L Brands Q4 Profit Beats Despite Sales Drop, Cautious Ahead


Warm Weather Warnings: Swimwear for Summer

Columbus, OH—Despite a sales decline, L Brands Inc. reported Wednesday that its fourth quarter profit actually rose beating expectations. But the parent to Victoria’s Secret gave a tepid forecast.

For the quarter ended Feb. 1, L Brands posted net profit of $489.6 million, or $1.65 a share, from $411.4 million, or $1.39 a share, last year. (Last year’s result included a goodwill impairment charge of $93.2 million.) The results beat analysts’ average estimate for $1.61 a share.

Net revenue dropped to $3.82 billion from $3.86 billion a year ago, due to higher promotional costs and winter weather that kept shoppers at home. Analysts had estimated revenues of $3.89 billion.Comparable store sales increased 1%.

La Senza U.S. Plans Put on Hold

By retail brand, sales at Victoria’s Secret Stores & Victoria’s Secret Beauty increased 1% to $1.72 billion while comps were up 3%. Victoria’s Secret Direct sales fell 6% to $504.5 million. Total Victoria’s Secret sales edged down 1% to $2,228.7 million. Bath & Body Works & The White Barn Candle Co.’s total sales decreased 4% to $1.2 billion with a 1% decline in comp sales. Comps at La Senza fell 3%, while sales dropped 9% to $92.8 million.

Gross profit margin contracted 220 basis points to 43%. Operating income fell 5% to $863.5 million, whereas operating margin shriveled 90 basis points to 22.6%.

General, administrative and store operating expenses dropped to $778.8 million from $835.3 million last year.

For its full year 2014 forecast, L Brands expects earnings of $3 to $3.20 a share while analysts’ consensus expects $3.30 a share.

In the first quarter, L Brands expects earnings of 44 to 49 cents a share. Analysts currently estimate earnings of 52 cents for the first quarter.

The company said it expects to report February comparable store sales in line with its previous guidance which is flat to up low-single digit.

Besides its fiscal forecast, L Brands gave another indication it is cautious ahead. After announcing last year that it planned to open at least six La Senza stores in the United States, the company now says it will “defer entry into the United States for the time being.”


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Jeff Prine

Jeff Prine, Editor at Large, Accessories Magazine
Jeff returns as a regular contributor to Accessories magazine. Initially Jeff worked as senior editor at Accessories more than 20 years ago and his love of the industry has followed him until present. Since his tenure here, Jeff has continued to report jewelry, watch and other luxury goods trends as executive editor at Modern Jeweler magazine, fashion director at Lustre, and as contributor on products and trends for consumer and trade publications and websites. In addition to his editorial experience, Jeff also served as an adjunct instructor for accessories merchandising at Fashion Institute of Technology. jeffp@busjour.com