L Brands (LB) will report third quarter results after the bell and host a call tomorrow morning at 9:00.
L Brands preannounced Q3 results when it reported July sales on August 3. The company said expects to report Q3 EPS at the high end of its $0.40-0.45/share range. Third quarter sales fell 4.7% to $2.76 bln, in-line with estimates. However, same-store sales (comps) for the quarter fell 8%, modestly below estimates but slightly better than -9% in Q1.
July comps fell 7%, at the low end of guidance for a mid-single digit decline. Comps fell 10% at Victoria's Secret and rose 1% at Bath & Body Works. The exit of swim and apparel categories impacted VS comps by 5% and total comps by 4%. The VS results were mostly in-line with estimates and showed sequential improvement while the miss came from the B&BW segment that sells candles and soaps.
The Victoria's Secret segment is investors' primary concern as the company's flagship brand; domestic VS stores accounted for 62% sales last year.
With some of the most important second quarter numbers already out, focus shifts to Q3 and 2017 guidance. In May, L Brands guided for 2017 EPS of $3.10-3.40. Third quarter earnings are expected to fall 14% from $0.42/share last year with comps down in the low single digit range.
Shares of LB are down ~40% year-to-date [vs. an 11% decline for the retail ETF (XRT)] and ~60% since its peak less than two years ago. The market hasn't been kind to retailers that have reported even solid quarters this earnings season. After restructuring last year, the Victoria Secret brand needs to find some traction to appease investors.
LB has a $11.2 billion market cap and trades at ~12x earnings estimates with an enterprise value 6.6x EBITDA.