L Brands, Inc. (NYSE: LB) today reported 2019 third quarter
results.
Third Quarter ResultsThe
company reported a loss per share of $0.91 for the third quarter
ended Nov. 2, 2019, compared to a loss per share of $0.16 for the
quarter ended Nov. 3, 2018. Third quarter operating loss was
$151.2 million compared to operating income of $54.4 million last
year, and net loss was $252.0 million compared to a net loss of
$42.8 million last year.
Reported results above include the following
significant items:
In 2019, pre-tax charges of $284.7 million
($0.93 per share) as follows:
- A $247.5 non-cash impairment charge
($0.83 per share) related to certain Victoria’s Secret store and
other assets; and
- A $37.2 million charge ($0.10 per
share) to increase reserves related to ongoing guarantees for the
La Senza business which was sold in the fourth quarter of
2018.
In 2018, pre-tax charges of $101.2 million
($0.32 per share) as follows:
- An $80.9 million non-cash
impairment charge ($0.26 per share) related to certain Victoria’s
Secret store assets; and
- A $20.3 million charge ($0.05 per
share), principally cash, related to the closure of the Henri
Bendel business.
Excluding the above charges, adjusted third
quarter earnings per share were $0.02 compared to $0.16 last year,
adjusted operating income was $96.3 million compared to $155.6
million last year, and adjusted net income was $5.7 million
compared to $45.0 million last year.
At the conclusion of this press release is a
reconciliation of reported-to-adjusted results, including a
description of the above charges.
The company reported net sales of $2.677 billion
for the 13 weeks ended Nov. 2, 2019, compared to net sales of
$2.775 billion for the quarter ended Nov. 3, 2018. Comparable
sales decreased 2 percent for the quarter ended Nov. 2,
2019.
Fourth Quarter 2019 OutlookThe
company stated that it expects 2019 fourth quarter earnings per
share to be about $2.00, which would result in full-year adjusted
earnings per share of about $2.40, compared to its previous
full-year guidance range of $2.30 to $2.60.
Earnings Call and Additional
InformationAdditional third quarter financial information,
including management commentary, is currently available
at www.LB.com. L Brands will conduct its third
quarter earnings call at 9:00 a.m. eastern on Nov.
21. To listen, call 1-866-363-4673 (international dial-in
number: 1-973-200-3978); conference ID 8594448. For an audio
replay, call 1-855-859-2056 (international replay number:
1-404-537-3406); conference ID 8594448 or log
onto www.LB.com.
ABOUT L BRANDS:L Brands, through Victoria’s
Secret, PINK and Bath & Body Works, is an international
company. The company operates 2,944 company-owned specialty
stores in the United States, Canada, the United Kingdom and Greater
China, and its brands are also sold in 700 franchised locations
worldwide. The company’s products are also available online
at www.VictoriasSecret.com and www.BathandBodyWorks.com.
Safe Harbor Statement Under the Private Securities
Litigation Reform Act of 1995We 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 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
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 vendor 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;
- shareholder activism matters;
- our ability to retain key personnel;
- our ability to attract, develop and retain qualified associates
and manage labor-related costs;
- the ability of our vendors 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;
- liabilities arising from divested businesses;
- our ability to implement and maintain information technology
systems and to protect associated data;
- our ability to maintain the security of customer, associate,
third-party 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 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.
