Key Takeaways From L Brands’ Q4 Results
Key trends from L Brands fourth quarter earnings are outlined below:
Segment-Wise Performance with outperformance by Bath and Body Works segment – The decline in traffic in brick-and-mortar stores has been a major cause of concern for VS, causing its store sales in Q4 to decline 1.2% to $2,038.3 million, while Victoria’s Secret direct sales were up 19.9% to $630.6 million. The company is making attempts to improve understanding of customers’ demands in order to make the products more relevant and relatable to them. The company has also focused on more efficient teams, strengthening its core bra business, and focusing on the holiday season during the end of the year. VS is also focusing on providing the most innovative and fashionable bras, in all its segments. L Brands opened five Victoria’s Secret stores and shuttered 19 outlets, taking the total count to 1,170 stores.
Strong performances by the company’s home fragrance assortment drove that segment sales and hence Bath and Body Works’ sales increased by 10.7% to $1,793.7 million, with a 6% rise in comparable sales. This segment has seen steady growth over the last few years and is likely to boost growth in the upcoming year as well. A total of 1,694 BBW stores operated in Q4.
Well-positioned customer strategy and focus on delivering a differentiated customer experience fuels growth – L Brands continues to revamp business by improving the store experience, localizing assortments, and enhancing direct business. These measures facilitate it to generate incremental sales and increase store transactions through higher conversion rates. A sustained focus on cost containment, inventory management, merchandise, and speed-to-market initiatives has kept L Brands afloat in a competitive environment. This is evident from the company’s positive earnings surprise history.
Growth in International Sales – With their sights set on the global marketplace, the international business has increased and as a result the company’s U.S. business has become a source for long-term growth and increased sales volumes, at the same time there was a decline in the U.K. business. The company continues to spend a lot of money to grow the business in China. In Q4, Victoria’s Secret and Bath & Body Works International sales surged 37.2% to $170.3 million.
Growth in E-commerce Sales – Driven by the growing trend of online shopping , online sales of the company rose in every geography underlining this to be a global trend. The online channel comprises of the company and retailer websites. L Brands is seeing very strong momentum in online sales growth with online revenue for VS was up 15% in Q4, while Bath & Body Works online revenue was up 22%. The online revenue was 18.3% of total revenue, becoming a significant part of the business. With rising disposable incomes and people continuing to spend more online, this channel constitutes an increasing share of the company’s top line.
Looking ahead, we believe that driven by the above trends L Brands is likely to get on steadier footing this coming year.
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