A customer carries a shopping bag on Wednesday, November 14, 2018 at a Victoria’s Secret Stores LLC store, a subsidiary of L Brands Inc., in New York, USA.
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Victoria’s Secret parent, L Brands, on Wednesday reported fourth-quarter earnings that exceeded analysts’ estimates, but sales fell too little due to the weak 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 has delivered an optimal profit outlook for the first quarter, saying it is building on the momentum it saw during the holidays. Sales are said to have been strong so far in February.
L Brands’ shares rose about 5% in after-hours trading.
Here’s how the company performed during the fourth quarter ended January 30, compared to what analysts expected, based on Refinitiv data:
- Earnings per share: $ 3.03 versus $ 2.91 expected
- Revenue: $ 4.82 billion versus $ 4.87 billion expected
L Brands had a 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 were above the $ 2.91 per share forecast by analysts.
Net sales grew to $ 4.82 billion from $ 4.71 billion a year ago. That was less than the $ 4.87 billion analysts had expected.
Sales in the same store increased by 10%, better than the 6.7% increase predicted by a Refinitiv survey. Inside, sales of the same store in Victoria’s Secret fell by 3%, but the decline was offset by 22% growth in the same store at Bath & Body Works.
The company has managed to increase its profitability by reducing inventory levels and selling more items at full price. By relying less on discounts to attract buyers, L Brands said it saw a significant improvement in both average unit prices and trading margins during the fourth quarter.
For the first quarter, L Brands is asking earnings per share to fall within 35 cents to 45 cents. This comes above the analysts’ calculation of 12 cents per share.
The company expects sales in the first quarter to be approximately $ 2.6 billion compared to 2019 levels. Once again, Bath & Body Works will see stronger growth, while sales at Victoria’s Secret remain under pressure, partly due to continued store closures.
Management also said in prepared remarks on Wednesday that L Brands is still continuing with its plans to separate Victoria’s Secret from Bath & Body Works, which they are expected to complete by August.
“In the next six months, we will continue to separate the two businesses and complete a dual track to prepare for an impact or a sale,” the company said.
L Brands entered into an agreement last year to sell Victoria’s Secret to private equity firm Sycamore Partners. But the $ 525 million deal fell apart as the pandemic temporarily shut down the store’s brick-and-mortar stores.
Victoria’s Secret has sought to revive its brand, which sells everything from lingerie and perfume, to pajamas and loungewear, as consumers have increasingly opted for bras and lingerie with more inclusive marketing messages.
L Brands is holding a conference call with analysts on Thursday morning to discuss the latest results.
Its shares have risen 119% over the past twelve months since closing Wednesday. L Brands has a market capitalization of $ 14.36 billion.
Find the full press release from L Brands here.