What To Expect From L Brands’ Q4 FY 2016 Earnings
L Brands, the parent company for Victoria’s Secret (VS) and Bath & Body Works, is slated to release its Q4 fiscal 2016 (fiscal year ends in January) results on February 22nd. In line with its previous quarters of fiscal 2016, we expect the company to continue with its slow performance in Q4, as well. The company had been undergoing major changes in its business structure and that was the primary reasons for its slowdown in fiscal 2016. However, as L brands completes all the restructuring activities, we expect its performance to revive once more establishing both the brands as leaders in their respective segments. In its recently held January Sales Performance Call, L Brands announced that for the fourth quarter of FY 2016, L Brands sales grew by 2% y-o-y to close to $4.5 billion, although the comparable sales remained flat. The earnings per share for the fourth quarter is expected to be around $1.90.
Changes In The Victoria’s Secret Business Led To A Weak 2016
The company excluded shoes, swimwear, accessories, and apparel from Victoria’s Secret’s core business and since these items offered annualized sales of ~$525 million in 2015, hence it had to sacrifice those gains last year. Also in its Beauty segment, the company is trying to shift its focus from the fantasy beauty products to fine fragrance and high-end body care products. The VS business has been recently segregated into 3 segments: Victoria’s Secret Lingerie, PINK, and Victoria’s Secret Beauty, with each segment led by a different executive reporting to the CEO. The business has also reduced its total headcount by 290. The Victoria’s Secret segment is the most important segment for L Brands. Currently, Victoria’s Secret Stores contributes to around 50% of L Brands’ revenues, while the Victoria’s Secret Direct contributes to 13% of the same.
The International Business Is Also Going Through Some Restructurings
Along with these changes, the economic climate was also not conducive to L Brands’ business in 2016. Recessions in certain international markets, slowdown in travel retail due to natural disasters and terrorism related activities, and weak foreign exchange rates against the U.S. dollars acted as dampeners to its international sales. VS built a local business in China in order to combat some of these challenges. It invested $4 million in the China business in the first quarter of FY 2016 and is establishing an L Brands management team in Shanghai. Around 40 stores were opened by L Brands in its international markets over the first two quarters of 2016.
Have more questions on L Brands? See the links below.
- What Is L Brands’ Revenue And EBITDA Breakdown?
- How Has L Brands’ Revenue And EBITDA Composition Changed Over 2012-2016E?
- L Brands Q4 2015 Pre-Earnings Report
- L Brands 2015 Year In Review
- How Was L Brand’s Monthly Performance In February 2016?
- How Was L Brand’s Monthly Performance In March 2016?
- What Is L Brands’ Fundamental Value Based On 2016 Estimated Numbers?
- How Did L Brands’ Different Segments Perform Over The Last 5 Years?
- What Are The Key Takeaways From L Brands Q1 FY2016 Earnings Results?
- Why Is Victoria’s Secret Undergoing Restructuring Changes?
- Key Takeaways From L Brands May 16 Performance Report
- Why Has L Brands’ Stock Price Declined By Around 30% Year-To-Date?
- Which Is The Most Important Segment For L Brands’ Future Growth?
- How Was L Brands’ Monthly Performance In June 2016?
- L Brands Q2 FY16 Earnings Preview
- L Brands Delivered A Moderate Q2, Restructuring Activities Progressing On Track
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