Sales miss forecasts, but good holiday start

L Brands missed analyst expectations in November, reporting a 1 percent comparable-store sales decline during the month. However, news that the start of the holiday shopping season was solid helped send the company’s shares higher, closing up 6.7 percent.

The comparable-store drop was driven by Victoria’s Secret’s 6 percent decline in November comparable-store sales, a number well below Wall Street expectations of a 2.2 percent decline.

As has been the case during the past few years, L Brands’ explanation for its results included the negative impact on sales from its exit from the swim and apparel categories.

“L Brands took a step back from October when it reported its first positive (comparable-store sales) since last November,” said Ken Perkins, president of research firm Retail Metrics.

Despite the setback, total L Brands sales for the month increased to $1.27 billion, up from $1.25 billion for the same month last year.

Even though sales declined, the chain’s profit margin was up significantly, thanks to fewer discounts.

“In fact, this is the first month all year that Victoria’s Secret merchandise margin has been ‘up significantly,’” said analyst Kimberly Greenberger of Morgan Stanley in a note to investors. The profit margin news is “another guidepost the turnaround is on track. We think (Victoria’s Secret’s) strong merchandise margin result is what is driving the stock up.”

Meanwhile, at Bath & Body Works, comparable-store sales for the month increased by 6 percent, better than Wall Street and the company’s own predictions.

Looking ahead, L Brands says it expects comparablestores sales in December to be flat to up at a low single-digit rate.

“We were pleased with our Thanksgiving weekend performance and the start to holiday,” said Amie Preston, chief investor relations officer. “Thanksgiving weekend results met our expectations, with total sales from Thursday through Monday up in the low-single digit range.”