The Secret Behind L Brands Posting a Profit in Q2

L Brands Inc. (NYSE: LB) released fiscal second-quarter financial results after markets closed Wednesday. The firm said that it had $0.25 in earnings per share (EPS) and $2.32 billion in revenue, compared with consensus estimates that called for a net loss of $0.42 per share and $2.21 billion in revenue. The same period of last year had $0.24 in EPS and $2.9 billion in revenue.

Note that as a result of the COVID-19 pandemic, the company’s stores were closed during periods of time throughout the second quarter. As of the end of the second quarter, most Bath & Body Works and Victoria’s Secret stores in North America have reopened.

So here’s where it gets complicated. The company reported comparable sales of 63% for the quarter, this number includes direct sales (online), and it excludes periods of time where stores were closed for four consecutive days or more. Counting this way, Bath & Body Works saw comparable sales increase 123% and Victoria’s Secret comparable sales increased 28%.

Now excluding direct sales, but still following the four consecutive day closure rule, L Brands had comparable sales growth of 33%. Bath & Body Works comparable sales increased by 87% and Victoria’s Secret comparable sales decreased by 10%.

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In terms of segment sales:

• Victoria’s Secret had net sales of $977.5 million, consisting of in-store sales of $363.6 million and direct sales of $613.9 million.
• Bath & Body Works had net sales of $1.20 billion, with in-store sales of $678.1 million and direct sales of $518.6 million.

The company did not provide guidance for the coming quarter or full year, citing COVID-19 uncertainty. However, analysts are calling for a net loss of $0.15 per share and $2.46 billion in revenue for the fiscal third quarter. Also there are consensus estimates of $0.12 in EPS and $10.81 billion for the fiscal full year.

Shares of L Brands closed Wednesday at $28.47, in a 52-week range of $8.00 to $29.14. The consensus analyst price target is $23.20. Following the announcement, the stock was initially up about 4% at $29.55 in the after-hours session.

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