l brands victoria's secret leslie wexner bralette

L Brands Inc. reported this morning that net sales for September increased 6 percent to $971.4 million for the five weeks ending Oct. 1 over last year’s $919.9 million. Even though comparable sales for both stores and e-commerce rose 3 percent, it was a slowdown from last year’s comp sales increase of 8 percent.

Comp sales for just the stores, excluding direct sales, in September dropped to an increase of 1 percent from last year’s rise of 9 percent. Year-to-date comp sales including e-commerce also slowed slightly to a rise of 3 percent, a decline from last year’s increase of 4 percent.

The stock is rising more than 1 percent to $71.50 in early trading because analysts had forecast for comps to be flat for the total company. Cowen and Co. analyst Oliver Chen said beating Street estimates could help the stock today. Chen also added, “We note continued merchandise margin pressure on beauty declines and promotions to drive trial [styles] and clear inventories could hurt gross margins for the quarter, more than the street’s current estimate for roughly 100 basis points of erosion in the third quarter.”

Amie Preston, chief investor relations officer, said on the company’s recorded call that the September merchandise margin rate was down significantly compared to last year, but gave no detail as to how much.

In the Victoria’s Secret category, strength in the Pink business was offset by declines in lingerie and the beauty business, which is being repositioned. In addition the exiting of the swim and apparel businesses also negatively affected the gains of Pink. Preston said the margin rate for Victoria’s Secret was hurt by promotional events meant to drive key categories and manage inventory.

Bath & Body Works remains strong with comps up 9 percent, although flat against last year. Margins for the division also were characterized as flat versus last year.

Looking ahead, Victoria’s Secret will focus on its sports collection and new Pink active bras and at the end of the month, it will target the bralette category. Bath & Body Works will transition to its “world’s best” theme.

L Brands said it expects October comps to be up low single digits.

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