Dive Brief:

• Moody's Investors Service on Tuesday downgraded L Brand's outlook from "stable" to "negative," with Moody's Vice President Christina Boni citing "the deteriorating operating margins and negative comparable store sales at Victoria's Secret for the past 10 quarters."

• Moody's anticipates that L Brands, which "has very good liquidity and moderate leverage," can continue to generate around $375 million of free cash flow to reduce debt, according to a note emailed by Moody's to Retail Dive.

• Boni's team also said they're concerned that Victoria's Secrets sales and profit "trends may remain weak" and that the company can ill afford any downward movement from its so far well performing Bath & Body Works unit.

Dive Insight:

L Brand's lingerie brand, which revolutionized mass marketing of slinky underwear and remains the market leader, has nevertheless lost favor among many consumers of late, and Wall Street is growing increasingly concerned.

Victoria's Secret did $2.5 billion in sales in the fourth quarter, for example, overshadowing the Bath & Body Works operations that are garnering all the praise. But comps declined 3%, compared to the 12% rise at Bath & Body Works. Stores are part of the problem: Taking out direct-to-consumer sales, store comps at Victoria's Secret fell 7% (as Bath & Body Works store comps rose 8%). It's no surprise that the company recently announced the closure of 53 underperforming Victoria's Secret stores, after closing 30 last year.

Furthermore, the company shows little inclination to address the market share that it's lost to the likes of American Eagle's Aerie brand and several digital natives that are offering less sexy items and that don't rely on "angels" to sell their undies.

Last month activist investor Barington Capital criticized L Brands' failure to bring Victoria's Secret's merchandising and marketing up to date as bad for business. L Brands swiftly pushed back, asserting that it "has made significant changes in its business to focus resources on core categories to enhance performance and accelerate growth," including offloading Henri Bendel and La Senza, and making management changes, among other moves.

Now Moody's analysts are chiming in, noting that the company has done well despite its "concentration on two narrow product niches," thanks in part to its "significant scale with revenues of about $13.2 billion" but signaling that the lingerie unit's weakness can't be ignored.

"Its merchandising strategy and supply chain has historically enabled the company to ensure product freshness and higher inventory turns relative to other specialty retail operators," the analysts wrote. "Nonetheless, current weakness at its Victoria's Secret division has pressured operating results with increased promotional activity as the company revamps its product and aligns its inventory levels with demand."

The company must also "address the wall of maturities that begin[s] with $338 million of notes due in May 2020," Moody's also said. "The company has approximately $2 billion of debt maturing before April 2022. We anticipate that the company will utilize its free cash flow for debt reduction in the next few years as it moves back to leverage levels similar to the end of 2015 (which was 2.6x per Moody's calculation)."