There seems to be no respite for L Brands, Inc. (NYSE: LB), which slipped 12.1 percent on Thursday following the release of its June 2018 sales results. Shares fell another 2 percent on Friday. Compareable sales overall were up 3 percent, but comps fell by 1 percent at Victoria's Secret, despite an extended sale and slashed prices.
Management admitted that the semi-annual sale had seen a soft start which had impelled it to extend it by two more weeks compared to last year to clear inventory. This led to a substantial decline in merchandise rate compared to the year-ago period.
Although net sales increased 6 percent to $1.282 billion in June, it compared unfavorably with May's net sales growth of 10 percent.
The company had earlier provided bleak second-quarter outlook and trimmed view for fiscal 2018 in the wake of stiff competition from brick-&-mortar and e-retailers. We note that the stock has declined 10.6 percent in the past three months against the industry's rise of 7.1 percent.
L Brands anticipates second-quarter and fiscal 2018 comps growth in low-single digits. Further, gross margin, an important metric which shows a company's financial health, has been constantly decelerating in the past few quarters. In the first quarter, gross margin contracted 120 basis points to 35.9 percent year over year and is expected to decline again in the second quarter.
Earnings per share in the second quarter are expected in the range of 30-35 cents versus 48 cents in the year-ago quarter. Management lowered fiscal 2018 earnings per share guidance to a range of $2.70-$3.00 from $2.95-$3.25. In the year-ago period, the company reported earnings per share of $3.20.
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