L Brands, parent company of Bath & Body Works and Victoria’s Secret, reported a better-than-expected first-quarter with gains across both its businesses as it prepares to spin off the brands into two separate companies.
The results were not all that surprising since L Brands had raised its expectations for the quarter several times before releasing its results.
In prepared remarks, L Brands said that shoppers have been “responding positively” to new merchandise at Victoria’s Secret. The brand has been moving away from an overtly-sexy image that had fallen out of favor in an era of inclusive sizes and diversity. Its first-ever Mother’s Day campaign featured a pregnant model.
“We are beginning to tell the story of our brand repositioning through our marketing,” the company said.
Net income rose to $276.6 million, or $0.97 per share for the quarter ended May 1, compared with a loss of $296.9 million, or $1.07 per share, in the year-ago period. Excluding one-time charges, L Brands earned $1.25 per share, ahead of the $1.21 that analysts expected.
Net sales jumped than 80% to $3.024 billion, better than expected, from $1.654 billion a year earlier. (L Brands stores were closed for about the half of the first quarter 2020 due to COVID-19 pandemic.) First quarter 2021 sales increased 15% compared to sales of $2.629 billion in the first quarter of 2019.
The company said that its sales benefited from the stimulus programs, which boosted sales at Bath & Body Works by $50 million and at Victoria’s Secret by $75 million, according to its estimates.
Total same-store sales were up 21%. Same-store sales at Victoria’s Secret increased 25% compared to last year and 9% compared to the first quarter of 2019.
Same-store sales at Bath & Body Works rose 16% over last year, when many shoppers started up stocking up on hand sanitizers, and 60% compared to the first quarter of 2019.
“L Brands delivered record first-quarter earnings, driven by continued strength and exceptional performance at Bath & Body Works and Victoria’s Secret,” said CEO Andrew Meslow. “We are pleased that the momentum in both businesses has continued, driven by positive customer responses to our assortments, which allowed us to reduce promotional activity and deliver substantial increases in our merchandise margin rates. Grounded in the strength of the two businesses, we look forward with confidence to the separation of Bath & Body Works and Victoria’s Secret into two industry-leading, publicly traded companies.”
In a separate release, L Brands said the spinoffs of the businesses is on track to be completed by August and named finance heads for both companies. As previously reported, Meslow will lead Bath & Body Works following the spin-off. Martin Waters, CEO of Victoria’s Secret, will continue to lead the company after the separation.
L Brands is forecasting second quarter earnings per share between $0.80 and $1.00, which excludes one-time costs related to the spin-off of Victoria’s Secret, compared to adjusted earnings per share of $0.25 in 2020 and $0.24 in 2019.
The company ended the quarter with 2,681 company-owned stores, consisting of 1,752 Bath & Body Works and 929 Victoria’s Secret locations.
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