L Brands posts widening losses, confirms cancellation of Victoria’s Secret Fashion Show
Nov 21, 2019
Columbus, Ohio-based fashion retailer L Brands, Inc. announced declining sales and widening losses for the third quarter on Wednesday, and has now confirmed that this year’s Victoria’s Secret Fashion Show will not be taking place.
For the third quarter ended November 2, 2019, the company reported net sales of $2.68 billion, down 3.5% from $2.78 billion in the prior-year period.
Overall comparable sales fell 2%, reflecting a decline of 7% in comps at Victoria’s Secret, partially offset by a 9% rise at Bath & Body Works, the consistent bright spot in L Brands’ portfolio.
The company’s third-quarter net loss totaled $252.0 million, or $0.91 per share, compared to a net loss of $42.8 million, or $0.16 per share, in the same period in the previous year.
At this point, Victoria’s Secret’s continued underperfomance comes as no surprise, having become a fixture of L Brands’ quarterly results over the last two years. The super sexy lingerie brand has been struggling to reinvent itself for an intimates industry that increasingly values comfort and body positivity, giving rise to the likes of Honey Birdette, ThirdLove and Rihanna’s Savage x Fenty.
In line with these efforts, it was revealed in an earnings call cited by Seeking Alpha that, following months of speculation, the annual Victoria’s Secret Fashion Show has indeed been canceled this year.
“We’ll be communicating to customers, but nothing that I would say is similar in magnitude to the fashion show,” said L Brands EVP and CFO Stuart Burgdoerfer, when discussing marketing plans for Victoria’s Secret over the holiday period.
“We think it’s important to evolve the marketing of Victoria’s Secret,” he went on to say by way of explanation.
Once a buzzy media spectacle, the fashion show has been steadily losing viewers over recent years, and even became a source of controversy last summer when Ed Razek, Victoria’s Secret’s former chief marketing officer, said that the label wouldn’t feature transgender models at the event “because the show is a fantasy” in an interview with Vogue.
As it attempts to boost its image in the public eye, the brand has since hired its first trans model, Valentina Sampaio, in direct and deliberate contrast to Razek’s controversial remarks.
More recently, supermodel Bella Hadid, who has walked the fashion show three times, appeared to take a shot at the event during this November’s Vogue Fashion Festival in Paris, saying in an interview that she had “never felt powerful” modeling lingerie in a runway show before taking part in the Savage x Fenty catwalk at New York Fashion Week earlier this year.
According to Burgdoerfer, the decision to forego this year’s fashion show is not expected to have a significant effect on Victoria’s Secret’s financial performance.
“As timing over the years shifted in terms of the airing the fashion show, did we see specific material impact in terms of a short-term sales response to the airing of the fashion show? As a general matter, the answer to that question is no,” he stated.
Year to date, L Brands’ net sales totaled $8.21 billion, down from $8.38 billion in the first three quarters of fiscal 2018.
Looking forward, L Brands announced that it expects to see fourth quarter-earnings per share of around $2.00, with full-year adjusted earnings per share coming to about $2.40.
Despite its declining sales and deepening losses, the positive outlook was enough to send shares in the company up almost 5% in the extended session on Wednesday.
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