For further information, please
contact:
L
Brands: |
|
Investor
Relations |
Media
Relations |
Amie
Preston |
Tammy
Roberts Myers |
(614)
415-6704 |
(614)
415-7072 |
apreston@lb.com |
communications@lb.com |
|
L BRANDS |
THIRD QUARTER 2019 |
|
Comparable Sales Increase (Decrease) (Stores and
Direct): |
|
Third Quarter2019 |
|
ThirdQuarter2018 |
|
Year-to-Date2019 |
|
Year-to-Date2018 |
|
|
|
|
|
|
|
|
|
|
Victoria’s Secret1 |
(7%) |
|
(2%) |
|
(6%) |
|
(1%) |
|
Bath & Body Works1 |
9% |
|
13% |
|
10% |
|
10% |
|
L Brands2 |
(2%) |
|
4% |
|
(1%) |
|
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): |
|
Third Quarter2019 |
|
ThirdQuarter2018 |
|
Year-to-Date2019 |
|
Year-to-Date2018 |
|
|
|
|
|
|
|
|
|
|
Victoria’s Secret1 |
(8%) |
|
(6%) |
|
(8%) |
|
(5%) |
|
Bath & Body Works1 |
5% |
|
10% |
|
5% |
|
8% |
|
L Brands2 |
(3%) |
|
0% |
|
(3%) |
|
(1%) |
|
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): |
|
Third Quarter 2019 |
|
Third Quarter 2018 |
|
Year-to-Date 2019 |
|
Year-to-Date 2018 |
|
|
|
|
|
|
|
|
Victoria’s Secret1 |
$ |
1,080.9 |
|
$ |
1,177.8 |
|
$ |
3,462.2 |
|
$ |
3,778.4 |
Victoria’s Secret Direct |
|
331.3 |
|
|
351.0 |
|
|
1,066.5 |
|
|
1,064.6 |
Total Victoria’s
Secret |
$ |
1,412.2 |
|
$ |
1,528.8 |
|
$ |
4,528.7 |
|
$ |
4,843.0 |
Bath & Body Works1 |
$ |
871.7 |
|
$ |
808.3 |
|
$ |
2,468.4 |
|
$ |
2,281.1 |
Bath & Body Works Direct |
|
192.4 |
|
|
147.9 |
|
|
527.3 |
|
|
399.1 |
Total Bath & Body
Works |
$ |
1,064.1 |
|
$ |
956.2 |
|
$ |
2,995.7 |
|
$ |
2,680.2 |
VS & BBW International2 |
$ |
133.4 |
|
$ |
134.0 |
|
$ |
422.9 |
|
$ |
414.6 |
Other |
$ |
67.0 |
|
$ |
155.9 |
|
$ |
259.8 |
|
$ |
446.8 |
L Brands |
$ |
2,676.7 |
|
$ |
2,774.9 |
|
$ |
8,207.1 |
|
$ |
8,384.6 |
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, direct sales in China, royalties
associated with franchised stores and wholesale sales.
|
Total Company-Owned Stores: |
|
Stores |
|
|
|
Stores |
|
Operating |
|
|
|
Operating |
|
at 2/2/19 |
Opened |
Closed |
|
at 11/2/19 |
|
|
|
|
|
|
|
|
|
|
|
|
Victoria's Secret U.S. |
957 |
4 |
(38 |
) |
923 |
PINK U.S. |
141 |
2 |
- |
|
143 |
Victoria's Secret Canada |
39 |
- |
- |
|
39 |
PINK Canada |
6 |
- |
- |
|
6 |
Total Victoria’s
Secret |
1,143 |
6 |
(38 |
) |
1,111 |
|
|
|
|
|
Bath & Body Works U.S. |
1,619 |
34 |
(12 |
) |
1,641 |
Bath & Body Works
Canada |
102 |
1 |
- |
|
103 |
Total Bath & Body
Works |
1,721 |
35 |
(12 |
) |
1,744 |
|
|
|
|
|
Victoria’s Secret
U.K./Ireland |
21 |
- |
- |
|
21 |
PINK U.K. |
5 |
- |
- |
|
5 |
Victoria’s Secret Beauty and
Accessories |
38 |
9 |
(5 |
) |
42 |
Victoria’s Secret Greater
China |
15 |
6 |
- |
|
21 |
Total International |
79 |
15 |
(5 |
) |
89 |
|
|
|
|
|
Total L Brands
Stores |
2,943 |
56 |
(55 |
) |
2,944 |
|
|
|
|
|
|
Total Noncompany-Owned Stores: |
|
Stores |
|
|
|
Stores |
|
Operating |
|
|
|
Operating |
|
at 2/2/19 |
Opened |
Closed |
|
at 11/2/19 |
|
|
|
|
|
Victoria’s Secret Beauty &
Accessories – Travel Retail |
164 |
14 |
(20 |
) |
158 |
Bath & Body Works – Travel
Retail |
12 |
3 |
- |
|
15 |
Victoria’s Secret Beauty &
Accessories |
219 |
6 |
(9 |
) |
216 |
Victoria’s Secret |
47 |
15 |
- |
|
62 |
PINK |
9 |
- |
- |
|
9 |
Bath & Body Works |
223 |
21 |
(4 |
) |
