Shares of Victoria's Secret parent company L Brands tumble 12% on weak 2017 guidance

L Brands plunges on guidance
L Brands plunges on guidance

Shares of L Brands dropped more than 12 percent after the market closed Wednesday, when the parent company of Victoria's Secret issued first-quarter and 2017 guidance that fell well short of Wall Street's expectations.

The sharp drop in the company's stock price came as the specialty apparel chain said it earned $2.03 a share in the fiscal fourth quarter, excluding items, topping analysts' estimate of $1.90 per share, according to Thomson Reuters.

The company's revenue, however, came up short. L Brands recorded sales of $4.49 billion during the holiday period, compared with a Thomson Reuters forecast of $4.51 billion.

A year ago, L Brands earned $2.15 a share on $4.4 billion in sales.

The Victoria's Secret brand has been under pressure as the chain reworks its business model. Changes include discontinuing swimwear and most of its apparel merchandise and eliminating its print catalogs. Comparable sales at the chain fell 3 percent during the fourth quarter, outweighing a 5 percent increase at Bath & Body Works.

L Brands had warned Victoria's Secret would continue to feel the repercussions from its change in strategy in 2017, yet its outlook still disappointed investors. At January's ICR Conference, in Orlando, Florida, the company said headwinds would be more severe in the first half, as it grappled with lost swim and apparel sales.

L Brands expects to earn between 20 cents and 25 cents per share in the first quarter, compared with the 49 cents per share anticipated by Wall Street, according to Thomson Reuters. For the year, the retailer said it should earn between $3.05 and $3.35 a share. That compares with analysts' projection of $3.70 a share.

In February, L Brands said its comparable sales will record a mid-to-high-teens decrease, steeper than its prior expectation of a mid-single digit decrease. Its decision to stop selling swim and apparel at Victoria's Secret is seen weighing on the company's results by about 6 percentage points, management said.

The company will provide more details about its fourth-quarter results on a call with investors Thursday morning.