At the end of January, the Wall Street Journal reported that Les Wexner, the long-time CEO of Victoria’s Secret and enabler of Jeffery Epstein, was looking to sell part or all of the brand. Around the same time, the REITs Simon and Brookfield, along with Authentic Brands Group, bid for Forever 21, which had recently declared bankruptcy. 

Why would anyone want to buy these brands?  

Yes, Victoria’s Secret grossed $7.3 billion in 2018 sales in the U.S., flat from the year prior, but down five percent from two years earlier. All of the fallout from the Epstein scandal, the cancelation of the Fashion Show and the continued cultural shift away from how Victoria’s Secret views “beauty”—which the entire brand is predicated on and cultural attitudes show no signs of reversing—should give any prospective buyer pause. But the brand’s declining sales percentages quickly eat into its large revenue numbers. 

For Victoria’s Secret, imagine sales continue falling five percent annually as they did between 2016 and 2017, which could be a conservative estimate if the brand falls increasingly out of favor. A brand earning $7 billion in annual revenue declining five percent annually over five years means a nearly 23% net decrease in sales. That’s down to $5.4 billion in annual revenue, on a cost structure that is likely more fixed than variable, which means profit is declining even more rapidly.   

For Forever 21 the problem is even more pronounced, where sales fell an estimated 12-15% annually over the last two years, from a peak of $4.4 billion in 2016. With that decrease annualized over the next five years, starting at $3.3 billion in 2018 revenue means five years later the brand would be down to $2 billion in annual revenue, a 46% decline. Sure, in Forever 21’s case, the brand’s health is existential for Simon and Brookfield and it keeps their malls full of shoppers and their occupancy and sales stats in check. But they are about to take on a mess of a brand going in the absolute wrong direction.  

For Forever 21 the problem is even more pronounced, where sales fell an estimated 12-15% annually over the last two years, from a peak of $4.4 billion in 2016. With that decrease annualized over the next five years, starting at $3.3 billion in 2018 revenue means five years later the brand would be down to $2 billion in annual revenue, a 46% decline. Sure, in Forever 21’s case, the brand’s health is existential for Simon and Brookfield and it keeps their malls full of shoppers and their occupancy and sales stats in check. But they are about to take on a mess of a brand going in the absolute wrong direction.  

Plenty can happen over five years and there’s no guarantee that the rate of falling sales for legacy brands will increase or decrease. But these estimates bluntly challenge the idea that legacy brands “have time” to figure out their problems and reverse these sales declines. With the numbers so large, one might think: “What’s a few hundred million of lost sales out of billions?” But these numbers add up fast. A bloated and legacy cost structure only twists the knife—add on declining profit, debt and being a public company and a big problem only gets bigger. 

If you think you have time to make desperately-needed changes on a brand with falling sales in today’s fast-paced landscape, you are dead wrong. And if you’re thinking of buying a legacy brand that is culturally declining and plan to revitalize it, think again.