By  on August 21, 2014

L Brands Inc. managed higher profits in the second quarter and ended the period in a tidy inventory position.

The Columbus, Ohio-based operator of Victoria’s Secret and Bath & Body Works generated net income of $188.4 million, or 63 cents a diluted share, 5.3 percent above the year-ago quarter’s bottom-line finish of $178.9 million. On average, analysts expected earnings per share of 62 cents.

Revenues grew 6.3 percent in the quarter to $2.68 billion from $2.52 billion as same-store sales advanced 3 percent overall and the same amount at its Victoria’s Secret and Bath & Body Works stores in the U.S. and Canada. The consensus estimate for revenues was $2.65 billion.

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Gross margin declined to 39 percent of sales from 39.3 percent in the year-ago period, reflecting the continuing promotional pressures faced by retailers during the spring and early summer months. However, L Brands finished the period with 4.6 percent less inventory at cost than it held at the end of the third quarter of 2013 — $1.08 billion versus $1.13 billion.

By division, Victoria’s Secret store sales were up 6.4 percent to $1.36 billion, Bath & Body Works stores up 4.4 percent to $638.3 million, VS Direct sales down 0.3 percent to $382.4 million and BBW Direct sales up 17.3 percent to $66.4 million. The two nameplates’ international operations grew 71.3 percent to $79.3 million.

Victoria’s Secret Direct sales were negatively affected by the company’s decision to discontinue certain noncore apparel categories in order to focus on those with greater growth potential and profitability. Stuart Burgdoerfer, executive vice president and chief financial officer of the company, estimated that the adjustment at VS Direct could mean the sacrifice of about $130 million in annual volume, while the phase-out of the makeup component of L Brands’ beauty business could constitute another $25 million in lost revenue this year.

The company, which will hold a conference call to discuss results this morning, said it expected adjusted EPS of between 26 and 31 cents in the third quarter and raised its full-year profit guidance to a range of between $3.03 and $3.18 from earlier projections of a $3 to $3.15 range.

Shares, up 0.2 percent to $62.98 during regular trading hours, added another 0.2 percent to move to $63.10 in after-hours trading following the earnings announcement.

In the first half, earnings rose 7.4 percent to $345.3 million while sales grew 5.9 percent to $5.07 billion.

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