory, supermodel and television host Heidi Klum surprised the guests with a runway appearance just weeks after giving birth. Black Eyed Peas and its lead singer Fergie also performed at the dolled-up extravaganza.
Meanwhile, a parade of models in wings and spacesuits took to the catwalk, showing off the company's signature lingerie and clothing, including the new Miraculous Push-Up bra.
As Victoria's Secret gears up for the year's most important selling season, its parent, Limited Brands Inc. (LTD), is hoping that the $12 million fashion showcase helps boost traffic and sales. The fashion show was shot Nov. 19 and is scheduled to be broadcast on CBS Corp.'s (CBS) network Tuesday night.
Sales at Victoria's Secret are crucial because the lingerie division accounts for a majority of the profit at Limited, which also owns Bath & Body Works.
The show "has a dual purpose of raising the brand cachet and driving the traffic to the stores and catalogue," Lazard Capital Markets' retail analyst Todd Slater said in an interview. "It continues to increase the profile of the brand. There's no one else doing anything quite like it. There's marketing dollars well spent."
Slater said Victoria's Secret, representing two-thirds of Limited's profit, may return to positive same-store sales as early as January. Same-store sales have been declining for more than two years.
"Once Victoria's Secret turns positive, investor psychology will reflect well for the company," said Slater.
Shares of Limited have risen 72% this year, outpacing the 47% gain of the S&P Retail Index. Shares were recently ahead 5% at $17.42.
Victoria's Secret faces tough competition from other retailers, including teen brands such as American Eagle Outfitters Inc.'s (AEO) aerie and Abercrombie & Fitch Co.'s (ANF) Gilly Hicks, women's clothing retailer Chico's FAS Inc.'s (CHS) Soma and department-store operator J.C. Penney Co.'s (JCP) Ambrielle, analysts said.
Victoria's Secret also has yet to prove that it can drive demand without promotions after reduced sales in October led to a sales shortfall, analysts said.
"All those [rivals] taken together, they [Victoria's Secret] are in a position where they need to defend their market share," said Barclays Capital analyst Jeff Black. He added that the fourth quarter accounts for about four-fifths of the chain's profit. "There's a lot riding on [the fourth quarter]. I'm not sure there's much visibility to [when Victoria's Secret will generate positive same-store sales.]"
The fashion show's ratings haven't lived up to the level during its heyday.
Viewers for the show climbed to 8.68 million last year from 7.5 million in 2007, CBS data showed. Still, that's down from a peak of 10.5 million in 2002. CBS said it doesn't provide a forecast of what the expected ratings will be for this year's broadcast.
To engage consumer interest, part of the record spending this year went to sponsor a model search in four cities. And the public is being allowed to vote online for its favorite new model. The top two candidates were taped in November and the actual winner will be digitally added to the televised fashion show when voting closes Tuesday.
"I thought that's creative," Black said.
Victoria's Secret also has improved its product line and is offering lower-priced items such as the Victoria Collection to appeal to budget-conscious shoppers. It doubled the assortment of its lower-priced products to 30% from 15%, Black said. It has also added bright colors, such as using superhero red and blue and combining pink and acid yellow in lacy underwear, to spur demand.
"They've taken their game up a notch," said Lazard Capital's Slater, adding that lines to the registers at the chain were among the longest in the malls during the Black Friday weekend and the new Miraculous Push-Up bra has also proven to be a big seller.
-By Andria Cheng; 415-439-6400; AskNewswires@dowjones.com