Dive Brief:

• L Brands on Thursday reported June sales that beat some analyst expectations, but merchandise margins came in below expectations, and inventory per square foot increased 20% year over year. Net sales in the five weeks ending July 7 rose 6% to $1.28 billion. Comparable sales for the period rose 3%, according to a company press release.

• That beat the Retail Metrics consensus estimate for comparable sales of 2.9%, and it was L Brands' sixth positive comp in the past seven months, Retail Metrics analysts noted in an email to Retail Dive. But comps at Victoria's Secret, the company's flagship brand, fell 1%, they noted.

• Shares tumbled Thursday, giving the company its worst investor treatment since March 1, when shares fell 13.9%, according to CNBC. 

Dive Insight:

Things are rough at Victoria's Secret, which is dragging L Brands down despite robust sales at its Bath & Body Works personal care brand, where June comps rose 10%.

Not even the lingerie brand's much-anticipated semi-annual sale could push things up this year. The event had a soft start, with negative traffic levels that prompted the retailer to extend it by about two weeks and further reduce prices. That dragged margins "down significantly from last year," Chief Investor Relations Officer Amie Preston said in a conference call Friday morning.

Growth in beauty sales were offset by declines in lingerie and at the company's PINK banner, a lower-cost brand aimed at teens and younger women, she also said.

The troubles come at a time when lingerie retail is in flux, as younger consumers choose pretty, well-fitting and well-performing underthings and leave sexy, breast-enhancing items — Victoria's Secret mainstay — on the table. Meanwhile, the company is facing competition from several fronts, as specialty retailers and online lingerie startups alike have taken advantage of Victoria's Secret's slow response.

American Eagle's Aerie, Gap's new Love brand and J.Crew's new intimates line, along with ranges from online upstarts like Everlane, Adore Me, True & Co, Lively and Thirdlove, all feature more comfortable fabrics and designs. Stitch Fix also has joined the fray with an add-on for its women's boxes called Stitch Fix Extras, a curated collection of camisoles, shapewear, underwear, tights, bralettes, bras and socks. And athleisure retailers like Lululemon and Gap's Athleta offer high-performing and often stylish items.

"We believe this all means the brand is broken," Jeffries & Co. analyst Randal Konik said in a note to clients after the report's release, according to CNBC.