L Brands reported falling sales and earnings during its second-quarter earnings report.
L Brands, the parent company of Victoria’s Secret and Bath & Body Works, released its quarterly earnings report this week. The earnings report was something of a mixed bag and didn’t do much to inspire confidence in the company.
The company’s net sales fell 2.8% year over year and earnings came in at 14 cents per share, which is down from 36 cents a year earlier. These results were due to store closures and weak sales at Victoria’s Secret locations.
Sales at Bath & Body Works did grow by 4% but this couldn’t offset the company’s weak performance in other areas. Shares of L Brands fell 5% after releasing the earnings report.
What happened during the second quarter?
Shares of L Brands have been on a downward slide for a while and this latest earnings report just added fuel to the fire. The stock is down 35% from a year earlier and 28% year to date.
So what happened during the second quarter? By far, the biggest issue affecting L Brands is declining sales at Victoria’s Secret. Sales at Victoria’s Secret continue to drop in recent quarters even as sales at Bath & Body Works have done well.
The Victoria’s Secret brand just doesn’t work as well with consumers as it did in the 90’s. Increasingly, younger generations want to buy from brands that show all different body types. But Victoria’s Secret still seems to be using the same messaging it used 20 years ago.
Plus, consumers have a lot more options when it comes to buying intimates apparel and clothing. The company’s Pink line targets college-aged women but by far, this age group seems to prefer brands like American Eagles Outfitters.
Can Victoria’s Secret become relevant again?
On a conference call with investors, company executives said that reviving Victoria’s Secret is its top priority. The company plans to roll out a new marketing plan and introduce new products. According to CFO Stuart Burgdoerfer, the company received a lot of positive feedback in response to its new lineup.
It’s good that L Brands recognizes that there is work to be done on Victoria’s Secret. But some analysts were skeptical that the company will be able to sufficiently address the problem.
Like Jeffries analyst Randal Konik pointed out, “L Brands still believes Victoria’s Secret problems are product-related, but we believe they are brand and competition-related.”
However, L Brands has been making some significant changes and recently let go of its long-time chief marketing officer. And the company announced it will no longer be promoting its annual fashion show. It may not be enough to bring the company back to relevance but it’s a start.
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