L Brands tops earnings estimates but misses on sales…
L Brands released its second-quarter earnings on Wednesday. The company managed to beat expectations on profit but came up short on sales. The lower-than-expected sales were largely due to poor performance from Victoria’s Secret, which is owned by L Brands.
Following the news, the company’s stock was down more than 7% on Thursday during premarket trading.
While the company did beat earnings estimates for this quarter, the company’s top and bottom lines have fallen year over year. L Brands shares are valued at $5.5 billion and are down about 21% in 2019.
L Brands Q2 Earnings Highlights
Here are the key points from L Brands’ Q2 earnings release:
- Adjusted EPS: 24 cents
- Revenue: $2.90 billion
- Same-Store Sales: down 1%
The company’s unadjusted net income fell from $99 million last year to $37.6 million this year. Its Q2 operating income also dropped from $228.1 million last year to $174.6 million this year.
The company’s decrease in comparable sales is largely due to Victoria’s Secret, which saw a 6% decrease in same-store sales. However, same-store sales at Bath & Bath & Body Works increased by 8%, giving the company some cushion.
Gross profit fell to $982.2 million in the quarter, representing a 7% decrease.
Fiscal 2019 Outlook
Per the earnings report, L Brands is expecting its third-quarter earnings per share to fall between a loss of 5 cents and a profit of 5 cents per share compared to earnings of 16 cents per share in the same period last year.
The company still expects its adjusted earnings per share for the 2019 fiscal year to fall between $2.30 and $2.60, down from $2.82 in the 2018 fiscal year.
Company-Owned Stores
As of August 3, 2019, L Brands owned a total of 2,927 stores internationally compared to 2,943 as of February 2, 2019.
This includes 1,109 Victoria’s Secret stores and 1,735 Bath & Body Works stores in the U.S. and Canada, as well as 83 international stores.
Cash Dividend
On August 9, 2019, L Brands declared its regular quarterly cash dividend.
The dividend of 30 cents per share is payable on September 6 to shareholders of record at the close of business on August 23. This is L Brands’ 179th consecutive quarterly dividend.
Improving Victoria’s Secret Performance
Stiff competition and changing consumer demands have significantly impacted the performance of lingerie maker Victoria’s Secret. In order to improve company performance, L Brands must improve sales at its 1,000+ Victoria’s Secret stores.
In a prepared statement, the company said, “Looking to the second half of the year, our number one priority continues to be improving performance at Victoria’s Secret.”
Earlier this month, L Brands announced in a memo that it would be losing Edward Razek, the company’s chief marketing officer. Razek had been with the company since the 1980s and is largely responsible for the company’s over-the-top image since that time.
Though the brand’s image was once successful, Victoria’s Secret has been losing market share for some time and ratings for its annual fashion show dropped. Razek also caused controversy last year by saying in an interview with Vogue that the company’s fashion shows shouldn’t include plus-size or transgender models.
As Victoria’s secret continues to turn things around, the company revealed that it will no longer be airing its annual fashion show and that it recently signed its first transgender model.
