A customer carries a shopping bag when leaving a store Victoria’s Secret Stores LLC, a subsidiary of L Brands Inc., in New York, USA, on Wednesday, November 14, 2018.
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AL Brands, parent company of Victoria’s Secret, released fourth quarter earnings on Wednesday that exceeded analysts’ estimates, but sales fell due to the weakness of its lingerie brand.
Although the retailer is not offering a year-round outlook, due to uncertainty surrounding the pandemic and the pending separation of its Victoria’s Secret brand from Bath & Body Works, it has provided an optimistic outlook for profit for the first quarter, saying it is growing in the dynamics you saw during the holidays. He said sales have been strong so far in February.
L Brands’ shares rose about 5% on the floor.
See how the company fared during the fourth quarter ended January 30, compared to what analysts expected, based on data from Refinitiv:
- Earnings per share: $ 3.03 against expected $ 2.91
- Revenue: $ 4.82 billion versus expected $ 4.87 billion
L Brands posted a net profit 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 the $ 2.91 per share forecast by analysts.
Net sales grew to $ 4.82 billion, from $ 4.71 billion a year ago. This fell short of the $ 4.87 billion expected by analysts.
Same store sales grew by 10%, better than the 6.7% increase predicted by the Refinitiv survey. Within that, Victoria’s Secret same-store sales fell 3%, but the decline was offset by the 22% same-store sales growth at Bath & Body Works.
The company was able 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 average unit prices and merchandise margin rates during the fourth quarter.
For the first quarter, L Brands is demanding that earnings per share be in the range of 35 to 45 cents. This is far ahead of analysts’ estimates of 12 cents per share.
She expects first quarter sales to be stable compared to 2019 levels, at $ 2.6 billion. Once again, Bath & Body Works will see stronger growth, while sales remain under pressure at Victoria’s Secret due in part to ongoing store closures.
Management also said in comments prepared on Wednesday that L Brands is still moving forward with its plans to separate Victoria’s Secret from Bath & Body Works, which is expected to be completed in August.
“In the next 6 months, we will continue to work to separate the two businesses, moving forward in two ways to prepare for a split or a sale,” said the company.
AL Brands had signed a deal to sell Victoria’s Secret last year to private equity firm Sycamore Partners. But the $ 525 million deal was broken, as the pandemic temporarily closed the retailer’s physical stores.
Victoria’s Secret has been trying to revive its brand, which sells everything from lingerie and perfume to pajamas and sleepwear, as consumers have increasingly opted for bras and underwear with more inclusive marketing messages.
L Brands is due to hold a conference call with analysts on Thursday morning to discuss the latest results.
Its shares have risen 119% in the last 12 months, since the market closed on Wednesday. L Brands has a market capitalization of $ 14.36 billion.
Find the complete L Brands press release here.