L Brands, Inc. (NYSE:LB) today reported second quarter earnings
results.
Earnings per share for the second quarter ended
July 29, 2017, were $0.48 compared to $0.87 for the quarter ended
July 30, 2016. Second quarter operating income was $300.9
million compared to $408.2 million last year, and net income was
$138.9 million compared to $252.4 million last year.
The reported results above include certain
significant items as detailed below:
- In 2016:
- A pre-tax gain of $108.3 million ($0.24 per share) related to a
cash distribution from Easton Town Center; and
- A pre-tax charge of $35.8 million ($0.08 per share) related to
the early extinguishment of the company’s July 2017 notes
Excluding the significant items above, adjusted
second quarter earnings per share decreased 31 percent to $0.48
compared to $0.70 last year, and adjusted net income was $138.9
million compared to $204.7 million last year.
The company reported net sales of $2.755 billion
for the second quarter ended July 29, 2017, compared to sales of
$2.890 billion for the second quarter ended July 30, 2016.
The company reported a comparable sales decrease of 8 percent for
the second quarter ended July 29, 2017. For the second
quarter ended July 29, 2017, the exit of the swim and apparel
categories had a negative impact of about 6 percentage points and 9
percentage points to total company and Victoria’s Secret comparable
sales, respectively.
At the conclusion of this press release is a
reconciliation of reported to adjusted results, including a
description of the significant items.
The second quarter comparable sales decline of 8
percent was below the company’s expectations. Accordingly,
the company’s guidance for the remainder of the year reflects a
more conservative sales forecast than its previous guidance.
The company updated its guidance for 2017 full-year earnings per
share to $3.00 to $3.20 from $3.10 to $3.40 previously, and issued
guidance for third quarter earnings per share between $0.25 and
$0.30.
Earnings Call and Additional Information
L Brands will conduct its second quarter
earnings call at 9:00 a.m. Eastern on Aug. 17. To
listen, call 1-866-363-4673; conference ID 21214013 (international
dial-in number: 1-973-200-3978; conference ID 21214013). For
an audio replay, call 1-855-859-2056; conference ID 21214013
(international replay number: 1-404-537-3406; conference ID
21214013) or log onto www.LB.com. Additional second
quarter financial information is also available
at www.LB.com.
ABOUT L BRANDS:L Brands, through Victoria’s
Secret, PINK, Bath & Body Works, La Senza and Henri Bendel, is
an international company. The company operates 3,077
company-owned specialty stores in the United States, Canada, the
United Kingdom and Greater China, and its brands are sold in more
than 750 additional franchised locations worldwide. The
company’s products are also available online at
www.VictoriasSecret.com, www.BathandBodyWorks.com,
www.HenriBendel.com and www.LaSenza.com.
Safe Harbor Statement Under the Private Securities
Litigation Reform Act of 1995
We caution that any forward-looking statements (as such term is
defined in the Private Securities Litigation Reform Act of 1995)
contained in this press release or the second quarter earnings call
or made by our company or our management involve risks and
uncertainties and are subject to change based on various factors,
many of which are beyond our control. Accordingly, our future
performance and financial results may differ materially from those
expressed or implied in any such forward-looking statements. Words
such as “estimate,” “project,” “plan,” “believe,” “expect,”
“anticipate,” “intend,” “planned,” “potential” and any similar
expressions may identify forward-looking statements. Risks
associated with the following factors, among others, in some cases
have affected and in the future could affect our financial
performance and actual results and could cause actual results to
differ materially from those expressed or implied in any
forward-looking statements included in this press release or the
second quarter earnings call or otherwise made by our company or
our management:
- general economic conditions, consumer confidence, consumer
spending patterns and market disruptions including severe weather
conditions, natural disasters, health hazards, terrorist
activities, financial crises, political crises or other major
events, or the prospect of these events;
- the seasonality of our business;
- the dependence on mall traffic and the availability of suitable
store locations on appropriate terms;
- our ability to grow through new store openings and existing
store remodels and expansions;
- our ability to successfully expand internationally and related
risks;
- our independent franchise, license and wholesale partners;
- our direct channel businesses;
- our ability to protect our reputation and our brand
