Victoria’s Secret-parent L Brands Inc. failed to excite Wall Street with a 2017 forecast that calls for continued pain on the bottom line as the firm retools.
The lingerie chain dropped swim and much of its apparel offering last spring and switched up its promotional stance, making for a series of tough quarterly reports.
But investors that have been waiting for better times are going to have to wait a little longer — and they don’t like it.
Shares of the firm tanked 12.3 percent to $51 in after-hours trading as investors fretted over trends from the last year, a 20 percent drop in Victoria’s Secret comps for February and a weaker profit forecast for the year ahead.
For the full year, L Brands’ net income slipped 7.5 percent to $1.16 billion, or $3.98 a share, on a 3.5 percent rise in sales, to $12.57 billion. Adjusted earnings per share fell to $3.74 from $3.99 in the prior year.
This year, the L Brands projected EPS would fall to a range of $3.05 and $3.35 — below the $3.61 Wall Street analysts had penciled in for the firm. The company said the forecast “includes negative impacts related to the exit of the swim and apparel categories at Victoria’s Secret, continued investment in China and investment in real estate at Victoria’s Secret and Bath & Body Works.”
And the fiscal year is starting off on a particularly sour note, with February comp sales set to be down by a percentage in the mid-to-high teens, below the mid-single digit projected.
Stuart Burgdoerfer, chief financial officer and executive vice president, told investors in November that comparisons would be tough through the early part of 2017, but the business should be in a position to grow sales by 7 to 10 percent in the back half of this year.
It should become clear if that prediction still holds when company executives go over the forecast and look back on the fourth quarter in detail on a conference call with Wall Street analysts Thursday.
L Brands fourth-quarter net income slipped 0.7 percent to $631.7 million from $636 million a year earlier. EPS moved the other direction, rising to $2.18 from $2.15 on the back of share buybacks by the company. Excluding the impact of a favorable tax settlement, the company posted adjusted earnings per share of $2.03.
EPS for the quarter came in well ahead of the $1.90 projected earlier this month by the firm, which often ends up topping its own forecasts.
Sales for the three months ended Jan. 28 rose 2.1 percent to $4.49 billion from $4.4 billion. Comparable sales were flat with a 4 percent drop at Victoria’s Secret and an 11 percent rise at Bath & Body Works.