Victoria’s Secret on the Rebound
19th May 2021

Victoria’s Secret’s once-fallen Angels continue to make a comeback. 

L Brands, parent company to the Victoria’s Secret and Bath & Body Works brands, revealed quarterly earnings Wednesday after the market closed, improving on both top and bottom lines across both brands, compared with 2020’s pandemic year. 

“L Brands delivered record first-quarter earnings, driven by continued strength and exceptional performance at Bath & Body Works and Victoria’s Secret,” Andrew Meslow, chief executive officer of L Brands, said in a statement. “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. We’d like to express our appreciation to our associates and partners who have made these record results possible. Grounded in the strength of the two businesses, we look forward with confidence to the separation of Bath & Body Works and Victoria’s Secret into two industry-leading, publicly traded companies.”

After months of pondering whether to sell or spin off the innerwear brand — which includes Victoria’s Secret Lingerie, Victoria’s Secret Beauty and Pink — parent company L Brands said earlier this month that it would pursue a tax-free spin-off of Victoria’s Secret this August. That would leave both brands, including the more lucrative Bath & Body Works business, to stand alone on the public market. 

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But the news, and earnings results, weren’t enough to tame investor fears. The stock, which closed down 3.31 percent to $67.19 a share, fell more than 2 percent in after-hours trading Wednesday. 

Even so, total company sales for the three-month period ending May 1 were more than $3 billion, compared with $1.6 billion during 2020’s first quarter, when many stores were forced to temporarily close because of local lockdowns. Compared with 2019’s pre-pandemic first quarter, the company’s revenues increased 15 percent, up from $2.6 billion. 

By brand, Bath & Body Works continued to make gains with nearly $1.5 billion in revenues for the quarter, compared with $760 million a year earlier, or $919 million in 2019. Revenues at Victoria’s Secret totaled more than $1.5 billion, up from $893 million a year earlier, but down from pre-pandemic levels of $1.6 billion in 2019’s first quarter. 

Meanwhile, total comparable sales, including each brand’s e-commerce businesses, increased during the quarter, up 16 percent at Bath & Body Works. That’s on top of a 41 percent surge the same time last year. Comparable sales at Victoria’s Secret rose 25 percent during the quarter, compared with a 15 percent reduction a year earlier. Comparable store sales were also up at both brands, 12 percent at Bath & Body Works and 3 percent at Victoria’s Secret, thanks to a combination of stimulus checks, relaxed COVID-19 restrictions and strong sales during Mother’s Day.  

“While it is difficult to quantify the benefit of stimulus payments, we estimate that sales were positively impacted by approximately $125 million ($50 million at Bath & Body Works and $75 million at Victoria’s Secret),” the company said. 

L Brands logged more than $276 million in profits, compared with a loss of nearly $297 million a year earlier, as a result. 

By division, lingerie shoppers responded “positively to glamour and fashion. We are beginning to tell the story of our brand repositioning through our marketing, including the highly emotional and first-of-its-kind Mother’s Day campaign with nine-month pregnant model Grace Elizabeth, which received substantial media impressions, the launch of Victoria’s Secret TikTok and Instagram influencer campaigns,” according to a company statement. 

At Pink, growth drivers included branded apparel, such as tie-dye, fleece and shorts, bras and underwear. 

Also on Wednesday, L Brands announced new chief financial officer roles once the spin-off of Victoria’s Secret’s is complete. Wendy Arlin, senior vice president of finance and controller for L Brands, will become Bath & Body Works’ new CFO, while Tim Johnson, previously CFO and chief administrative officer of Big Lots, as well as a Limited Brands alum, will be Victoria’s Secret’s new CFO. L Brands’ current CFO Stuart Burgdoerfer is set to retire in August.  

“We are confident that Wendy and Tim are the right leaders to help each business deliver profitable growth and enhanced value to our stakeholders,” Sarah Nash, chair of the L Brands board, said in a statement. “Wendy is an exceptional and skillful leader who knows our business well and has made significant contributions to the company, having worked closely with the board, Stuart [Burgdoerfer] and other senior leaders during her 16 years at L Brands. Tim is an experienced public company CFO with extensive knowledge of the retail industry in addition to having previously spent over eight years with L Brands early in his career.”

L Brands ended the quarter with 2,681 company-owned stores, or 1,752 Bath & Body Works and 929 Victoria’s Secret locations. 

The company is not providing full-year guidance, but is anticipating earnings per share to be in the range of $.80 to $1 a piece for the second quarter, compared to adjusted EPS of 25 cents a year earlier. That excludes onetime costs related to the spin-off of Victoria’s Secret.

Shares of L Brands are up nearly 450 percent, year-over-year.

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