L Brands’ same-store sales flat, lowers 2017 outlook

L Brands is preparing for steep losses in the near-future, specifically across its Victoria’s Secret brand.



For the quarter ended January 28, 2017, net sales were $4.489 billion, an increase of 2% compared to $4.395 billion for the quarter ended January 30, 2016. The company’s net income was $631.7 million compared to $636 million last year.



Comparable store sales for the period were flat — an issue that the company blames on the exit of the swim and apparel categories across Victoria’s Secret, which had a negative impact of two percentage points on total company sales, and 4 percentage points on Victoria’s Secret same-store sales.



For the year, net income was $1.158 billion compared to $1.253 billion last year. This was impacted by different factors, such as a pre-tax gain of $108.3 million related to a cash distribution from Easton Town Center, and a pre-tax charge of $35.8 million related to the early extinguishment of the company’s July 2017 notes.



It also included a favorable tax settlement of $41.7 million, and pre-tax charges of $34.5 million related to previously announced actions at Victoria’s Secret, including severance charges, fabric cancellations and the write-off of catalogue paper; and a favorable tax settlement of $41.7 million in 2016, according to the company.



For the year, net sales were $12.574 billion, an increase of 3% compared to $12.154 billion for the year ended January 30, 2016. Same-store sales for the year increased 2%. Similar to the fourth quarter however, the exit of the swim and apparel categories had a negative impact of two percentage points and three percentage points to total company and Victoria’s Secret comparable sales, respectively.



Looking ahead, the company expects the exit of these categories at Victoria’s Secret, continued investment in China and investment in real estate at Victoria’s Secret and Bath & Body Works to continue taking their toll.



That said, L Brands expects a company-wide mid-to-high-teens decrease in February comparable sales. The company expects sales to be down about 20% at Victoria’s Secret, again based on the loss of swim and apparel — a move that is negatively impacting total company comparable sales by about six percentage points. Meanwhile, L Brands expects a mid-single digit decline at Bath & Body Works.



The outlook and contributing factors have analysts questioning the brand’s future, according to Madison.com.