A customer carries a shopping bag when exiting 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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Victoria’s Secret parent company L Brands reported fourth-quarter earnings ahead of analysts on Wednesday, but sales lagged due to weakness in the lingerie brand.
Although the retailer does not offer a full year outlook, due to the uncertainty surrounding the pandemic and the impending divorce of its Victoria’s Secret brand from Bath & Body Works, it offered positive first quarter earnings outlook and said at the momentum saw the holiday. Sales have been strong in February so far.
Shares of L Brands were up about 5% during out of hours trading.
Here’s how the company fared during the fourth quarter ended Jan. 30 compared to what analysts expected, based on data from Refinitiv:
- Earnings per share: $ 3.03 versus $ 2.91 expected
- Revenue: $ 4.82 billion vs. $ 4.87 billion expected
L Brands posted net income of $ 860.3 million, or $ 3.03 a share, compared to a loss of $ 192.3 million, or 70 cents a share, a year earlier. The results exceeded the analyst predicted $ 2.91 per share.
Net sales grew from $ 4.71 billion a year ago to $ 4.82 billion. That was less than the $ 4.87 billion analysts expected.
Same-store sales were up 10%, better than the 6.7% increase predicted by a Refinitiv survey. Within that, same store sales at Victoria’s Secret fell 3%, but the decline was offset by 22% growth in same store sales at Bath & Body Works.
The company has been able to increase its profitability by lowering inventory levels and selling more items at full price. By relying less on discounts to lure shoppers, L Brands said it saw a significant improvement in both average unit prices and merchandise margins in the fourth quarter.
For the first quarter, L Brands is calling for earnings per share to fall within a range of 35 cents to 45 cents. That is well above analyst estimates of 12 cents per share.
It expects first quarter revenue to be roughly flat compared to 2019, at $ 2.6 billion. Again, Bath & Body Works will see stronger growth, while sales at Victoria’s Secret remain under pressure, in part due to ongoing store closings.
Management also said in prepared comments on Wednesday that L Brands is still working on its plans to separate Victoria’s Secret from Bath & Body Works, which is expected to be completed by August.
“Over the next six months, we will continue to work towards the separation of the two companies, following a dual track to prepare for a spin-off or a sale,” the company said.
L Brands had signed a deal last year to sell Victoria’s Secret to the private equity firm Sycamore Partners. But the $ 525 million deal fell apart as the pandemic temporarily closed the store’s physical stores.
Victoria’s Secret has sought to revive its brand, which sells everything from lingerie and perfume to pajamas and lounge wear, as consumers increasingly turn to bras and underwear with more inclusive marketing messages.
L Brands will hold a conference call with analysts Thursday morning to discuss the latest results.
Shares are up 119% over the past 12 months, as of Wednesday’s close. L Brands has a market capitalization of $ 14.36 billion.
Find the full L Brands press release here.