L Brands dragged down by weakness at Victoria's Secret
L Brands Inc. -- in need of a win after long-time leader Les Wexner has come under fire for his close ties to disgraced financier Jeffrey Epstein -- gave investors mixed news Wednesday as profit beat estimates in the latest quarter but Victoria’s Secret continues to struggle.
At Victoria’s Secret, same-store sales fell 6 per cent last quarter, missing analysts’ estimates. Comparable sales for Bath & Body Works -- recently the company’s bright spot -- rose 8 per cent, outpacing expectations. For the third quarter, it’s expecting earnings per share of between negative and positive 5 cents a share, below the average analyst estimate.
Since July, the scandal surrounding Epstein has cast a shadow on Victoria’s Secret owner Wexner. Wexner has said Epstein, who was his former money manager, had “misappropriated vast sums of money” from him and his family. Investors interested in asking more have to wait for the company’s quarterly earnings call, which is expected on Thursday at 9 a.m.
L Brands’ beauty and skin care chain stands in stark contrast to its Victoria’s Secret unit, which has struggled to gain footing amid changing consumer demands and a move away from its overly sexy aesthetic. It said foot traffic at Victoria’s Secret stores was down in the quarter, even as online sales rose.
Recently, the lingerie company has shown a willingness to change. It hired its first openly transgender model and in May it said it would change the way it does its annual fashion show. Additionally, Ed Razek, the lingerie company’s controversial chief marketing officer, said he would resign this month. Change is slow, the results show, but the company said in prepared remarks that its No. 1 priority is continuing to improve performance at Victoria’s Secret.
The company clarified Wednesday that its guidance already includes the newest round of planned tariffs, even as other retailers wait to incorporate it into their own guidance. Still, the current trade environment creates “a greater level of uncertainty in forecasting our results for the third and fourth quarters than is typical,” executives said.
The shares swung between gains and losses in late trading Wednesday. They were down 21 per cent year to date through Wednesday’s close.