Strong October sales boost L Brands shares
L Brands shares rose by more than 6 percent on Thursday after the Columbusbased retailer reported strong October sales.
The parent company of Victoria’s Secret and Bath & Body Works reported that comparable store sales — a key indicator of a retailer’s health — increased 4 percent in October, much better than Wall Street expectations of a 0.4 percent rise.
Sales were particularly brisk at Bath & Body Works, where comparable store sales rose by 11 percent. Victoria’s Secret, which had been struggling recently, posted flat comparable store sales, as the lingerie chain’s discounts have been driving customers back to the brand.
Victoria’s Secret profit margin for the month “was down significantly” because of discounts, said Amie Preston, L Brands’ chief investor relations officer. Meanwhile, the profit margin at Bath & Body Works was up from last year, as the chain offered fewer discounts during October.
While Wall Street was pleased by the performance, many are still holding their breath over “ongoing challenges we see at Victoria’s Secret,” said analyst Jim Corridore of CFRA Reserch in a note to investors. “Looking ahead to the crucial holiday season, we think L Brands needs to see improvement at Victoria’s Secret, after recent challenges related to slowing sales and missed execution.”
During October, overall sales at L Brands rose to $860.5 million, up from $794.1 million for the same month last year.
Based on those early results, L Brands expects to report third-quarter sales of $2.8 billion, up from $2.6 billion last year.
But the company also expects to report a loss in the quarter of approximately 17 cents per share. The loss includes charges of $20 million related to closing Henri Bendel stores and charges of $80 million related to some Victoria’s Secret store assets.
Excluding those charges, the company would report earnings of 15 cents per share, well up from the company’s previous predictions of 5 cents per share.
L Brands also announced that it will pay a regular quarterly dividend of 60 cents per share on Dec. 7, the company’s 176th consecutive quarterly dividend.