L Brands swings to loss as Victoria's Secret sale approaches

By

Robin Driver

Published
Feb 27, 2020

As L Brands, Inc. prepares to sell a controlling stake in its Victoria’s Secret brand to private equity firm Sycamore Partners, the Columbus, Ohio-based company has reported a net loss of $192.3 million, or $0.70 per share, for the fourth quarter ended February 1, 2020, down from net income of $540.1 million, or $1.94 per share, in the prior-year period.
 

The company’s net sales for the quarter totaled $4.71 billion, decreasing 2.9% from $4.85 billion in the same period in the previous year. Comparable sales declined 2%.
 
Sales in the North American Victoria’s Secret business were $2.28 billion, reflecting a 10% decrease in comparable sales, while Bath & Body Works North America posted a 10% increase in comps, with total sales of $2.17 billion.

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The company’s international segment reported quarterly sales of $177.1 million, down from $190.7 in the prior-year period.
 
Bath & Body Works has been a consistent bright spot in L Brands’ portfolio for some time, while Victoria’s Secret has continued to flounder as it struggles to adapt to changing consumer expectations.
 
Announced earlier this month, the sale of a 55% stake in the lingerie brand to Sycamore Partners for around $525 million is intended to allow the retailer to refocus its energies into the more successful beauty and bath brand, which will be operated as a standalone company.

The transaction is expected to close in the second quarter. When it concludes, L Brands CEO Leslie Wexner will step down from his current role, becoming chairman emeritus and handing the reins over to Bath & Body Works’ current chief operating officer, Andrew Meslow, who will also join the company’s board.
 
Full-year 2019 sales at L Brands were $12.91 billion, falling 2.4% from $13.24 billion in 2018, while comparable sales slipped 1%.
 
Once again, Bath & Body Works performed significantly better than Victoria’s Secret, achieving a 10% increase in comps and sales of $4.21 billion in its North American business, while the lingerie brand posted sales of $6.80 billion, representing a 7% decline in comps.
 
Annual sales in L Brands’ international segment fell from $605.3 million to $600.0 million.
 
The company reported a net loss of $366.4 million, or $1.33 per share, for fiscal 2019, compared to income of $643.9 million, or $2.31 per share, in the previous year.
 
As its plans for the future begin to take shape, L Brands currently expects to report an adjusted loss per share of approximately $0.05 in the first quarter of fiscal 2020 but has not yet provided full-year guidance due to its pending transaction with Sycamore Partners.