Business

Casting off swimwear hits Victoria's Secret bottom line

Parent firm L Brands suffers as younger customers turn to less-supportive lingerie

Sales at Victoria’s Secret fell more than projected last quarter, highlighting the trouble it has had connecting with younger customers.

Thu Aug 17 2017 - 08:36

L Brands Inc. tumbled as much as 10 percent in late trading after disappointing investors with its profit forecast, a sign that the company's comeback is still a ways off.

Earnings will be 25 cents to 30 cents in the third quarter, the owner of Victoria's Secret and Bath and Body Works said. Analysts had been looking for 36 cents on average.

Sales at Victoria’s Secret also fell more than projected last quarter.The outlook underscores the troubles Victoria’s Secret has had connecting with younger customers. Shoppers have been shifting toward cheaper, less-supportive lingerie like bralettes - a category where the company faces competition from American Eagle Outfitter’s Aerie brand and e-commerce players. On top of that, consumers are skipping trips to the mall, and many are spending more money on travel and technology than apparel.

Same-store sales at Victoria’s Secret plunged 14 per cent last quarter, a deeper drop than the 12 per cent decline predicted by analysts. The decision to depart from the swim and apparel categories lobbed 6 percentage points off total comparable sales and 9 percentage points off Victoria’s Secret comparable sales.

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Total sales by that measure fell 8 percent, compared with an estimated decline of 7 per cent. One bright spot: Bath and Body Works grew faster than expected in the period. Still, that division only accounts for about 30 per cent of revenue.

L Brands also cut its annual earnings forecast to $3 to $3.20, compared with an earlier range of as much as $3.40.

The shares fell as low as $35.45 in extended trading. Even before the drop, the stock was down 40 per cent this year.

- (Bloomberg)

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