L Brands Q4 Profit Beats Despite Sales Drop, Cautious Ahead

In Industry News, Reports, What's New by Jeff PrineLeave a Comment


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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