Dive Brief:
- L Brands on Wednesday reported earnings that beat analysts' expectations, yet shares fell nearly 4% in after-hours trading when the company revised its guidance for the year.
- The parent of Victoria's Secret, Bath & Body Works and other brands reported earnings of 59 cents per share, compared to estimates from Thomson Reuters for 55 cents per share, according to CNBC. Revenue missed, though, coming in at $2.61 billion compared to estimates for $2.62 billion. Same-store sales across L Brands rose 3% in the quarter ending April 30, with Victoria's Secret increasing 2% and Bath & Body Works up 6%.
- L Brands downgraded its outlook for the year, decreasing its guidance to $3.60 to $3.80 for full-year adjusted earnings per share, from the previously forecasted $3.90 to $4.10.
Dive Insight:
L Brands has been seeing a shaky year so far, in part due to the struggles of its primary brand Victoria's Secret, which dominates around 60% of the lingerie market.
Victoria's Secret has seen multiple changes in 2016, starting with February's abrupt departure of its CEO Sharen Jester Turney, who was replaced by L Brands CEO and chairman Les Wexner. Following this change, the company went through a massive organizational restructuring which saw Victoria's Secret cut 200 jobs, end its swimwear and direct channel apparel sales to focus more on "core categories," and halt the production of its print catalog.
In a conference call with analysts Thursday, Victoria's Secret reiterated its commitment to these "core categories," including its signature bras and panties, as well as the sport category, which sells sport bras, leggings and sweats.
While Victoria's Secret has long been the most dependable brand in L Brands lineup, it's seeing increased competition from online startups like Adore Me and apparel retailers placing more emphasis on their own lingerie brands, like American Eagle's Aerie. The latter brand, in fact, reported a massive 32% rise in comparable store sales in the first quarter Thursday, besting expectations for a 14.9% rise from analysts polled by Consensus Metrix.
Aerie's global brand president Jennifer Foyle attributed the brand's success in the quarter to strong marketing campaigns and apparel collections.
The success of Aerie's marketing campaigns is worth paying attention to, especially when comparing them to Victoria's Secret's advertisements that feature women with the traditional thin-and-tall model physique. Aerie, by contrast, in 2014 chose to eschew Photoshop in its advertisements and use models that have more realistic body types. The tactic has also been adopted by Adore Me, which says it has seen good customer response to intermingling plus-sized models wearing its lingerie with thinner models on its website.
