What To Expect From L Brands’ Q1

by Trefis Team
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L Brands (NYSE: LB), is scheduled to announce its first quarter 2018 earnings soon.  The company will be eager to see a breakthrough in its results following a lukewarm performance over the last quarter. With growth in its Bath and Body Works segment, a well-positioned customer strategy, international diversification, and rising online sales working in its favor, we expect the company to show some improvement in its upcoming results. On the other hand, the Victoria’s Secret segment is also undertaking many growth initiatives to revive its performance which had slowed down the results in 2017.

Management envisions its Q1 earnings to be approximately $0.15 per share and net sales close to $2.626 billion. Recent growth initiatives taken by L Brands viz: revamping business by improving the store experience, localizing assortments, and enhancing direct business, will facilitate it to generate incremental sales and increase store transactions through higher conversion rates in Q1 and beyond. Additionally, the company’s foray into international markets is likely to provide long-term growth opportunities and generate increased sales volumes.

Please refer to our dashboard analysis on L Brands.

Below are key factors that will likely drive L Brands first quarter earnings results.

Bath & Body Works segment will continue to perform well – Strong performances by the company’s home fragrance assortment drove this segment sales and hence Bath and Body Works sales rose by 6% y-o-y in Q4. This segment is likely to boost growth in the upcoming earnings as well.

Revival in Victoria’s Secret Performance – The decline in traffic in brick-and-mortar stores has been a major cause of concern for VS, causing its sales to decline by 1% y-o-y in the previous quarter’s  sales. To revive the performance the company has since made attempts to improve their understanding of customers’ demands in order to make the products more relevant and relatable to them. VS is working on providing the most innovative and fashionable bras, in all its segments, which should positively impact its Q1 results.

Steady focus on delivering a differentiated customer experience will aid strong returns – L Brands continues to revamp business by improving the store experience, localizing assortments, and enhancing direct business. These measures will 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.

Increasing footprint in the International Markets – With their sights set on the global marketplace, the international business will boost the company’s top line and could become a source for long-term growth and increased sales volumes. L Brands’ store operations around the world are a mix of company-owned and franchised locations both upholding the highest brand standards with no visible difference to the customer.

Driven by these key trends, we anticipate L Brands to post improved results in Q1, compared to its performance in the previous quarters of 2017.

 

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