L Brands (LB) reports Q4 2020 earnings beat, strong profit outlook


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.

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Victoria’s Secret parent L Brands on Wednesday reported fourth-quarter earnings that topped analysts’ estimates, but sales fell short due to weakness at its lingerie brand.

Although the retailer isn’t offering an outlook for the full year, due to the uncertainty around the pandemic and the pending separation of its Victoria’s Secret brand from Bath & Body Works, it provided an upbeat profit outlook for the first quarter, saying it’s building on the momentum it saw over the holidays. It said sales, so far, have trended strongly in February.

L Brands shares rose about 5% in after-hours trading.

Here’s how the company did during its fourth quarter ended Jan. 30 compared with what analysts were expecting, based on Refinitiv data:

  • Earnings per share: $3.03 vs. $2.91 expected
  • Revenue: $4.82 billion vs. $4.87 billion expected

L Brands posted net income of $860.3 million, or $3.03 per share, compared with a loss of $192.3 million, or 70 cents a share, a year earlier. The results topped the $2.91 per share forecast by analysts.

Net sales grew to $4.82 billion from $4.71 billion a year ago. That was short of the $4.87 billion expected by analysts.

Same-store sales rose 10%, better than the 6.7% increase forecast by a Refinitiv survey. Within that, Victoria’s Secret’s same-store sales dropped 3%, but the decline was offset by 22% same-store sales growth at Bath & Body Works.

The company has managed to boost its profitability by slashing inventory levels and selling more items at full price. By relying less on discounts to lure in shoppers, the company said it saw significant improvement in both average unit prices and merchandise margin rates during the fourth quarter.

For the first quarter, L Brands is calling for earnings per share to fall within a range of 35 cents to 45 cents. That comes in way ahead of analysts’ estimates for 12 cents per share.

L Brands expects first-quarter sales to be about flat compared with 2019 levels, at $2.6 billion. Again, Bath & Body Works will see stronger growth, while sales decline at Victoria’s Secret due to ongoing store closures.

Management also said in prepared remarks that L Brands is still forging ahead with its plans to separate Victoria’s Secret from Bath & Body Works, which it expects to complete by August.

“Over the next 6 months, we will continue to work toward the separation of the two businesses, proceeding down a dual track to prepare for either a spin-off or a sale,” the company said.

The company had struck a deal to sell Victoria’s Secret last year to Sycamore Partners, but the $525 million agreement fell apart as the pandemic temporarily shuttered its stores.

Victoria’s Secret has been trying to revive its brand as consumers have increasingly opted for lingerie with more inclusive marketing.

L Brands is set to hold a conference call with analysts Thursday morning to discuss the latest results.

Its shares are up 119% over the past 12 months, as of Wednesday’s market close. It has a market cap of $14.36 billion.

Find the full press release here.

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