240 |
Total |
674 |
59 |
(33 |
) |
700 |
|
L BRANDS,
INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS
OF LOSS |
THIRTEEN
WEEKS ENDED NOVEMBER 2, 2019 AND NOVEMBER 3, 2018 |
(Unaudited) |
(In
thousands except per share amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019 |
|
|
|
2018 |
|
Net
Sales |
$ |
2,676,747 |
|
|
$ |
2,774,874 |
|
Costs of
Goods Sold, Buying and Occupancy |
|
(1,936,244 |
) |
|
|
(1,846,622 |
) |
Gross
Profit |
|
740,503 |
|
|
|
928,252 |
|
General,
Administrative and Store Operating Expenses |
|
(891,717 |
) |
|
|
(873,857 |
) |
Operating
Income (Loss) |
|
(151,214 |
) |
|
|
54,395 |
|
Interest
Expense |
|
(92,098 |
) |
|
|
(95,685 |
) |
Other Income
(Loss) |
|
(34,051 |
) |
|
|
164 |
|
|
|
|
|
Loss Before
Income Taxes |
|
(277,363 |
) |
|
|
(41,126 |
) |
Provision
(Benefit) for Income Taxes |
|
(25,371 |
) |
|
|
1,624 |
|
|
|
|
|
Net
Loss |
$ |
(251,992 |
) |
|
$ |
(42,750 |
) |
|
|
|
|
Net Loss Per
Diluted Share |
$ |
(0.91 |
) |
|
$ |
(0.16 |
) |
|
|
|
|
Weighted
Average Shares Outstanding |
|
276,398 |
|
|
|
275,103 |
|
|
|
|
|
|
|
|
|
|
L BRANDS,
INC. AND SUBSIDIARIES |
CONSOLIDATED
STATEMENTS OF INCOME (LOSS) |
THIRTY-NINE
WEEKS ENDED NOVEMBER 2, 2019 AND NOVEMBER 3, 2018 |
(Unaudited) |
(In
thousands except per share amounts) |
|
|
|
|
|
|
|
2019 |
|
|
|
2018 |
|
Net
Sales |
$ |
8,207,095 |
|
|
$ |
8,384,569 |
|
Costs of
Goods Sold, Buying and Occupancy |
|
(5,550,340 |
) |
|
|
(5,453,442 |
) |
Gross
Profit |
|
2,656,755 |
|
|
|
2,931,127 |
|
General,
Administrative and Store Operating Expenses |
|
(2,480,024 |
) |
|
|
(2,493,787 |
) |
Operating
Income |
|
176,731 |
|
|
|
437,340 |
|
Interest
Expense |
|
(286,105 |
) |
|
|
(291,916 |
) |
Other Income
(Loss) |
|
(65,550 |
) |
|
|
733 |
|
|
|
|
|
Income
(Loss) Before Income Taxes |
|
(174,924 |
) |
|
|
146,157 |
|
Provision
(Benefit) for Income Taxes |
|
(783 |
) |
|
|
42,356 |
|
|
|
|
|
Net Income
(Loss) |
$ |
(174,141 |
) |
|
$ |
103,801 |
|
|
|
|
|
Net Income
(Loss) Per Diluted Share |
$ |
(0.63 |
) |
|
$ |
0.37 |
|
|
|
|
|
Weighted
Average Shares Outstanding |
|
276,059 |
|
|
|
279,142 |
|
|
|
|
|
|
|
|
|
|
L BRANDS,
INC. AND SUBSIDIARIES |
ADJUSTED
FINANCIAL INFORMATION |
(Unaudited) |
(In
thousands except per share amounts) |
|
|
|
|
|
|
|
|
|
Third Quarter |
|
Year-to-Date |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Details of Special Items - Income (Expense) |
|
|
|
|
|
|
|
Victoria's
Secret Asset Impairment |
$ |
(247,532) |
|
$ |
(80,878) |
|
$ |
(247,532) |
$ |
(80,878) |
Henri Bendel
Closure Costs |
- |
|
(20,310) |
|
- |
|
(20,310) |
Special
Items included in Operating Income (Loss) |
(247,532) |
|
(101,188) |
|
(247,532) |
|
(101,188) |
La Senza
Guarantees |
(37,217) |
|
- |
|
(37,217) |
|
- |
Loss on
Extinguishment of Debt |
- |
|
- |
|
(39,564) |
|
- |
Special
Items included in Other Income (Loss) |
(37,217) |
|
- |
|
(76,781) |
|
- |
Tax Effect
of Special Items included in Operating Income (Loss) and Other
Income (Loss) |
27,015 |
|
13,463 |
|
36,547 |
|
13,463 |
Special Items included in Net Income (Loss) |
$ |
(257,734) |
|
$ |
(87,725) |
|
$ |
(287,766) |
|
$ |
(87,725) |
Special
Items included in Earnings (Loss) Per Diluted Share |
$ |
(0.93) |