images;
- our ability to attract customers with marketing, advertising
and promotional programs;
- our ability to protect our trade names, trademarks and
patents;
- the highly competitive nature of the retail industry and the
segments in which we operate;
- consumer acceptance of our products and our ability to manage
the life cycle of our brands, keep up with fashion trends, develop
new merchandise and launch new product lines successfully;
- our ability to source, distribute and sell goods and materials
on a global basis, including risks related to:
- political instability, significant health hazards,
environmental hazards or natural disasters;
- duties, taxes and other charges;
- legal and regulatory matters;
- volatility in currency exchange rates;
- local business practices and political issues;
- potential delays or disruptions in shipping and transportation
and related pricing impacts;
- disruption due to labor disputes; and
- changing expectations regarding product safety due to new
legislation;
- our geographic concentration of supplier and distribution
facilities in central Ohio;
- fluctuations in foreign currency exchange rates;
- stock price volatility;
- our ability to pay dividends and related effects;
- our ability to maintain our credit rating;
- our ability to service or refinance our debt;
- our ability to retain key personnel;
- our ability to attract, develop and retain qualified associates
and manage labor-related costs;
- the ability of our manufacturers to deliver products in a
timely manner, meet quality standards and comply with applicable
laws and regulations;
- fluctuations in product input costs;
- our ability to adequately protect our assets from loss and
theft;
- fluctuations in energy costs;
- increases in the costs of mailing, paper and printing;
- claims arising from our self-insurance;
- our ability to implement and maintain information technology
systems and to protect associated data;
- our ability to maintain the security of customer, associate,
supplier or company information;
- our ability to comply with regulatory requirements;
- legal and compliance matters; and
- tax, trade and other regulatory matters.
We are not under any obligation and do not intend to make
publicly available any update or other revisions to any of the
forward-looking statements contained in this press release or
second quarter earnings call to reflect circumstances existing
after the date of this press release or to reflect the occurrence
of future events even if experience or future events make it clear
that any expected results expressed or implied by those
forward-looking statements will not be realized. Additional
information regarding these and other factors can be found in Item
1A. Risk Factors in our 2016 Annual Report on Form 10-K.
|
|
L BRANDS |
|
SECOND QUARTER
2017 |
|
|
|
Comparable Sales Increase (Decrease) (Stores and
Direct): |
|
|
|
|
Second Quarter 2017 |
|
SecondQuarter2016 |
|
Year-to-Date2017 |
|
Year-to-Date2016 |
|
|
|
|
|
|
|
|
|
|
Victoria’s Secret1 |
(14 |
%) |
|
2 |
% |
|
(14 |
%) |
|
2 |
% |
|
Bath & Body
Works1 |
6 |
% |
|
5 |
% |
|
4 |
% |
|
6 |
% |
|
L
Brands2 |
(8 |
%) |
|
3 |
% |
|
(9 |
%) |
|
3 |
% |
|
1 – Results include company-owned stores in the U.S. and Canada
and direct sales.2 – Results include company-owned stores in the
U.S., Canada, the U.K. and Greater China and direct sales.
Comparable Sales Increase (Decrease) (Stores
Only): |
|
|
|
|
Second Quarter2017 |
|
SecondQuarter2016 |
|
Year-to-Date2017 |
|
Year-to-Date2016 |
|
|
|
|
|
|
|
|
|
|
Victoria’s Secret1 |
(11 |
%) |
|
1 |
% |
|
(11 |
%) |
|
1 |
% |
|
Bath & Body
Works1 |
4 |
% |
|
3 |
% |
|
2 |
% |
|
4 |
% |
|
L
Brands2 |
(6 |
%) |
|
1 |
% |
|
(7 |
%) |
|
2 |
% |
|
1 – Results include company-owned stores in the U.S. and
Canada.2 – Results include company-owned stores in the U.S.,
Canada, the U.K. and Greater China.
Total Sales (Millions): |
|
|
Second Quarter 2017 |
|
Second Quarter 2016 |
|
Year-to-Date 2017 |
|
Year-to-Date 2016 |
|
|
|
|
|
|
|
|
Victoria’s Secret1 |
$1,351.0 |
|
$1,469.1 |
|
$2,597.5 |
|
$2,850.3 |
Victoria’s Secret
Direct |
|
295.3 |
|
|
398.3 |
|
|
581.8 |
|
|
757.9 |
Total
Victoria’s Secret |
$1,646.3 |
|
$1,867.4 |
|
$3,179.3 |
|
$3,608.2 |
Bath & Body
Works1 |
$753.0 |
|
$709.1 |
|
$1,341.5 |
|
$1,295.7 |
Bath & Body Works
Direct |
|
107.3 |
|
|
92.3 |
|
|
196.9 |
|
|
165.9 |
Total
Bath & Body Works |
$860.3 |
|
$801.4 |
|
$1,538.4 |
|
$1,461.6 |
VS & BBW
International2 |
$113.9 |
|
$99.7 |
|
$217.2 |
|
$195.0 |
Other |
$134.5 |
|
$121.2 |
|
$256.6 |
|
$238.8 |
L
Brands |
$ |
2,755.0 |
|
$ |
2,889.7 |
|
$ |
5,191.5 |
|
$ |
5,503.6 |
|
|
|
|
|
|
|
|
|
|
|
|
1 – Results include company-owned stores in the U.S. and
Canada.2 – Results include retail sales from company-owned stores
outside of the U.S. and Canada, royalties associated with
franchised stores and wholesale sales.
