Victoria's Secret parent L Brands sales tumble 37%, with stores shut during coronavirus pandemic

Key Points
  • Net sales during the first quarter decreased 37% to $1.65 billion. 
  • L Brands said Wednesday it still remains committed to make Bath & Body Works a "pure-play public company," with Victoria's Secret operating as another standalone business. 
  • It said it expects to permanently shut roughly 250 Victoria's Secret and PINK stores across North America this year. 
A pedestrian walks past a Victoria's Secret storefront closed and boarded up on Robson Street during the COVID-19 crisis on April 17, 2020 in Vancouver, Canada.
Andrew Chin | Getty Images

Victoria's Secret parent company L Brands reported Wednesday its third straight quarterly loss and fourth consecutive drop in sales, as its stores were forced shut for most of the period due to the coronavirus pandemic

Its shares were recently down about 1% in after-hours trading on the news. 

Here's how the company did during its fiscal first quarter ended May 2: 

  • Earnings per share, adjusted: A loss of 99 cents 
  • Revenue: $1.65 billion 

The retailer, which also owns Bath & Body Works, reported a net loss of $296.9 million, or $1.07 per share, compared with a profit of $40.3 million, or 14 cents a share, a year ago. Excluding one-time charges, it lost 99 cents per share. 

Net sales decreased 37% to $1.65 billion from $2.63 billion a year ago. 

Overall, L Brands' same-store sales rose 4%, while they surged 41% at Bath & Body Works and dropped 13% at Victoria's Secret.

At Victoria's Secret, total sales tumbled 46% to $821.5 million. 

Total sales at Bath & Body Works dropped 18% to $712.7 million, though Bath & Body Works' online business surged 85%, with people stocking up on hand sanitizers and scented soaps online, the company said. 

Analysts were calling for L Brands to report an adjusted loss of 72 cents per share on revenue of $1.72 billion, according to Refinitiv estimates. However, it is difficult to compare reported earnings to analyst estimates for L Brands' first quarter, as the coronavirus pandemic continues to hit global economies with earnings impacts that are difficult to assess. 

The company announced Wednesday, in a separate securities filing, that current COO Charles McGuigan is stepping down. 

Meantime, L Brands said it still remains committed to make Bath & Body Works a "pure-play public company," with Victoria's Secret operating as another standalone business. 

With its distressed lingerie business, it said it plans to focus on managing inventory and selling more items at full price. It has named current L Brands CFO Stuart Burgdoerfer as interim CEO of Victoria's Secret. It said it expects to permanently shut roughly 250 Victoria's Secret and PINK stores across North America this year. 

L Brands on May 4 announced it struck an agreement with private-equity firm Sycamore Partners to terminate its Victoria's Secret deal. Sycamore had previously agreed to acquire a 55% share in Victoria's Secret for $525 million, which would have allowed the lingerie brand to go private. 

However, Sycamore Partners tried to end its deal with L Brands in April, citing store closures and missed rent payments during the pandemic. L Brands said it struck a termination agreement earlier this month to avoid "costly and distracting litigation to force a partnership with Sycamore." 

L Brands' goal, with the split, is to allow its stronger soap and fragrance business to grow without being weighed down by its struggling bra business. But some analysts argue even Bath & Body Works is challenged. 

"While Bath & Body Works has been a key source of strength for L Brands over the past decade, recently it's shown signs of peaking," Jefferies analyst Randy Konik said in a note to clients ahead of Wednesday's earnings report. 

L Brands is expected to hold a call with analysts Thursday at 9 a.m. ET to discuss its first-quarter results. 

The company has already said it is not providing a second-quarter or full-year outlook, due to Covid-19. But it does anticipate the majority of its shops will be reopened by the end of July. 

L Brands said it had $957 million in cash on hand at the end of the first quarter. 

As of Wednesday's market close, L Brands shares have fallen more than 32% this year. The company has a market cap of about $3.4 billion. 

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