What To Expect From LBrands Q2 2018 Earnings

L Brands (NYSE: LB), is scheduled to announce its second quarter 2018 earnings on August 22. During the Q1 earnings the net sales of the company rose to $2.626 billion, up 8% from the prior-year quarter, with adjusted earnings per share at $0.17. This was driven by growth across its Bath and Body Works segment, a well-positioned customer strategy, international diversification, and rising online sales. Store only comparable sales had also increased 3% year over year.  Even though the BBW segment continues to perform well, the results have been disappointing for Victoria’s Secret. On the other hand,  VS Stores still continue to be the most important segment for the company as it derives close to 50% of its revenues from this segment and it is striving to get it back on track.

With the growth in its Q1 results, Management now envisions its Q2 earnings to be in between the band of $0.30 – $0.35 per share. Recent growth initiatives taken by L Brands viz: revamping the business by improving the store experience, localizing assortments, and enhancing direct business, will help it to generate incremental sales and increase store transactions through higher conversion rates in Q2 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 interactive dashboard: Our Expectations For LBrands’ Q2 2018.

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

Bath & Body Works segment will continue to perform well – Strong performances by the company’s home fragrance assortment drove this segment’s sales and hence Bath and Body Works sales rose by 21.4% to $1,23.6 million in Q1. 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 in Q1 earnings by 47.6% to $83.2  million. 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 Q2 results.

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.

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.

Looking ahead,  we believe that driven by the above trends the company is focused on improving performance in the Victoria’s Secret business, staying close to its customer, improving the customer experience in stores and online, and improving assortments in compelling new product launches with steadier footing this coming Q2 earning.

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