Total Company-Owned Stores: |
|
|
|
Stores |
|
|
|
|
|
|
|
Stores |
|
|
Operating |
|
|
|
|
|
|
|
Operating |
|
|
at 1/28/17 |
|
Opened |
|
Closed |
|
at 7/29/17 |
|
|
|
|
|
|
|
Victoria's Secret
U.S. |
|
998 |
2 |
|
(6 |
) |
|
994 |
PINK U.S. |
|
133 |
2 |
|
(1 |
) |
|
134 |
Victoria's Secret
Canada |
|
37 |
2 |
|
- |
|
|
39 |
PINK Canada |
|
9 |
- |
|
(2 |
) |
|
7 |
Total
Victoria’s Secret |
|
1,177 |
6 |
|
(9 |
) |
|
1,174 |
|
|
|
|
|
|
|
Bath & Body Works
U.S. |
|
1,591 |
17 |
|
(12 |
) |
|
1,596 |
Bath & Body Works
Canada |
|
102 |
- |
|
- |
|
|
102 |
Total
Bath & Body Works |
|
1,693 |
17 |
|
(12 |
) |
|
1,698 |
|
|
|
|
|
|
|
Victoria’s Secret
U.K. |
|
15 |
1 |
|
- |
|
|
16 |
PINK U.K. |
|
3 |
- |
|
- |
|
|
3 |
Victoria’s Secret
Beauty and Accessories |
|
31 |
- |
|
(1 |
) |
|
30 |
Victoria’s Secret
China |
|
- |
2 |
|
- |
|
|
2 |
Total VS
& BBW International |
|
49 |
3 |
|
(1 |
) |
|
51 |
|
|
|
|
|
|
|
Henri Bendel |
|
29 |
- |
|
- |
|
|
29 |
La Senza U.S. |
|
4 |
- |
|
- |
|
|
4 |
La Senza Canada |
|
122 |
1 |
|
(2 |
) |
|
121 |
Total L Brands
Stores |
|
3,074 |
27 |
|
(24 |
) |
|
3,077 |
|
|
|
|
|
|
|
|
|
Total Noncompany-Owned Stores: |
|
|
|
Stores |
|
|
|
|
|
|
Stores |
|
|
Operating |
|
|
|
|
|
|
Operating |
|
|
at 1/28/17 |
|
Opened |
|
Closed |
|
At 7/29/17 |
|
|
|
|
|
|
|
|
Victoria’s Secret
Beauty & Accessories – Travel Retail |
|
152 |
|
11 |
|
(8 |
) |
|
155 |
Bath & Body Works –
Travel Retail |
|
8 |
|
2 |
|
- |
|
|
10 |
Victoria’s Secret
Beauty & Accessories |
|
239 |
|
7 |
|
(10 |
) |
|
236 |
Victoria’s Secret |
|
23 |
|
4 |
|
- |
|
|
27 |
PINK |
|
5 |
|
- |
|
- |
|
|
5 |
Bath & Body
Works |
|
151 |
|
13 |
|
(1 |
) |
|
163 |
La Senza |
|
203 |
|
4 |
|
(9 |
) |
|
198 |
Total |
|
781 |
|
41 |
|
(28 |
) |
|
794 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
L BRANDS, INC. AND SUBSIDIARIES |
|
CONSOLIDATED STATEMENTS OF
INCOME |
|
THIRTEEN WEEKS ENDED JULY 29, 2017 AND JULY
30, 2016 |
|
(Unaudited) |
|
(In thousands except per share
amounts) |
|
|
|
|
|
|
|
|
|
|
|
2017 |
|
|
|
2016 |
|
|
|
Net Sales |
$ |
2,755,020 |
|
|
$ |
2,889,744 |
|
|
|
Costs of Goods Sold, Buying and Occupancy |
|
(1,727,129 |
) |
|
|
(1,776,840 |
) |
|
|
Gross Profit |
|
1,027,891 |
|
|
|
1,112,904 |
|
|
|
General,
Administrative and Store Operating Expenses |
|
(726,996 |
) |
|
|
(704,688 |
) |
|
|
Operating Income |
|
300,895 |
|
|
|
408,216 |
|
|
|
Interest Expense |
|
(100,428 |
) |
|
|
(101,172 |
) |
|
|
Other Income |
|
16,617 |
|
|
|
73,014 |
|
|
|
|
|
|
|
|
|
|
Income
Before Income Taxes |
|
217,084 |
|
|
|
380,058 |
|
|
|
Provision for Income Taxes |
|
78,210 |
|
|
|
127,636 |
|
|
|
|
|
|
|
|
|
|
Net Income |
$ |
138,874 |
|
|
$ |
252,422 |
|
|
|
|
|
|
|
|
|
|
Net Income Per Diluted Share |
$ |
0.48 |
|
|
$ |
0.87 |
|
|
|
|
|
|
|
|
|
|
Weighted Average Shares Outstanding |
|
288,936 |
|
|
|
290,986 |
|
|
|
|
|
|
|
|
|
|
L BRANDS, INC. AND SUBSIDIARIES |
|
CONSOLIDATED STATEMENTS OF
INCOME |
