Dive Brief:

• Victoria's Secret is moving assertively to make good on a key tactic in its recovery — raising prices — but UBS analysts this week warned the brand may not be ready for that. Data from the UBS Evidence Lab found that the average Victoria's Secret price rose 19% year over year in August, while just 31% of merchandise was on sale in the same period.

• Promotions have been endemic at the retailer, which a year ago decimated margins when it extended its annual sale by two weeks and slashed prices further. Last week, at owner L Brands' shareholders meeting, newly arrived brand chief John Mehas said that due to a "lack of innovation" in recent years, customers have "refused to pay full price."

• But the retailer must also address the merchandising and marketing missteps that have cost it share in order to justify the higher prices, UBS warned in a recent client note emailed to Retail Dive. "This was the lowest percentage since April 2017 and 1400 bps below the [last 12 month] average," analysts led by Jay Sole wrote of the hikes. "[B]ut we're concerned price increases will hurt VS unit demand badly."

Dive Insight:

Low prices can hurt a brand, and returning to premium price points can be crucial to a recovery. But it's a tricky business.

Tapestry successfully returned to higher prices and elevated the brand cachet at its Coach business in recent years, for example, but has made less progress in a similar effort at its Kate Spade banner. For Kate Spade, a design reboot hasn't resonated, and items aren't selling. Cutting prices in that scenario is an obvious way to move merchandise.

L Brands founder Les Wexner said as much last week. He admitted that markdowns have become a problem at Victoria's Secret, and noted that they are "the largest expense we have," worse than tariffs and transportation costs. But he also defended them as the only way to make sales when the merchandise misses.

"If I'm really close to the customer and I really know my customer perfectly well, you'd have zero markdowns and the quantities would be right," Wexner said. "If markdowns go up or if turns slow down it means we're not tracking with the customer. We have too many errors."

Mehas at last week's meeting unveiled new styles and third-party brands designed to upgrade the retailer's offer. Judging by what is still found at Victoria's Secret stores, however, a more appealing assortment has yet to reach the customer, according to Jane Hali & Associates analysts.

"The selection looks the same, over the top sexy and, we felt, quite expensive," CEO Jane Hali told Retail Dive in an email regarding the firm's store visits in Boston last Thursday, noting that "Some of the lingerie items look toned down with menswear plaids etc. in the back of the store."

But overall, "they refuse to get the message that sexy is out and comfort is in," she said. "They continually give away share to the digitally native brands. It has become uncomfortable shopping the store and even looking online. We are so over this."

The brand's image has also been hurt by overly sexualized marketing that has turned off many shoppers, especially younger ones. Wells Fargo analysts in a Sept. 10 note on last week's meeting said that "Over the past several years, despite meaningful struggles across their business, [L Brands] management has been very set in their ways, appearing somewhat dismissive of the need to change their model and evolve" but counted its announcement "that the long-televised [Victoria's Secret] fashion show is on the chopping block" as among the "profitability-preserving changes (finally) taking place."

But UBS suggested that such changes must catch up before prices rise. "Success depends on [L Brands] raising prices while at the same time improving its product assortment and marketing message," Sole said.