L Brands (LB) earnings Q3 2019

L Brands (LB) earnings Q3 2019

A customer carries a shopping bag while exiting a Victoria’s Secret Stores LLC store, a subsidiary of L Brands Inc., in New York, U.S., on Wednesday, Nov. 14, 2018.

Bloomberg | Getty Images

L Brands turned in mixed third-quarter results Wednesday as declining sales at its Victoria’s Secret brand continued to weigh on its performance.

The company’s earnings matched expectations, but revenue fell short. It also said its fiscal year earnings would fall within a previously projected range.

L Brand’s stock, which had closed near a 10-year low, rose more than 4% in extended trading. Earlier Wednesday, it hit a 52-week low of $15.80. 

Here’s how the company compared to Wall Street’s expectations, according to Refinitiv consensus estimates:

  • Earnings per share: 2 cents, adjusted, vs. 2 cents, expected
  • Revenue: $2.68 billion vs. $2.69 billion, expected
  • Same-Store Sales: Down 2% vs. down 1.0%, expected

The company’s net losses widened to $252 million, or 91 cents per share, from a loss of $42.75 million, or 16 cents per share, in the same quarter a year ago.

Excluding one-time items, L Brands earned 2 cents per share, in line with analysts estimates, according to a Refinitiv survey. 

Sales fell to $2.68 billion from $2.78 billion a year ago, and were slightly lower than the $2.69 billion, analysts expected.

Same-store sales declines at Victoria’s Secret accelerated, dropping 7% in the latest period compared to the 2% decline in the same quarter last year.

Same-store sales growth at Bath & Body Works slowed, however, growing at 9% in the third quarter, compared to the 13% increase last year.

The company also said it expects 2019 fourth-quarter earnings per share to be about $2.00, which would result in full-year adjusted earnings per share of about $2.40. L Brands previously expected fiscal 2019 earnings to range between $2.30 and $2.60 per share.

The company has continued to struggle with sinking sales at Victoria’s Secret, as women increasingly opt for more inclusive lingerie brands like Adore Me, Lively, ThirdLove and American Eagle‘s Aerie.

In October, L Brands cut 50 employees from its headquarters staff and its head of lingerie division for more than 16 years stepped down. The resignation of April Holt followed a string of other top-level management departures at the lingerie brand, including former chief marketing officer Edward Razek and former CEO Jan Singer.

The scandal surrounding convicted sex offender Jeffrey Epstein also tainted the company’s image, after Epstein’s $46 million charitable donation to CEO Les Wexner became public. L Brands hired outside counsel to review the company’s relationship with Epstein in late July.

“There’s a big belief in the company that we need to evolve,” said John Mehas, who took over as CEO after Singer left. Mehas was speaking at L Brands’ investor day in September, where the company discussed efforts it would be making to revive sales.

Strong sales at Bath & Body works, meanwhile, have been the saving grace of L Brands, though some analysts expect its sales have peaked. Despite the store’s strong same-store sales growth of 8% last quarter, Jeffries analyst Randal Konik pointed to slowing store traffic and moderating demand for candles last quarter as a signal that Bath & Body Works is headed for the downside.

In March, hedge fund Barington Capital sent a letter to L Brands CEO Les Wexner recommending that the company spin off Victoria’s Secret or seek an IPO for Bath & Body Works.

In its outlook for the third quarter, L Brands had forecast profits ranging between a loss of 5 cents per share and a gain of 5 cents per share.

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