|
TWENTY-SIX WEEKS ENDED JULY 29, 2017 AND JULY
30, 2016 |
|
(Unaudited) |
|
(In thousands except per share
amounts) |
|
|
|
|
|
|
|
|
|
|
2017 |
|
|
|
2016 |
|
|
Net Sales |
$ |
5,191,543 |
|
|
$ |
5,503,560 |
|
|
Costs of Goods Sold, Buying and Occupancy |
|
(3,260,802 |
) |
|
|
(3,347,701 |
) |
|
Gross Profit |
|
1,930,741 |
|
|
|
2,155,859 |
|
|
General,
Administrative and Store Operating Expenses |
|
(1,420,655 |
) |
|
|
(1,424,255 |
) |
|
Operating Income |
|
510,086 |
|
|
|
731,604 |
|
|
Interest Expense |
|
(201,035 |
) |
|
|
(198,501 |
) |
|
Other Income |
|
26,479 |
|
|
|
79,934 |
|
|
|
|
|
|
|
|
Income
Before Income Taxes |
|
335,530 |
|
|
|
613,037 |
|
|
Provision for Income Taxes |
|
102,602 |
|
|
|
208,309 |
|
|
|
|
|
|
|
|
Net Income |
$ |
232,928 |
|
|
$ |
404,728 |
|
|
|
|
|
|
|
|
Net Income Per Diluted Share |
$ |
0.81 |
|
|
$ |
1.39 |
|
|
|
|
|
|
|
|
Weighted Average Shares Outstanding |
|
289,132 |
|
|
|
291,882 |
|
|
|
|
|
|
|
|
|
L BRANDS, INC. AND SUBSIDIARIES |
|
|
ADJUSTED FINANCIAL INFORMATION |
|
|
(Unaudited) |
|
|
(In thousands except per share
amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter |
|
Year-to-Date |
|
|
|
|
|
2017 |
|
|
2016 |
|
|
|
2017 |
|
|
2016 |
|
|
|
Details of
Special Items - Income (Expense) |
|
|
|
|
|
|
|
|
|
|
Victoria's Secret
Restructuring |
|
$ |
- |
|
$ |
- |
|
|
$ |
- |
|
$ |
(34,545 |
) |
|
|
Special Items included
in Operating Income |
|
|
- |
|
|
- |
|
|
|
- |
|
|
(34,545 |
) |
|
|
Gain on Distribution
from Easton Town Center, LLC |
|
|
- |
|
|
108,310 |
|
|
|
- |
|
|
108,310 |
|
|
|
Loss on Extinguishment
of Debt |
|
|
- |
|
|
(35,827 |
) |
|
|
- |
|
|
(35,827 |
) |
|
|
Special Items included
in Other Income |
|
|
- |
|
|
72,483 |
|
|
|
- |
|
|
72,483 |
|
|
|
Tax Effect of Special
Items |
|
|
- |
|
|
(24,724 |
) |
|
|
- |
|
|
(11,549 |
) |
|
|
Special Items included
in Net Income |
|
$ |
- |
|
$ |
47,759 |
|
|
$ |
- |
|
$ |
26,389 |
|
|
|
Special Items included
in Earnings Per Diluted Share |
|
$ |
- |
|
$ |
0.16 |
|
|
$ |
- |
|
$ |
0.09 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation
of Reported Operating Income to Adjusted
Operating Income |
|
|
|
|
|
|
|
|
|
|
Reported Operating
Income |
|
$ |
300,895 |
|
$ |
408,216 |
|
|
$ |
510,086 |
|
$ |
731,604 |
|
|
|
Special Items included
in Operating Income |
|
|
- |
|
|
- |
|
|
|
- |
|
|
34,545 |
|
|
|
Adjusted Operating
Income |
|
$ |
300,895 |
|
$ |
408,216 |
|
|
$ |
510,086 |
|
$ |
766,149 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation
of Reported Net Income to Adjusted Net Income |
|
|
|
|
|
|
|
|
|
|
Reported Net
Income |
|
$ |
138,874 |
|
$ |
252,422 |
|
|
$ |
232,928 |
|
$ |
404,728 |
|
|
|
Special Items included
in Net Income |
|
|
- |
|
|
(47,759 |
) |
|
|
- |
|
|
(26,389 |
) |
|
|
Adjusted Net
Income |
|
$ |
138,874 |
|
$ |
204,663 |
|
|
$ |
232,928 |
|
$ |
378,339 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation
