Can Next or M&S turn Victoria’s Secret around?

Next and Marks & Spencer recently expressed interest in taking on the UK operations of Victoria’s Secret, which collapsed last month. Retail Gazette finds out how the US lingerie retailer can be turned around by the British retail giants, should they end up buying it out of administration.

Victoria’s Secret Next Marks & Spencer M&S L Brands Lex Wexner
Next and Marks & Spencer are reportedly in the race to acquire Victoria's Secret.

The retail industry was left wondering what the future holds for Victoria’s Secret when parent company L Brands placed its UK arm into administration on June 5, putting over 800 jobs and 25 stores at risk.

Before its collapse, speculation was rife that Victoria’s Secret would have a change of hands when L Brands’ billionaire founder Lex Wexner sold the firm’s controlling stake to Sycamore Brands for about $525 million (£407 million) – a move that could’ve effectively taken Victoria’s Secret private.

However, the deal fell through and L Brands said it was preparing for Victoria’s Secret to operate as a separate company. Before placing its UK arm into administration, L Brands said it would close 250 Victoria’s Secret stores across North America – representing about a quarter of its store estate on the continent.

READ MORE: Victoria’s Secret: What went wrong?

Now, British retail giants Next and Marks & Spencer have expressed interest in taking on the UK operations of Victoria’s SecretSky News had initially reported they were among at least three parties looking at becoming the new franchise partner for Victoria’s Secret in the UK, and were negotiating with administrators from Deloitte.

Next is looking to expand its wider business by linking up with brands in multiple categories. For example, the fashion retail giant recently signed flexible leases to take over the existing beauty halls of a handful of Debenhams stores that are set to permanently close down.

Meanwhile, M&S is already a leading seller of underwear and intimate clothing in the UK. It currently holds a 27 per cent share of the lingerie market and 36 per cent of the market for bras. This arguably places it at an advantage to steer Victoria’s Secret.

However, the retailer’s sales in its clothing and home departments have been struggling in recent years. For the year ending March 28, sales in that division plunged by 37 per cent year-on-year after £52 million hit that was largely attributed to the Covid-19 pandemic. This decline played a significant role in bringing M&S’s overall full-year profits down by more than a fifth.

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In its most recent full-year results, M&S’s clothing & home arm sales plunged 37%.

In response to this, M&S revealed a £1 billion plan of action that aimed to help mitigate the impacts of the coronavirus crisis as well as embrace a new way of operating in a world that would “never be the same again”.

With speculation rife that M&S is eyeing up Victoria’s Secret’s UK business, experts have told Retail Gazette taking the lingerie retailer on board would be a good move for the business.

Peter Scott, retail consultant at Graystone Strategy, said the move could solve M&S’s dire need to attract a younger consumer base.

“M&S has always been a market leader in underwear so it makes sense,” he said.

“But I suspect, its clothing categories had an inability to attract millennials.

“Victoria’s Secret could solve that problem providing it with two great brands (Victoria’s Secret and Pink) which can then be used to entice a new consumer into M&S.”

Jane Dessar, head of retail at executive search firm Odgers Berndtson, agreed that M&S could “benefit the most from a successful collaboration” if such a deal with Victoria’s Secret allowed it to attract younger customers – but she remained sceptical of how it could work.

“M&S has established itself as the gold standard of lingerie in the UK, and incorporating a third party lingerie brand into their existing portfolio where the size, fit and range are at odds with current lines has the potential to become problematic,” she explained.

She highlighted that Next, which recently signed a partnership deal with online retailer Sosandar, “speaks to a wider consumer base” compared with M&S.

“Next has already found success with brands such as Lipsy which attract a younger consumer and are sold both online and in store,” Dessar added.

“Next may therefore have an easier time incorporating the Victoria’s Secret brand into its offering given its existing customer base.”

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Next splashed out £17m in 2008 to acquire fashion retailer Lipsy.

Despite the retailers’ success in incorporating and collaborating with fashion brands in the past, they have nonetheless felt the effects of Covid-19.

In April, Next said the impact of the UK’s lockdown on trading had been “faster and steeper” than expected and warned that sales would remain under pressure throughout 2020.

The retailer reopened for online trading on April 14, and reported a 41 per cent plunge in total full-price sales over its first quarter to April 25. Next’s in-store sales on their own were down 52 per cent while online sales dropped 32 per cent.

While Next has increasingly embraced third-party brands, M&S has traditionally steered away from selling non-M&S brands. But has recently taken steps to change this, such as its kidswear collaboration with Roald Dahl and the Natural History Museum in February.

“There would need to be a real change of internal attitude and organisation so that Victoria’s Secret gets the push it needs and is able to grow and perform in the M&S environment,” Scott explained.

“By losing all of the standalone store costs, Victoria’s Secret can fit easily into many over spaced M&S branches making it a perfect match.”

Scott added it could prove a challenge for Next because it has never taken underwear and/or leisurewear on board on the scale of M&S. However, he said “as a standalone underwear brand, Victoria’s Secret would help change this for Next”.

“Next relies heavily on digital sales,” he said.

“The US would retain the Victoria’s Secret online business in the UK, so this would be a missed opportunity for Next if that position can’t be resolved, or it would need to find a way to integrate the stock into its own online Next store.”

Meanwhile, the owner of homeware retailer By Caprice, Caprice Bourret, told Retail Gazette that Victoria’s Secret would be a good addition for M&S as it was “an overall tired brand and needs a revamp”.

“It would be a smart and strategic move to acquire Victoria’s Secret as it will bring in the overall footfall percentage up,” she said.

“M&S needs this so they would be wise to dig deep and make this happen.

“It extends their target market which is something they need, and this will accomplish just that.

“Victoria Secret just wants the biggest pay cheque, so again M&S need to dig deep if they want it.

“The problem with Victoria Secret was really management. The main issue was the overspending. Their marketing campaigns were also tired.”

Whoever acquires Victoria’s Secret – whether it be M&S or Next or another party – they may choose to migrate it entirely online. There is a good chance that neither M&S nor Next would want to take on the bricks-and-mortar responsibilities and expenses that come with Victoria’s Secret’s UK stores, including a four-flour 40,000 sq ft flagship on London’s Bond Street.

Meanwhile, Victoria’s Secret itself may need to modernise its product offering and implement inclusive marketing to refresh the business to consumers. The outdated and sexist campaigns are a thing of the past, and with a fresh portfolio, the sector is likely to see further retailers in the race to acquire the once-popular lingerie brand.

Both M&S and Next declined to comment.

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  1. Both good candidates, however, over time the brand will be incorporated into existing sites, with mass closure of VS dedicated sites.


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