Retail

L Brands tops lowered earnings expectations as it preps to take Victoria's Secret private

Key Points
  • L Brands had earlier this year cut its earnings outlook for the fourth quarter after reporting weak 2019 holiday sales.
  • Its same-store sales were down 1% for the year, compared with a 3% jump in 2018.
Pedestrians walk past a Victoria's Secret store, a subsidiary of L Brands, in New York.
Craig Warga | Bloomberg | Getty Images

L Brands reported earnings and sales for the holiday quarter that topped analysts' expectations, as it prepares to take its Victoria's Secret lingerie business private.

Its shares were relatively unchanged in after-hours trading on the news.

L Brands had earlier this year cut its earnings outlook for the fourth quarter after reporting weak 2019 holiday sales.

It said Victoria's Secret's same-store sales, including online, shrank 10% during the fourth quarter. Its Bath & Body Works division, meantime, reported same-store sales growth of 10%.

Overall, L Brands' same-store sales dropped 2% during the holiday quarter. L Brands' same-store sales were down 1% for the year, compared with a 3% jump in 2018.

Here's how the company did for the quarter ended Feb. 1, compared with what analysts were expecting, based on Refinitiv data:

  • Earnings per share: $1.88, adjusted, vs. $1.86 expected
  • Revenue: $4.71 billion vs. $4.69 billion expected

L Brands swung to a net loss of $192.3 million, or 70 cents a share, during the fourth quarter, from earnings of $540.1 million, or $1.94 per share, a year ago. Excluding one-time items, L Brands earned $1.88 per share, topping estimates of $1.86 a share, reported by Refinitiv.

Sales fell to $4.71 billion from $4.85 billion a year ago. Analysts were expecting the company to report sales of $4.69 billion.

The earnings report comes on the heels of L Brands announcing earlier this month that private equity firm Sycamore Partners will acquire a 55% stake in Victoria's Secret from its owner for $525 million. Upon the close of the deal, L Brands' founder, 82-year-old Les Wexner, is also set to step down as its chairman and CEO.

The companies said the transaction is expected to close in the second quarter.

The new L Brands has said it aims to "sharpen its focus" on Bath & Body Works, running those stores as a separate company. The division that sells candles and lotions has been dragged down by L Brands' underperforming bra and underwear business.

L Brands said Wednesday it expects to report an adjusted loss during the first quarter of about 5 cents per share, while analysts had been expecting a profit of 10 cents. It said it is not offering a full-year outlook due to its pending transaction with Sycamore. But it said its first-quarter forecast includes its Victoria's Secret business.

The company is expected to hold a conference call Thursday, at 9 a.m. ET, to discuss the fourth-quarter and full-year results.

L Brands shares closed Tuesday down about 3%. The stock has fallen more than 15% over the past 12 months. L Brands has a market value of $6.3 billion.

Read the full press release here.

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