Big loss last Thursday for shares of L Brands, the holding company of famous brands such as Victoria’s Secret and Bath & Body Works.
The stock for Victoria’s Secret holding company fell 16% after it announced its 4Q declines and a negative projection for the 2017, it was the company’s second-worst day in 35 years of public trading. Q4 operating income decreased 8% to $987.6 million over the year-ago period, and net income was $631.7 million, down from $636 million last year; this is despite a 2% net sale increase over the same Q4 period a year ago, up from $4.49 billion.
Last year, L Brands decided to forgo swimwear and apparel and instead focus on streamlining its lingerie catalog focusing on beauty, bras and its Pink youth brand. Experts report this costed the company around 2% points of sales from total company sales and 4 percentage points to its Victoria’s Secret brand.
Stuart Burgdoerfer, L Brands’ chief financial officer has defended its position through a positioning shift to Asia, particularly China “moved aggressively into the sports bra and bralette business-, noting “We drove a lot of growth in those categories.” However the company still expects a 20% decline in Victoria’s Secret sales, due to the lower margin from sports bra and bralette, and the 2016 trend of market goers expecting heavy discounting and sales. The recipe for success would be to continue to diversify sales, but still strengthen the brands appeal to safeguard its more profitable products.
“We’ve got pressure in the first half of the year, as we’ve outlined, as you appreciate from the sales and margin impact on the non-go-forward business that we had a year ago, but we’re optimistic that we’ve laid a good foundation for accelerated growth in the back half of 2017 and for the next several years,” pointed the CFO.