A customer is carrying a shopping bag as he was leaving a Victoria’s Secret Stores LLC store, a subsidiary of L Brands Inc., in New York, USA, on Wednesday, November 14, 2018.
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L Brands, the father of Victoria’s Secret, on Wednesday reported fourth-quarter earnings that exceeded analysts’ estimates, but sales fell due to the weakness of its lingerie brand.
Although the retailer does not offer a year-round outlook due to the uncertainty surrounding the pandemic and the pending separation of its Victoria’s Secret brand from Bath & Body Works, it offered an optimistic outlook for the first quarter, saying it is building on the impulse he saw during the holidays. Sales are said to have been strong so far in February.
L Brands shares increased by approximately 5% in trading after the program.
Here’s how the company did during the fourth quarter ended Jan. 30, compared to what analysts expected, based on Refinitive data:
- Earnings per share: $ 3.03 versus $ 2.91 expected
- Revenue: $ 4.82 billion compared to $ 4.87 billion expected
L Brands posted net income of $ 860.3 million, or $ 3.03 per share, compared to a loss of $ 192.3 million or 70 cents per share a year earlier. The results exceeded $ 2.91 per share forecast by analysts.
Net sales rose to $ 4.82 billion from $ 4.71 billion a year ago. This was outside the $ 4.87 billion expected by analysts.
Sales at the same store increased by 10%, better than the 6.7% increase provided by a Refinitive survey. In this respect, sales in the same Victoria’s Secret store decreased by 3%, but the decrease was offset by the increase in sales in the same store by 22% at Bath & Body Works.
The company managed to increase its profitability by reducing inventory levels and selling more items at full price. Relying less on discounts to attract buyers, L Brands said it saw a significant improvement in both average unit prices and merchandise margin rates in the fourth quarter.
In the first quarter, L Brands requires earnings per share to be in the range of 35 to 45 cents. This is well ahead of analysts’ estimates of 12 cents per share.
First-quarter sales are expected to be roughly flat compared to 2019 levels at $ 2.6 billion. Again, Bath & Body Works will grow stronger, while sales remain under pressure at Victoria’s Secret due, in part, to the continued closure of stores.
The management also stated on Wednesday, in the prepared comments, that L Brands continues to advance its plans to separate Victoria’s Secret from Bath & Body Works, which it expects to complete by August.
“Over the next 6 months, we will continue to work for the separation of the two companies, and we will go a dual route to prepare for either a decline or a sale,” the company said.
L Brands struck a deal to sell Victoria’s Secret last year to private equity firm Sycamore Partners. But the $ 525 million deal fell apart as the pandemic temporarily closed the retailer’s brick and mortar stores.
Victoria’s Secret has tried to revive its brand, which sells everything from lingerie and perfume to pajamas and loungewear, as consumers have increasingly opted for bras and underwear with more inclusive marketing messages.
L Brands will hold a conference call with analysts on Thursday morning to discuss the latest results.
Its shares have risen 119% in the past 12 months since the market closed on Wednesday. L Brands has a market capacity of $ 14.36 billion.
Find the full press release from L Brands here.