Victoria’s Secret Shows Continued Progress Around Holidays
The Victoria’s Secret Angels had a good Christmas. So did Bath & Body Works.
Parent company L Brands Inc. on Thursday revealed net sales for the holiday shopping season, or the nine-week period ending Jan. 2, were $3.8 billion, compared with $3.9 billion the same time last year.
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“We are very pleased with our holiday results, which significantly exceeded our initial expectations, driven by an increase in profitability at both Bath & Body Works and Victoria’s Secret,” Andrew Meslow, chief executive officer of L Brands and Bath & Body Works, said in a statement. “In this challenging environment, we maintained our focus on customer and associate safety and delivered exceptional execution. Bath & Body Works continues to deliver record results, demonstrating the strength of the brand. The turnaround at Victoria’s Secret also continues to gain momentum, driven by an improved merchandise assortment and focused execution of retail fundamentals and our profit improvement plan.”
The company now expects to report fourth-quarter earnings per share of between $2.70 and $2.80.
“We are pleased with the continued progress in the turnaround of the Victoria’s Secret business,” the company added. “Improved assortments, disciplined inventory management and improved selling enabled a substantial reduction in promotional activity.”
Even so, while the Victoria’s Secret brand — which includes the Lingerie, Beauty and Pink divisions — is clearly making progress in its recovery efforts, the majority of gains around the holiday were still in the Bath & Body Works brand. Total company comparable sales increased 5 percent during the holiday shopping season, year-over-year — or a 17 percent gain at Bath & Body Works and a 9 percent decrease at Victoria’s Secret. In stores, Victoria’s Secret’s comparable sales dropped 23 percent, while sales in the direct channel rose 24 percent during the holiday shopping season.
The retailer added, however, that significant increases in conversion and average unit retails at the Victoria’s Secret brand helped offset declines in store traffic. L Brands had 2,682 stores globally as of Jan. 2, or 1,747 Bath & Body Works and 935 Victoria’s Secret locations.
Meanwhile, the innerwear giant has added a string of senior-level hires over the last few months to help turn the brand around, updated the assortment and marketing materials, sold a majority stake of the Victoria’s Secret U.K. business to Next plc and closed hundreds of unprofitable stores to make way for more lucrative markets, such as Milan and Israel.
L Brands also trimmed about $400 million in expenses by reducing the corporate headcount and revealed plans to separate Victoria’s Secret into a private company, helping unlock value from the Bath & Body Works brand. It has yet to release a firm date for the spin-off.
“Management remains clear about their plan to split the brands and it goes without saying that VS is looking increasingly more attractive,” Simeon Siegel, managing director and senior retail analyst at BMO Capital Markets, wrote in a note. “That may actually make it more difficult to sell and a spin may prove to be the way to go. Either way, it remains a catalyst, and we expect further color ahead.”
Shares of L Brands, which are up approximately 154 percent year-over-year, closed up 6.02 percent Thursday to $46.17 a piece. The company plans to report fourth-quarter earnings on Feb. 24.
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