L Brands’ De­cem­ber sales droop, stock slips

The Columbus Dispatch - - Business - By Tim Feran The Colum­bus Dis­patch

L Brands re­ported dis­ap­point­ing De­cem­ber sales on Thursday, join­ing other re­tail­ers that had a glum hol­i­day sea­son. Shares of the Colum­bus-based re­tailer closed with a loss of 4.4 per­cent.

Kohl’s and Macy’s were among the oth­ers re­port­ing dis­ap­point­ing re­sults, and even though Tar­get posted health­ier sales in the com­bined Novem­ber and De­cem­ber sea­son, its shares also slid, as Wall Street took a dim view of the re­tail sec­tor.

De­cem­ber sales at L Brands dropped to $2.477 bil­lion from $2.516 bil­lion a year

ear­lier. Com­pa­ra­ble-store sales, a key in­di­ca­tor of a re­tailer’s health, were flat in the im­por­tant hol­i­day month.

L Brands re­ported that com­pa­ra­ble-store sales at Vic­to­ria’s Se­cret were down 6 per­cent, driven by droop­ing sales in lin­gerie and in the Pink brand. That was sig­nif­i­cantly worse than the 1 per­cent drop in com­pa­ra­ble-store sales that Vic­to­ria’s Se­cret had re­ported for De­cem­ber 2017, and the 4 per­cent drop that the re­tailer had re­ported for De­cem­ber 2016.

Vic­to­ria’s Se­cret profit mar­gins were “down sig­nif­i­cantly to last year,” said Chief In­vestor Re­la­tions of­fi­cer Amie Pre­ston. The re­tailer tried to lure shop­pers into stores by cut­ting prices.

Profit mar­gins aren’t likely to get much bet­ter as the strug­gling lin­gerie brand has en­tered Jan­uary with a con­tin­u­a­tion of its semi-an­nual sale. How­ever, the cal­en­dar might bring a bit of re­lief: “At the end of the month, we will fo­cus on Valen­tine’s Day,” Pre­ston said.

On a more pos­i­tive note, L Brands re­ported that it ex­pects its fourth-quar­ter earn­ings to be at the higher end of its fore­cast of $1.90 to $2.10 per share. That does not in­clude a charge that L Brands will take of ap­prox­i­mately $80 mil­lion re­lated to the sale of lin­gerie brand La Senza.

Al­though the pre­dic­tion about fourth-quar­ter earn­ings drew ap­proval from Wall Street, “Vic­to­ria’s Se­cret’s De­cem­ber sales miss on ‘down sig­nif­i­cantly’ (profit) mar­gin leaves us con­cerned,” wrote Mor­gan Stan­ley an­a­lyst Kimberly Green­berger in a note to in­vestors. “We con­tinue to look to the sec­ond half of 2019, at the ear­li­est, for marked im­prove­ment.”

L Brands also could point to con­tin­ued good news at Bath & Body Works, where com­pa­ra­ble-store sales in De­cem­ber were up by 11 per­cent, driven by strong re­sults in both the hol­i­day and semi-an­nual sales.

Sig­nif­i­cantly, profit mar­gins at Bath & Body Works were up, as the re­tailer was able to sell more of its mer­chan­dise with­out of­fer­ing dis­counts. That means that al­though the semi-an­nual sale con­tin­ues into Jan­uary, there is “less dis­tressed in­ven­tory to clear this year due to our suc­cess­ful hol­i­day,” Pre­ston said.

Al­though that is good news, the fact that Bath & Body Works “does have less dis­tressed in­ven­tory to clear this year due to a suc­cess­ful hol­i­day sea­son ... could im­pact the tim­ing and depth of Jan­uary pro­mo­tions as well as over­all sales per­for­mance,” Green­berger said. “Thus, in­vestors should be pre­pared for Bath & Body Works to de­liver po­ten­tially its weak­est com­pa­ra­ble-store sales of the year in Jan­uary.”

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