Bras and lingerie: Victoria's secret weapons
Posted
Feb 28 2008, 06:01 PM
by
Anthony Mirhaydari
Rating:
Recessionary fears have pummeled stocks across the retail sector -- especially those catering to well-heeled females. The fear is that women, who are more likely then men to shop at trendy boutiques, will be forced scale back discretionary purchases of overpriced clothing during economic downtimes. So when the still-unfolding credit debacle first surfaced late last summer, the likes of Liz Claiborne, Talbots, and Ann Taylor nosedived.
All the panic and fear has created a beautiful opportunity to bottom-feed on Limited Brands, one of the world’s largest makers of women’s lingerie, fragrances, and beauty products under the Victoria’s Secret and Bath & Body Works labels. To fully understand why Limited is a great buy, you first need to appreciate the motives behind the purchase of a $50 bra or a $20 pair of underwear.
Nancy Etcoff, the psychologist and author of "Survival of the Prettiest," probably says it best when she argues that "good looks are a woman's most fungible asset, exchangeable for social position, money, even love. But, dependent on a body that ages, it is an asset that a woman uses or loses."
Before I am cast as chauvinistic, I’d quickly note that much of the same applies for men too. In fact, University of Texas economist Daniel Hamermesh puts the cross-gender income penalty for "plainness" at 5-10% regardless of occupation. Studies by other academics seem to verify these findings.
And of course, looks are a big deal when it comes to reproductive success: Hamermesh finds that "unattractive women marry men with less human capital." Psychologist David Buss, also of the University of Texas, studied the preferences of some 10,000 people from 37 cultures around the world. He found a woman’s physical attractiveness to be at or near the top of the checklist for every man surveyed.
Don’t judge me or get all philosophic about this -- it’s just a fact of life people. Even kids and toddlers are drawn to the attractive among us. And if beauty wasn’t a paramount concern, the global cosmetic industry wouldn’t have generated some $280 billion in revenue last year.
These are the reasons Limited will buck the trend, fight the recession, and outperform its peers. The need to feel desirable and sexy factor much more in the undergarment purchasing decisions of women compared to men -- the latter is less likely to have a problem throwing a pair of Hanes into the cart while shopping for motor oil at Wal-Mart. This is the source of the justification for purchasing a $50 brassiere, even if you’re pinching pennies elsewhere.
After all, feeling beautiful can be just as important as actually being beautiful. Associating your self-image with the models of Victoria’s Secret can be a big confidence boost. You just don’t get the same visceral impact from buying a nice blouse down at Ann Taylor.
The company reported end-of-year results yesterday, and considering the difficult environment, the numbers weren’t too bad. Income fell 12%, but this was made worse by a one-time operational snafu at the company’s new distribution center forced limited distribution of the perennial Victoria’s Secret catalog. Margins are healthy (that $50 bra only requires a handful of silky fabric and lace) and the company is sitting on some $500 million in cash with which to invest in new products and fresh advertising.
But that was enough for Standard & Poor’s to put Limited Brands’ investment-grade rating on credit watch after yesterday’s quarterly results were released. Analyst Diane Shand is worried that "the company will not be able to improve its credit metrics as quickly as…expected, due to the soft U.S. economy, weak mall traffic and declining consumer confidence."
I think Diane is underestimating the psychology here. Plus, as was outlined in today’s Wall Street Journal, efforts are underway to move the Victoria’s Secret brand away from explicit sexuality, and back to its "ultra-feminine" roots with "more-sophisticated, higher-quality products."
