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EXCLUSIVE: Victoria’s Secret Drops $18M for Stake in Frankies Bikinis

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The investment marks the lingerie giant’s latest comeback strategy and an attempt to gain share in the fast-growing swimwear industry.

Victoria’s Secret is diving head first into the swimwear market with an $18 million investment into Los Angeles-based brand Frankies Bikinis.

The move gives Victoria’s Secret & Co.—which includes the Victoria’s Secret Lingerie, Victoria’s Secret Beauty and Pink divisions—a minority stake in the swimwear brand. It’s also the latest chapter in the lingerie giant’s comeback strategy, one that began roughly three years ago and includes there introduction of swimwear, first online in 2019, and then in stores last year.

“Our investment in Frankies Bikinis is a continuation of our efforts to expand partnerships with culturally relevant brands founded by women entrepreneurs,” said Martin Waters, chief executive officer of Victoria’s Secret Lingerie.

But there’s more to it than that. The acquisition also gives Victoria’s Secret a bigger piece of the fast-growing swimwear industry, one that has been on fire since the start of the pandemic. Despite the lack of travel during lockdown, many consumers found refuge in escaping (even if it was only to their balcony) and putting on a bathing suit, dreaming of travel.

The result was literally thousands of start-ups entering the space, many with increased investor money. Kim Kardashian’s Skims, Beyoncé’s Ivy Park, Adam Selman and Bethenny Frankel have all expanded into swimwear since the start of the pandemic. New York-based Andie Swim raised $18.5millionof its own last December with the help of Jay Z’s venture fund.

Star power aside, a number of swimwear brands, both big and small, have reported record swim sales in the last two years. In fact, the U.S. swimwear market is one of the few fashion categories to have fully recovered since the start of the pandemic, now surpassing 2019’s revenue levels, according to Euromonitor International. Data from the research firm anticipates that the global swimwear market, which was worth more than $16 billion in 2020, will grow to about $21.4 billion by 2025.

Victoria’s Secret eliminated its swimwear category—what was once estimated to be a $525 million business—in spring 2016, only to bring it back online to its e-commerce (then part of L Brands) three years later. Swim pieces didn’t become available in select stores until 2021.

These days, in addition to its own brand, Victoria’s Secret offers swimwear brands like Frankies Bikinis, Beach Riot, Bfyne, Vitamin A, Miraclesuit, Baobab, Roxy and Skinny Dippers, among others, on its website.

Patti Cazzato, head of emerging businesses at Victoria’s Secret, didn’t offer the percentage of Victoria’s Secret’s revenues that come from swimwear, but did say that the business and consumers alike are “delighted” with the assortment after only one year back in the market.

”We’re excited to be able to offer our customer a wide range of choices in swimwear,” she said. “Victoria’s Secret & Co. is looking to provide customers with a highly covetable range of brands in swimwear.”

Still, competition in the swimwear pool is fierce.

Jitong Li, research analyst at Euromonitor, covering beauty and fashion, pointed out that unlike the lingerie market—where Victoria’s Secret is the clear market share leader with roughly a quarter of the total U.S. market—the number-one swimwear brand by share (currently Speedo) is only a few percentage points ahead of the second biggest swimwear brand in the market (Gap Inc.) That means the market is ripe for disruption—and that companies will have to offer something new in order to compete.

“It’s already a very competitive market,” Li said. “If [brands] want to attract the next generation of consumers, they need to have something unique and exciting, because there are already so many brands. They need to have a clear selling point, whether it’s sustainability or comfort, to attract specific consumers.”

But that’s exactly what Victoria’s Secret had in mind when it decided to invest in Frankies Bikinis.

“Frankies has a unique insight as a digitally native brand with the majority of their customer base under30. This partnership gives us further insight into the Gen Z and Millennial customer mind-set,” Cazzato said. “As we evaluate companies to begin strategic partnerships with, we seek to curate relationships with brands that will help us access categories and customer segments where we are underweight and brands that are culturally relevant. Frankies Bikinis gained a significant amount of traction in the last few years and we see our partnership as a wonderful opportunity to grow our offering to our customers.

“Frankies was one of the first to disrupt the swim market and build their brand through social media,”Cazzato continued. “They continue to differentiate themselves through organic collaborations with influencers who are also their customers. Their digital first approach, customer connection and distinctive, fresh voice in the industry always leaves everyone looking forward to what they’ll do next. And with Victoria’s Secret & Co.’s impressive reach, we can add to this powerful combination.”

Frankies Bikinis was founded by Francesca Aiello in 2012 while still in high school. Since then the brand has expanded into footwear, men’s swim separates, beauty, activewear, cell phone cases and ready-to-wear apparel, in addition to collaborations with names like Alo Yoga, streetwear brand Kith, model Sofia Richie, actress Hailee Steinfeld and tennis star Naomi Osaka.

Aiello, who also serves as creative director of Frankies, declined to divulge specific revenues, but told WWD in December that the brand’s total sales have grown 70 percent at a compound annual growth rate, over the last five years.

Per the terms of the transaction, Aiello and all other members of Frankies’ leadership team will continue to operate independently.

“Francesca grew up with Instagram and has organically used the platform to grow her business,”Cazzato said. “We love Frankies’ authentic voice and aspirational marketing.”

Aiello said she’s equally smitten with the Victoria’s Secret team.

“Victoria’s Secret and Frankies Bikinis are true heritage brands in my eyes; companies that women tie unforgettable memories to, whether that be a first purchase from the brand or a memory of a time wearing it,” she explained. “After meeting with the Victoria’s Secret team, it was apparent to myself and my team that they were the force that has the infrastructure to assist Frankies Bikinis in the tremendous growth that we are capable of and ready for. Partnering with Victoria’s Secret means growth across all aspects of our brand. Retail expansion is definitely still at top of mind and something that I think Victoria’s Secret will be a huge help with, as well. They have such incredible retail experience and are really experts in that space. I [also] have plans for category expansion.”

First up is a Frankies Bikinis pop-up shop in Manhattan’s SoHo this spring, the brand’s first physical retail space in New York. Cazzato added the extended partnership will also include exclusive Frankies Bikinis x Victoria’s Secret capsules.

Victoria’s Secret said the minority acquisition of Frankies Bikinis, which closed on Thursday, should not impact the company’s previously stated first quarter 2022 guidance.

Kegler Brown Hill & Ritter served as legal adviser for Victoria’s Secret, while Ritholz Levy Fields served as legal adviser for Frankies Bikinis. In addition, The Sage Group served as exclusive financial adviser to Frankies Bikinis.

“With Victoria’s Secret beside us, Frankies Bikinis will continue to deliver our signature collections that encourage customers to explore their personal style and create looks unique to themselves that make them feel their most confident,” Aiello said. “I believe that together we can continue to bring a new wave of fashion into the swimwear industry for all women of all shapes, all sizes and all backgrounds.”

Waters added: “We are excited to be partnering with Francesca and the team at Frankies Bikinis. She has created an aspirational beachwear brand and trend leader in the swimwear category, with room to grow and extend into new categories and attract new customers.”