Sales for the nine-week period ending Jan. 4, were $3.9 billion, compared with just over $4 billion the same time last year. The company’s overall comparable sales, which also includes Bath & Body Works and Pink in the portfolio, fell 3 percent during the same period.
By brand, Victoria’s Secret comparable sales fell 12 percent during the November and December shopping season. That’s on top of a 4 percent decline in 2018’s holiday season. In fact, all of the company’s gains came from the Bath & Body Works business.
L Brands added that in Victoria’s Secret’s current quarter-to-date, merchandise margin rates are down, driven by increased promotional activity, an overlap from last year’s sourcing costs and misses in bras and sleepwear.
“The miss to expectations was driven by casual sleepwear, as sales and margin dollars increased in sexy sleep[wear],” the company said in a statement.
The company lowered its fourth-quarter earnings per share guidance as a result from $2 a share down to $1.85.
But investors didn’t seem to mind. The stock shot up more than 6 percent at the start of Thursday’s trading session, thanks to the strength of the Bath & Body Works business. Comparable sales at the Bath & Body Works business increased 9 percent during the holiday shopping season on top of the 14 percent gain the same time last year.
“Holiday sales were at the high end of expectations with strong customer response to key promotional days,” a company statement said, regarding Bath & Body Works.
L Brands is also seen as a value buy right now by some investors, which could have furthered added to its stock jump. Bank of America analyst Lorraine Hutchinson recently upgraded the stock to a “buy” rating thanks to the “inexpensive valuation, a high-dividend yield, strong and growing Bath & Body Works business and potential for stabilization at Victoria’s Secret.”
Wells Fargo senior retail analyst Ike Boruchow echoed Hutchinson’s statements. His firm has an “overweight” rating on L Brands stock.
“In spite of VS reporting its worst holiday ever, there is no change to our thesis as we continue to believe there’s significant value in the optionality within the [L Brands] portfolio,” Boruchow wrote in a note. “Investors were on the sidelines waiting for VS to get their holiday 2019 out of the way — the buy side was anticipating very weak results, which they received — and investors may now be ready to step in. VS has become so challenged that now more than ever there should be [an] elevated focus on strategic alternatives for LB.”
Even so, many retail companies count the fourth quarter — when shopping goes into overdrive — as their highest grossing quarter in terms of both sales and profits. And the time between Thanksgiving and Christmas this year was six days shorter than the previous year.
That was time Victoria’s Secret clearly needed. Total revenues at the Victoria’s Secret business have been on the decline since 2017. The most recent quarter was no exception, with the core Victoria’s Secret brand falling short on both top and bottom lines and L Brands executives confirming that the annual Victoria’s Secret Fashion Show had been axed.
Aside from canceling the show, Victoria’s Secret has made a number of other concessions in the last year in an attempt to turn the brand and its image around. These include bringing back swimwear; selling off unprofitable businesses; hiring its first transgender model, Valentina Sampaio, then plus-size model Ali Tate Cutler, and working with other lingerie brands, like Livy and Bluebella.
“It’s a work in progress,” Stuart B. Burgdoerfer, chief financial officer and executive vice president of L Brands, said on November’s conference call with analysts. “[There have been] some signs of success, but the overall result is not what we want it to be. The team is very focused on it.”