Poor sales curb L Brands dividend

L Brands shares dropped slightly Thursday after the Columbus-based retailer cut its quarterly dividend by half following declining sales.

As part of its monthly sales report, L Brands announced that its regular quarterly dividend will be 30 cents per share. While it is the company’s 177th consecutive quarterly dividend, it is half of the retailer’s prior dividend of 60 cents per share.

Comparable store sales, a key indicator of a retailer’s health, dropped by 1 percent in January, a better performance than the 2.7 percent drop that Wall Street analysts had predicted.

But sales for the month dropped to $780.1 million, down from $1 billion for the same month last year. Profit margins were also down.

Wall Street remained wary of the company’s effort to revitalize its Victoria’s Secret chain.

“While we commend efforts to renew focus on (L Brands’) core business, Victoria’s Secret, with the sale of La Senza lingerie brand announced December 13, we expect the challenges within Victoria’s Secret to persist,” analyst Camilla Yanushevsky of CFRA Research wrote in a note to investors.

“In our view, Victoria’s Secret has failed to adapt to shifting ‘body positive’ tastes. We note that (American Eagle Outfitters’) ‘inclusive’ lingerie brand Aerie posted comparable sales growth of 32 percent (in the third quarter), and, in our view, will continue to grab significant market share (from L Brands).”

As in the past, L Brands’ two big brands offered differing results.

Victoria’s Secret reported a 1 percent drop in comparable store sales, driven by sales declines in lingerie and in the Pink brand. The profit margin “was down significantly to last year, driven by increased promotional (price-cutting) activity,” said Amie Preston, chief investor relations officer. Comparable store sales at brick-and-mortar stores dropped 8 percent during January, well off the flat sales reported in January last year.

Meanwhile, at Bath & Body Works, comparable store sales for the month were flat and “lean inventory levels allowed us to reduce promotional (price-cutting) activity for the month,” Preston said.

The reduction in discounting had a significant effect on profit margins at the body care and home fragrance retailer, which increased for the month.

For the fourth quarter, sales at Bath & Body Works rose to $1.95 billion from $1.79 billion. Comparable store sales for the brand’s brick-and-mortar stores increased by 8 percent. Online sales increased by 30 percent to $324.7 million.