|
$ |
(0.32) |
|
$ |
(1.04) |
|
$ |
(0.31) |
|
|
|
|
|
|
|
|
Reconciliation of Reported Operating Income (Loss) to
Adjusted Operating Income |
|
|
|
|
|
|
|
Reported
Operating Income (Loss) |
$ |
(151,214) |
|
$ |
54,395 |
|
$ |
176,731 |
|
$ |
437,340 |
Special
Items included in Operating Income (Loss) |
247,532 |
|
101,188 |
|
247,532 |
|
101,188 |
Adjusted
Operating Income |
$ |
96,318 |
|
$ |
155,583 |
|
$ |
424,263 |
|
$ |
538,528 |
|
|
|
|
|
|
|
|
Reconciliation of Reported Net Income (Loss) to Adjusted
Net Income |
|
|
|
|
|
|
|
Reported Net
Income (Loss) |
$ |
(251,992) |
|
$ |
(42,750) |
|
$ |
(174,141) |
|
$ |
103,801 |
Special
Items included in Net Income (Loss) |
257,734 |
|
87,725 |
|
287,766 |
|
87,725 |
Adjusted Net
Income |
$ |
5,742 |
|
$ |
44,975 |
|
$ |
113,625 |
|
$ |
191,526 |
|
|
|
|
|
|
|
|
Reconciliation of Reported Earnings (Loss) Per Diluted
Share to Adjusted |
|
|
|
|
|
|
|
Earnings Per Diluted
Share |
|
|
|
|
|
|
|
Reported
Earnings (Loss) Per Diluted Share |
$ |
(0.91) |
|
$ |
(0.16) |
|
$ |
(0.63) |
|
$ |
0.37 |
Special
Items included in Earnings (Loss) Per Diluted Share |
0.93 |
|
0.32 |
|
1.04 |
|
0.31 |
Adjusted
Earnings Per Diluted Share |
$ |
0.02 |
|
$ |
0.16 |
|
$ |
0.41 |
|
$ |
0.69 |
|
|
|
|
|
|
|
|
See Notes to
Reconciliation of GAAP Financial Measures to Non-GAAP Financial
Measures. |
|
|
|
|
|
|
|
|
|
|
|
|
L BRANDS, INC. AND
SUBSIDIARIESNOTES 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 2019
In the third quarter of 2019, adjusted results exclude the
following:
- A $247.5 million charge ($230.0 million net of tax of $17.5
million), $217.1 million included in buying and occupancy expenses
and $30.5 million included in general, administrative and store
operating expenses, related to the impairment of certain Victoria’s
Secret store and other assets.
- A $37.2 million charge ($27.7 million net of tax of $9.5
million), included in other income (loss), to increase reserves
related to ongoing guarantees for the La Senza business which was
sold in the fourth quarter of 2018.
In the second quarter of 2019, adjusted results exclude the
following:
- A $39.6 million pre-tax loss ($30.0 million net of tax of $9.5
million), included in other income (loss), associated with the
early extinguishment of $764 million in outstanding notes maturing
between 2020 and 2022 through the issuance of $500 million of new
notes maturing in 2029 and the use of $315 million in cash,
lowering total debt by $264 million.
In the first quarter of 2019, there were no adjustments to
results.
Fiscal 2018
In the third quarter of 2018, adjusted results exclude the
following:
- An $80.9 million charge ($72.7 million net of tax of $8.2
million), included in buying and occupancy expenses, related to the
impairment of certain Victoria’s Secret store assets.
- $20.3 million ($15.0 million net of tax of $5.3 million) of
Henri Bendel closure costs, included in buying and occupancy
expenses ($13.8 million) and general, administrative and store
operating expenses ($6.5 million).
In the first and second quarter of 2018, there were no
adjustments to results.
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.
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