Victoria's Secret Owner Dives as Forecast Signals Slow Rebound

(Bloomberg) -- L Brands Inc. fell sharply in late trading after releasing a profit forecast that came in well below expectations -- a signal the company still has work to do to turn around its slumping Victoria’s Secret brand.

  • The company sees profit, excluding some items, in a range of $2.20 to $2.60 this year. That’s well below the average estimate from analysts. Revenue in the crucial fourth quarter was also below the average estimate.

Key Insights

  • Victoria’s Secret, which accounts for more than half of L Brands sales, has been hurt recently for failing to keep up with changing consumer demands. And the road only gets harder from here: Major retailer Target Corp. announced earlier this week plans to launch three new private-label brands specializing in low-cost underwear and sleepwear, joining upstarts like Rihanna’s lingerie company Savage X Fenty and ThirdLove, which aim to be more inclusive of women of different shapes, sizes and backgrounds.
  • John Mehas recently started as Victoria’s Secret Lingerie’s new chief executive officer and he’s already been shaking things up to revive the struggling brand. Earlier this month, the unit announced a partnership with a French luxury label to sell high-end lingerie.
  • In a bright spot, L Brands’ Bath & Body Works division posted same-store sales growth of 12 percent, double the year-earlier gain. The parent company is increasingly relying on the unit as sales fade at Victoria’s Secret, which saw comparable sales drop 3 percent in the period.

Market Reaction

  • L Brand shares declined almost 10 percent to $24.80 in late trading Wednesday. The stock had gained 6.7 percent this year through Wednesday’s close.

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  • For more details on the report, click here.
  • For the company statement, click here.

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