L Brands to close stores as sales stagnate
L Brands, the parent of Victoria’s Secret, saw its share price fall 8 per cent after releasing disappointing results and halving its dividend payout.
The US-headquartered company is struggling to arrest declining revenue in its flagship lingerie network, where same-store sales fell 8 per cent in January, contributing to a 1 per cent drop in overall sales. Online sales, however, rose by 8 per cent.
Overnight, subsequent to releasing its results, the company said it would close 53 stores in North America. Earlier this year it said it would reintroduce swimwear to its range after an absence of several years to increase foot traffic in stores.
Net sales for the year to February 2 were US$13.237 billion compared to $12.632 billion for the 53 weeks ended February 3 last year. Adjusted to take account of the extra week, sales rose 3 per cent in the latest year.
But after excluding significant one-off items, the company’s adjusted net income this year was $786.7 million compared to $919.5 million for the 53-week period last year.
As a result of that decline, L Brands cut its quarterly dividend from 61 cents per share paid last year to just 30 cents.
Analyst Randal Konik of Jefferies said L Brands’ banners “are not wanted anymore”.
“Keep in mind that comps remain negative despite very high promos, which means true brand demand is even worse than reported as some consumers buy things when they are given away for free or marked down by more than 50-75 per cent,” he said.