Dive Brief:

• L Brands shares tumbled 14% Thursday after a disappointing December sales report that fell short of analyst expectations. December sales rose 3% to $2.5 billion, from $2.4 billion in the year-ago period and same-store sales rose 1% in the same period, according to a company press release.

• Yearly net sales fell to $11.6 billion from $11.8 billion in the year-ago period and same-store sales fell 4% in that time. The company said it's decision to end swim and other apparel sales had a negative impact of about three percentage points to total company same-store sales and five percentage points Victoria’s Secret same-store sales.

• By brand, Victoria’s Secret December same-store sales fell 1%, where growth in its beauty and Pink business was more than offset by a decline in lingerie sales, according to a transcript of the company’s pre-recorded call. Heavy promotions drove down the merchandise margin rate "significantly."  Bath & Body Works December same-store sales rose 4% and promotional levels were "about flat."

Dive Insight:

Investors seemed to take note of the company's weakness at its once formidable Victoria’s Secret brand, which is depending on beauty and bath brands to pick up the slack. "Our store checks found Bath & Body Works to consistently be one of the busiest locations in the mall," Retail Metrics president Ken Perkins said in an email to Retail Dive. "We found [Victoria’s Secret] Pink division to have steady traffic throughout the holiday season, with VS noticeably quieter."

Victoria’s Secret was the underpinning of founder and CEO Les Wexner’s retail shift after selling off his flagship The Limited brand in 2007 to focus on the lingerie segment and expand into personal care and fragrances. That worked nicely for a time, but the unit has been struggling for a while now. Early last year the company said it would streamline its categories to focus on three areas that would most appeal to millennial shoppers: beauty, bras and Pink. But the exit from swimwear and apparel continues to take a toll, and American Eagle’s rival Aerie brand has proven to be a thorn in its side.

In fact, Aerie, like Victoria’s Secret in its heyday, is making up for sluggish apparel sales at American Eagle. "Aerie continues to glitter," GlobalData Retail analyst Anthony Riva noted in an email to Retail Dive. "Its fresh take on lingerie – especially in the sense of using ordinary women as models and its body-positive advertising – is still striking a chord with consumers. New stores and effective marketing have also helped to drive sales."

Before the effect of any significant one-time items, including the impact of tax reform legislation, the company expects to report fourth quarter earnings of about $2.00 per share, compared to its previous guidance of $1.95 to $2.10 per share, the company also said last week.