L Brands Reports Second Quarter Earnings

— Updates Earnings Guidance —

COLUMBUS, Ohio , Aug. 16, 2017 (GLOBE NEWSWIRE) -- 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
  Second
Quarter
2016
  Year-
to-
Date
2017
  Year-
to-
Date
2016
 
                 
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
Quarter
2017
  Second
Quarter
2016
  Year-
to-
Date
2017
  Year-
to-
Date
2016
 
                 
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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L Brands Inc