Dive Brief:

• L Brands raised its guidance for the first quarter, citing improved sales driven by "unusual shifts in consumer spending patterns," the company said in a press release Friday. 
• The retailer credited the spending to government stimulus payments to households and easing COVID-19 restrictions, among other factors, which are lifting both Bath & Body Works and Victoria's Secret.
• For Q1, L Brands now expects earnings per share to reach 85 cents to $1, up from previous guidance of 55 cents to 65 cents per share. "The environment remains uncertain, and there is no assurance that these improved trends will continue," L Brands noted.

Dive Insight:

Roughly a year ago, L Brands was taking unprecedented actions and scrambling for cash as it and the retailer's industry peers sailed into unknown territory.

All at once, the company closed its stores to combat COVID-19's spread, sent corporate staff home to work remotely, withdrew its guidance and drew down nearly $1 billion from its revolver to stay afloat. Shortly later, the company halted shareholder dividends and scaled back executive pay as a nod to the all-consuming uncertainty that hung over the retail industry.

Amid the upheaval of the moment, a deal to sell a majority stake in Victoria's Secret to private equity firm Sycamore Partners fell apart. 

A year made quite the difference for L Brands. The company is back on track to break up its successful Bath & Body Works banner from the struggling (but still huge) Victoria's Secret. In the fourth quarter, the company swung back to a profit with a net income of $860.3 million and posted a comparable sales increase of 10%.

As its performance improved at the end of the year, L Brands went from hoarding cash to passing it along to shareholders. Earlier in March, the company announced a new $500 million stock buyback program and reinstatement of its annual dividend, at 60 cents per share, while also repaying some $1 billion in debt. 

The focus on returns to shareholders signals as much as anything a return to business as usual at L Brands and other major retailers. In the years leading up to the pandemic, L Brands passed on billions of dollars to shareholders even as mall retail as a sector came under intense pressure, and the Victoria's Secret banner lost sales and market share. All told, L Brands spent $5.7 billion on share buybacks and dividends between 2015 and 2019, according to Retail Dive research. 

After the company's move to restore dividends and buybacks, and its earlier Q1 guidance, analysts have sounded an optimistic note on L Brands, with multiple firms raising their price target for the retailer's stock. Telsey Advisory Group analysts led by Dana Telsey pointed in a research note to the "continued momentum" demonstrated by L Brands' Q4 and early Q1 performance. 

"The company's ability to deliver a compelling offering at both brands, while pulling back on promotional activity helped drive significant merchandise margin improvement across the business last quarter, which has likely continued into early FY21," the analysts said. They noted also that, despite Victoria's Secret's return to profitability, "we remain cautious over the ultimate positioning of the brand as consumer preferences evolve."

As L Brands heads into another year — one that is still full of uncertainty but likely to be much brighter than 2020 as COVID-19 vaccines roll out to the public — it is undergoing a major change at the board level. The company announced days ago that L Brands founder Les Wexner and his wife Abigail Wexner will be stepping away from the board in May.