Shares of L Brands (LB) joined its retail peers in moving lower after the parent of Victoria's Secret and Bath & Body Works announced flat comparable sales fot December.
DECEMBER RESULTS AND GUIDANCE: L Brands said on Thursday that its same-store sales for the five weeks ended January 5 were flat vs. last year on net sales of $2.48B, compare to net sales of $2.52B for the year-ago period. In a conference call discussing the month, management said the 2% sales decline on a reported basis vs. the flat comp was driven by the calendar shift caused by the 53rd week last year, as a higher volume week shifted out of December and into November this year on a reported basis. The company said comp sales for Victoria's Secret were down 6%, driven by a decline in lingerie and PINK, while SSS were up 11% at Bath & Body Works, driven by strong results in both the holiday and semiannual sale time periods. It added that it expects to report fourth quarter earnings per share towards the higher end of its previous guidance of $1.90-$2.10, not including a preliminary estimated pre-tax charge related to the sale of La Senza of approximately $80M, or 15c per share. Analysts currently expect the company to report Q4 EPS of $2.02.
ANALYST SEES CONSENSUS ESTIMATES MOVING LOWER: Following L Brands' "poor" December sales results, Loop Capital analyst Laura Champine said she expects consensus estimates for fiscal 2019 to move lower as the turnaround for the lingerie brands is again pushed out. The analyst maintained a Sell rating on L Brands and lowered her price target to $23 from $24.
WHAT'S NOTABLE: Though the company's third quarter earnings per share and revenue were slightly ahead of analyst expectations, when reported in November, the company announced plans to halve its annual dividend to $1.20 per share from $2.40. In addition, management decided to close its Henri Bendel high-end cosmetic brand while pursuing "strategic alternatives" for its small La Senza subsidiary. In December, L Brands announced plans to sell La Senza to an affiliate of global private equity firm Regent LP. The issue at Victoria's Secret, whose CEO Jan Singer is departing, is that customers are seeking cheaper undergarments that prioritize comfort and while the brand has tried to adapt by ending its catalog, doubling down on sports bras and releasing a collection of "bralettes," it was a late adopter of the trend, according to a Wall Street Journal report. In late December, Amazon (AMZN), which has been gaining share from retailers, said that it had a "record-breaking" holiday season with more items ordered worldwide than ever before. Amazon customers shopped at record levels from a wide selection of products across every department, it said. "This season was our best yet, and we look forward to continuing to bring our customers what they want, in ways most convenient for them in 2019. We are thrilled that in the U.S. alone, more than one billion items shipped for free this holiday with Prime," said Jeff Wilke, CEO Worldwide Consumer at Amazon, said at the time.
In other L Brands news, The Columbus Dispatch reported this week that the federal Occupational Health and Safety Administration is investigating the death of an L Brands employee who died on Friday after an industrial accident at the company's Reynoldsburg complex. According to the OSHA incident report, Harvey Beavers was one of two employees loading boxes of Bath and Body Works products onto a truck using an expandable conveyor when he became pinned between the machine and the stacked boxes and was crushed, according to an OSHA incident report. L Brands said in a statement, "Our top priority is associate safety, and we are cooperating fully with OSHA as they work to determine the cause of his death."
PRICE ACTION: Near midday, shares of L Brands are down 5% to $26.80.
Keywords: Bath & Body Works, Bath & Body, Victoria's Secret, PINK, Henri Bendel, La Senza, turnaround