In a move to deleverage the company’s balance sheet over
time, last night specialty retailer L Brands (LB 29.45, -5.10, -14.8%)
disclosed plans to reduce its annual ordinary dividend to $1.20 from $2.40 per
share. The company also announced a new leader at the Victoria’s Secret
Lingerie division and reported better than expected third quarter results and
solid comps and raised its full year 2018 adjusted earnings per share outlook.
It appears investors are reacting most harshly to L Brands’ decision to trim the dividend. After a review, the Board of Directors announced plans to reduce the annual ordinary dividend to $1.20 from $2.40 per share, beginning with the quarterly dividend to be paid in March 2019. The approximately $325 mln in cash made available from the dividend reduction will be utilized primarily to contribute to the deleveraging of the company’s balance sheet over time.
The company also announced that current Tory Burch President, John Mehas, has been named CEO of Victoria’s Secret Lingerie, effective early 2019, replacing Jan Singer, who has resigned. Mr. Mehas, an alumnus of Polo Ralph Lauren, Gap, and Bloomingdales, comes into Victoria’s Secret as sales have continued to stagnate.
In the third quarter, L Brands reported a 6.0% increase in net sales to $2.77 bln on EPS of $0.16, both of which beat market expectations. Comparable store sales, including sales from company-owned stores and direct channels, were up 4% in the quarter on a 2% decline out of Victoria’s Secret and a 13% increase out of Bath & Body Works.
Total Victoria’s Secret sales were $1.53 bln, down about 0.7% as declines at Victoria’s Secret offset gains at Victoria’s Secret Direct. Bath & Body Works reported overall sales growth of 17.2% to $956.2 mln. VS & BBW International reported 16.6% growth to $134 mln, and sales designated as Other were up 5.2% to $155.9 mln in the period.
Management also offered that during the quarter, L Brands made decisions which will enable the company to increase its focus on its core businesses and highest growth opportunities. Management feels that these actions, including the closure of the Henri Bendel business and the pursuit of alternatives for La Senza, will strengthen L Brands in the long-term.
As to the guidance, L Brands stated that it expects 2018 fourth quarter EPS to be $1.90-2.10 and thus increased its full year 2018 adjusted EPS outlook to $2.60-2.80 from $2.45-2.70 previously.
LB’s stock gave up the 50-day simple moving average this morning (31.37) on its way to losses of 17.5% at its worst levels. Shares now boast declines of about 51% on the year vs the Retail SPDR’s (XRT) 2.1% dip.
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