L Brands Stock Down On Flat Comps, Earnings View Updated

L Brands, Inc. (NYSE:LB) dropped 4.4% on Jan 10, due to lower-than-expected holiday season sales. Notably, comparable sales (comps) for the five-week period ended Jan 5, 2019 remained flat compared with the prior-year period increase of 1%. Moreover, net sales during the month under review decreased 1.6% to $2.48 billion from $2.52 billion reported in the prior-year period.

Moving on, Victoria’s Secret witnessed comps decline of 6%, owing to soft performance in Lingerie and Pink brands. Also, Victoria’s Secret merchandise margin rate fell significantly due to higher promotional activities to boost traffic. L Brands has been reeling under consumers’ changing preferences that continue to impact its Victoria’s Secret lingerie brand. Further, weakness in the Pink brand has added to its woes.

Meanwhile, comps improved 11% in Bath & Body Works, driven by strong demand in holiday season and semi-annual sales. Merchandise margin rate for the same also increased on the back of less promotional activities and calendar shift.

For the 48-week period ended Jan 5, comps rose 3% year over year, while net sales increased 7.5% to $12.46 billion. Comps declined 2% at Victoria’s Secret, while the metric improved 12% at Bath & Body Works.

Apart from December comps, this Zacks Rank #2 (Buy) company updated its bottom line projection for fourth-quarter fiscal 2018. The company now expects adjusted earnings to be at the higher end of its prior view of $1.90-$2.10. This outlook doesn’t include an estimated pretax charge of $80 million related to the sale of La Senza. Keeping in these lines, the company concluded the deal related to the sale of La Senza to an affiliate of Regent LP on Jan 6, 2018.

Notably, this specialty retailer of women's intimate and other apparel, beauty, and personal care products lost 16.6% in the past six months, underperforming the industry’s decline of 16.4%.

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