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Why Acquiring a Hot DTC Brand Rarely Lives Up to Its Promise

Victoria’s Secret acquired e-commerce brand Adore Me this week, in what’s likely to be the first of many deals between strategics and fast-growing start-ups. But if history is any guide, there’s no guarantee that Adore Me will help usher Victoria’s Secret into the future.
A model wears a lilac lace detailed bra with wave patterned leggings for an Adore Me campaign.
Victoria’s Secret acquired e-commerce brand Adore Me this week, in what’s likely to be the first of many deals between strategics and fast-growing start-ups. (Adore Me)

As the market for fashion start-ups turns ice cold, many of these upstarts would be so lucky to find themselves in the same position as Adore Me.

The 11-year-old intimates brand is being acquired by Victoria’s Secret for $400 million in cash, the lingerie giant announced this week.

Such a deal gives Adore Me’s founders and investors a lucrative exit, and the brand will now have access to resources that will help widen its reach. Adore Me accounted for 6 percent of total sales done directly with intimate and swimwear brands in the US in October, according to data from research firm Earnest, which tracks credit and debit card spending. (Adore Me is projecting $240 million in sales this year, according to Victoria’s Secret’s acquisition viewed by BoF). But it faces competition from other DTC intimates brands such as ThirdLove and Savage X Fenty, plus American Eagle-owned Aerie and, until this week, category leader Victoria’s Secret itself.

The start-up no longer has to worry about meeting venture capital investors’ growth expectations, or attempting to go public in a volatile market that has sent shares of other DTC brands tumbling as much as 90 percent.

As for Victoria’s Secret, the company is banking on the acquisition to help it drum up elusive growth. The brand, which spun off from the scandal-plagued L Brands in 2021, has struggled to attract enough new customers despite a rebranding that has seen it ditch the ultra-sexy marketing it relied on for decades. In August, Victoria’s Secret said it expects sales to decline in the single digits this year.

Adore Me can provide Victoria’s Secret access to a younger audience. The brand is popular with Gen Z consumers due to its relatively low price point and inclusive imagery that features models of different body types. Victoria’s Secret has also begun using more diverse models in its own marketing, but it will take time for memories of its “Angels” campaigns to fade. The bigger brand can also leverage Adore Me’s technological savvy, including a subscription service, which allows customers to order a box of intimates and only pay for what they keep and drives customer retention.

That’s all true in theory, anyway. The reality of deals between big, established brands and fast-growing upstarts is much more fraught.

The Adore Me acquisition is reminiscent of a series of deals that occurred in the late 2010s. Walmart bought Bonobos, Modcloth and Eloquii, and Unilever purchased Dollar Shave Club – like Adore Me, known for its subscription service – for $1 billion. They too hoped the smaller brands would modernise the bigger ones, while remaining quasi-independent commercial forces.

But it’s been difficult for DTC brands to thrive under the umbrella of powerful retailers. Blending a developing supply chain with an established one can get messy quickly, and the freewheeling culture favoured by many start-ups isn’t always welcome once the proverbial grown ups enter the boardroom.

For many of the brands acquired by strategics and holding companies over the last few years, a pattern has emerged: what made the DTC brand dynamic and unique was stifled within a bigger corporate structure, and the promised revitalisation and sales boost for the parent company remained elusive.

For example, Walmart agreed to sell ModCloth to private equity firm Go Global in 2019, just two years after buying the start-up. Bonobos remains popular with its core consumers, but never became the world-beater Walmart was surely hoping for when it bought the brand in 2017.

Victoria’s Secret has the advantage of having watched some of its competitors blunder into overpaying for buzzy but tiny brands. It’s set clear expectations for Adore Me, saying it is willing to infuse more cash in the business beyond its initial $400 million, predicated on the start-up hitting growth targets in a two year period. Time will tell whether this is a sign Victoria’s Secret has realistic goals for its new brand — or that Adore Me has swapped one backer’s unrealistic expectations for another.

Adore Me, while one of many DTC lingerie start-ups, is also no cookie-cutter brand. It has differentiated itself among intimate apparel start-ups with its try-before-you-buy personalised box offering, which Victoria’s Secret said has helped Adore Me drive brand loyalty and repeat purchases. Of course, there’s little stopping one or more of its competitors from rolling out a similar service, notes Jonna Kim, a vice president of equity research at Cowen.

“What Adore Me offers can be replicated by others,” Kim said. “If their growth rate decelerates, then Victoria’s Secret is sitting with a name that is not growing at the rate they want it to.”

Since Victoria’s Secret doesn’t have much of a track record when it comes to acquisitions, it remains to be seen which bucket its acquisition will fall into. The lingerie giant could leave room for Adore Me to continue to innovate and simply supply it with the resources it needs to remain differentiated in a crowded sector.

If it does so, the sky’s the limit. One of the rare success stories for these sorts of deals is Gap Inc.’s acquisition of the activewear brand Athleta for around $150 million in 2008. At the time, Athleta was an online and catalogue-based direct-to-consumer outfit with a dedicated cult following, said Ari Bloom, founder and chief executive at brand aggregator A-Frame Brands. Gap Inc. used its retail expertise to grow Athleta’s physical footprint and now the brand generates more than $1 billion in annual sales.

Athleta “was a good DTC business, and Gap is good at opening stores,” Bloom said. “That’s a good success story.”



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Compiled by Darcey Sergison.

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