Source: Company reports/Fung Global Retail & Technology

1Q17 Results

L Brands reported adjusted EPS of $0.33 down 5.6% from the year-ago quarter but above the $0.29 consensus estimate. Total revenues for 1Q17 were $2.44 billion versus expectations of $2.46 billion, and were down 6.8% year over year. Total comps declined 9% from the year-ago quarter. Management noted that the exit from the swim and apparel categories had a negative impact of 6 percentage points and 9 percentage points to total company and Victoria’s Secret comparable sales, respectively. By business segment, total revenue at Victoria’s Secret decline by 11.9%, to $1.53 billion, while revenue at Bath & Body Works grew by 2.7%, to $678 million. Including in-store and e-commerce sales, Victoria’s Secret comps declined by 14% versus a 2% increase in the year-ago period. Strength in the PINK business was offset by a decline in the lingerie business and the exiting of swim and apparel businesses. Bath & Body Works comps increased by 2%, versus a 6% increase in the year-ago quarter, driven by growth in the e-commerce channel and improved merchandise margin rate. Accounting for only in-store sales, comps at Victoria’s Secret declined 12% and comps at Bath & Body Works declined 1%.

FY17 Outlook

The company raised its FY17 guidance for EPS to $3.10–$3.40 from $3.05–$3.35 versus the $3.22 consensus estimate. For 2Q17. L Brands expects 2Q17 EPS of $0.40–$0.45, slightly below the $0.46 consensus estimate. The company expects May comps to decrease by mid-to-high-single digit percentage The company now expects February comps to decrease by a mid-teens percentage; it had previously guided for a mid-single-digit decrease for the month. The exit of swim and apparel at Victoria’s Secret is expected to negatively impact total company comps by 6%.