L Brands’ Continued Slump Might Be Cause For Worry For The Company

It seems that L Brands, the parent company of Victoria’s Secret (VS) and Bath & Body Works (BBW), is taking more than the expected time to recover from its ongoing slump. Analysts are constantly downgrading its share price on account of the declining prices of its bras and a weak store traffic footfall. The poor performance is likely to continue in the near future and currently companies such as American Eagle owned Aerie (in lingerie and bras segment) and Nike and Under Armour (in the sports bra category) are significantly outperforming Victoria’s Secret’s performance.

L Brands’ Q2 fiscal 2017 results, in line with its previous few quarters, have been disappointing. Though the teenage lingerie brand, PINK, and the personal care brand, BBW, grew steadily, the most important segment for the company, VS’s lingerie, as well as the Beauty segment, are still lagging behind in their performances. This is dragging down the overall results for the company.

It seems that the decision to exit from the swimwear and apparels category is not working out too well for the company. The situation is being aggravated by the constant decline in footfalls in Victoria’s Secret’s brick-and-mortar stores. The VS Stores and VS Direct together make up for almost 80% of our valuation of L Brands. Hence, the brand not performing well is the main driver behind L Brands’ poor performance over the last few quarters.

In its Q2 earnings call, Ms. Singer, the company’s lingerie CEO, spoke about a few strategies through which the company is trying to revive the demands for VS’s lingerie. However, these need to work in the favor of the company very soon for it to revive from its current slump. The company’s stock price has fallen by around 50% in the last one year.

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