In February 2020, L Brands, the publicly-traded parent of Victoria’s Secret and Bath & Body Works, struck a $525 million deal with private equity firm Sycamore Partners to give up its majority stake in Victoria’s Secret and take the brand private.

Sales and profits at Victoria’s Secret are growing, and L Brands is planning to spin off the intimate apparel brand into a separate public company in August. Victoria’s Secret’s improving performance and investor enthusiasm about its prospects as a standalone company have helped drive up shares of L Brands (LB) around 90% this year, making the stock one of the hottest performers on the S&P 500. And Victoria’s Secret is tapping a new group of women, including soccer star Megan Rapinoe, actress Priyanka Chopra Jonas and plus-size model Paloma Elsesser, to become public faces of the brand. They will also work on new product lines, develop content and support social causes on behalf of Victoria’s Secret.

“I think most people probably doubted their ability to recover after what was a really challenging three to four years,” said Janine Stitcher, a retail analyst at Jefferies. “But they’ve done it.”

Despite the turnaround, Victoria’s Secret still has work to do winning back consumers it lost in recent years and fending off upstart bra brands, say analysts.

“The future of Victoria’s Secret looks like more inclusive branding, which is going to be a long road for them,” said Erin Schmidt, a retail analyst at Coresight Research. “Inclusivity is not something that you can simply tack on to a product or to a marketing campaign. Consumers are demanding that they see that within the internal corporate structures and the supply chain.”

Cora Harrington, author of “In Intimate Detail: How to Choose, Wear & Love Lingerie” and founder of the blog The Lingerie Addict, said Victoria’s Secret needs to expand its bra and underwear sizes to appeal to a broader group of consumers.

Offering a range of sizes “makes people feel like there’s something there for them and encourages people to visit the site, shop the site and share things with their friends,” she said.

Harrington also noted that plus size models are still not featured as prominently in Victoria’s Secret marketing as competitors such as Rihanna’s Savage X Fenty brand.

“It’s interesting to see Victoria’s Secret pick up little bits and pieces of where the industry is moving, but somehow still be reluctant to go all in in some pretty significant ways,” she said.

Victoria’s Secret did not respond to request for comment on Harrington’s criticisms.

What went wrong at Victoria’s Secret

Victoria’s Secret’s sales dropped to $5.4 billion in 2020 from $7.7 billion in 2015. Analysts attribute this decline to Victoria’s Secret’s struggle to adapt to consumer demand for more custom-fitted bras and its brand messaging and advertisements.

“It was all push-up bras that were made for not necessarily what women want to wear, but made for what [Victoria’s Secret] thought men would want,” said Stitcher from Jefferies.

“They were just kind of stuck with the same marketing message that they had for years. And that didn’t really resonate anymore,” Stitcher said.

Victoria’s Secret was also damaged by scandals surrounding corporate leaders and workplace culture.

“Why not? Because the show is a fantasy,” Razek said. Razek later apologized for his “insensitive” comments. He left the company in 2019.

In stores, Victoria’s Secret had also relied on heavy promotions to draw customers and clear out unsold bras and underwear sitting on shelves, hitting profit margins. “The inventory got too high and the pricing completely collapsed,” said Stitcher.

Victoria’s Secret’s rebound

More recently, Victoria’s Secret has been shifting its marketing, and it’s paying off, say analysts.

“We’re moving from sexy for a few to sexy for all,” Martin Waters, CEO of Victoria’s Secret, said on a call with analysts last month. “It’s about including most women rather than excluding most women and being grounded in real life rather than mostly unattainable.”

This repositioning was a dramatic departure for Victoria’s Secret and it’s taken time to shift consumer perceptions, said Coresight’s Schmidt.

“For a brand that has had its challenges both within the internal part of the organization and externally, this is a tremendous change for the consumer,” she said.

Victoria’s Secret has also expanded its bra assortment, said Stitcher. It’s selling more bralettes and unwired bras instead of push-up bras, and it’s offering fewer markdowns. Victoria’s Secret’s profit margin was up more than 10 percentage points during the three months ending May 1 this year compared with the same period in 2019.

“They’ve been promoting much more minimally. Pricing is back to where it was before they started to spiral downwards,” Stitcher said.

“The business has gotten much better than anyone would have expected,” she said.