L Brands reports higher than expected Q1 earnings

By

Robin Driver

Published
May 20, 2021

Victoria’s Secret parent company L Brands, Inc. announced net income of $276.6 million, or $0.97 per share, for the first quarter ended May 1, 2021, on Wednesday, compared to a loss of $296.9 million, or $1.07 per share, in the same period in the previous year. Adjusted earnings per share totaled $1.25, beating analysts’ estimates of $1.25, according to Refinitiv.

 
The company’s quarterly net sales came to $3.02 billion, up 82.8% from $1.65 billion in the prior-year period, when revenues were strongly negatively affected by store closures implemented to combat the Covid-19 pandemic. Compared to the $2.62 billion achieved by the company in the first quarter of 2019, its sales increased 15.0% in Q1 2021.
 
Sales at the Victoria’s Secret lingerie brand totaled $1.55 billion, up 73.9% from $893.6 billion in 2019, but down 7.0% when compared to Q1 2019, a decline that was due, in part, to the net closure of 233 stores over the last two years.

Victoria’s Secret Direct sales were $520.9 million, up 69.4% from $307.6 million in the first quarter of 2020 and 43.9% from $362.1 million in Q1 2019.
 
The brand’s comparable sales, which exclude revenues from stores that were closed for four consecutive days or more, including those shut temporarily due to the coronavirus crisis in 2020, rose 25% year over year and 9% compared to 2019.
 
At Bath & Body Works, quarterly net sales were $1.47 billion, increasing 93.2% from $760.6 million in the prior-year period and 59.9% from $919.0 million in the first quarter of 2019. Comparable sales at the brand rose 16% compared to 2020.
 
“L Brands delivered record first quarter earnings, driven by continued strength and exceptional performance at Bath & Body Works and Victoria’s Secret,” said L Brands CEO Andrew Meslow in a release. “We are pleased that the momentum in both businesses has continued, driven by positive customer responses to our assortments, which allowed us to reduce promotional activity and deliver substantial increases in our merchandise margin rates.”
 
L Brands is currently preparing for the spin-off of the Victoria’s Secret Brand into a separate company. The separation, which was recently approved by the group’s board of directors and is expected to conclude in August of this year, is intended to allow the two resulting companies to concentrate on their own strategic priorities.
 
Bath & Body Works, which has consistently outperformed Victoria’s Secret over the last few years, will be free to pursue its growth plans, exploring potential for expansion both in North America and Europe.
 
Iconic lingerie brand Victoria’s Secret, on the other hand, will continue to work to turn its business around by realigning itself with the shifting values of the intimates industry, which has increasingly moved to consider comfort and inclusivity.
 
Looking to the future, L Brands expects to achieve earnings per share of between $0.80 and $1.00 in the second quarter, excluding one-time costs related to the spin-off of Victoria’s Secret. Due to the ongoing uncertainty surrounding the Covid-19 pandemic and the upcoming separation of Victoria’s Secret, the company has not provided full-year financial guidance for fiscal 2021.