of Reported Earnings Per Diluted Share to
Adjusted Earnings Per Diluted
Share |
|
|
|
|
|
|
|
|
|
|
Reported Earnings Per
Diluted Share |
|
$ |
0.48 |
|
$ |
0.87 |
|
|
$ |
0.81 |
|
$ |
1.39 |
|
|
|
Special Items included
in Earnings Per Diluted Share |
|
|
- |
|
|
(0.16 |
) |
|
|
- |
|
|
(0.09 |
) |
|
|
Adjusted Earnings Per
Diluted Share |
|
$ |
0.48 |
|
$ |
0.70 |
|
|
$ |
0.81 |
|
$ |
1.30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Reconciliation of GAAP Financial Measures
to Non-GAAP Financial Measures. |
|
|
|
|
|
|
|
|
|
|
|
|
L BRANDS, INC. AND
SUBSIDIARIES NOTES TO RECONCILIATION
OF GAAP FINANCIAL MEASURES TO NON-GAAP
FINANCIAL MEASURES (Unaudited)
The “Adjusted Financial Information” provided in the attached
reflects the following non-GAAP financial measures:
Fiscal 2017
In the first and second quarters of 2017, there were no
adjustments to results.
Fiscal 2016
In the second quarter of 2016, adjusted results exclude the
following:
- A $108.3 million pre-tax gain ($70.2 million net of tax of
$38.1 million), included in other income, related to a $124.4
million cash distribution from Easton Town Center.
- A $35.8 million pre-tax loss ($22.4 million net of tax of $13.4
million), included in other income, associated with the early
extinguishment of our July 2017 notes.
In the first quarter of 2016, adjusted results exclude the
following:
- Pre-tax charges of $34.5 million ($21.4 million net of tax of
$13.1 million) related to actions at Victoria’s Secret, including
severance charges, fabric cancellations and the write-off of
catalogue paper.
The Adjusted Financial Information should not be construed as an
alternative to the reported results determined in accordance with
generally accepted accounting principles. Further, the
Company’s definition of adjusted income information may differ from
similarly titled measures used by other companies. Management
believes that the presentation of adjusted financial information
provides additional information to investors to facilitate the
comparison of past and present operations. While it is not
possible to predict future results, management believes the
adjusted information is useful for the assessment of the ongoing
operations of the Company because the adjusted items are not
indicative of our ongoing operations due to their size and nature.
Additionally, management uses adjusted financial information as key
performance measures of results of operations for the purpose of
evaluating performance internally. The Adjusted Financial
Information should be read in conjunction with the Company’s
historical financial statements and notes thereto contained in the
Company’s quarterly reports on Form 10-Q and annual report on Form
10-K.
For further information, please contact:
L Brands:
Investor Relations
Amie Preston
(614) 415-6704
apreston@lb.com
Media Relations
Tammy Roberts Myers
(614) 415-7072
communications@lb.com
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