Victoria’s Secret parent company L Brands, Inc. (NYSE:$LB) struggled today. As of 12:42 p.m. EDT, LB stock was down 9.2%. It all started after the retailer reported disappointing guidance in its Q2 earnings report.
Even though L Brands’ results surpassed expectations, it was the company’s weak guidance that sent the stock heading to six-year lows.
What’s Been Happening?
According to L Brands management, overall comparable sales dropped 8%, and at Victoria’s Secret, comps fell 14%. These were both below the company’s guidance.
Overall revenue dropped 4.6% to $2.76 billion, which met expectations. In regards to the bottom line, adjusted EPS fell from $0.70 to $0.48, which surpassed the consensus of $0.44.
Because consumers are starting to visit brick-and-mortar retail stores less and less, the demand for Victoria’s Secret products seems to be declining. Additionally, there is a tremendous amount of competition coming from chains like American Eagle Outfitters’ (NYSE:$AEO) Aerie.
What Does the Future Look Like?
Taking into consideration the weak comparable-sales results, L Brands lowered its 2017 full-year EPS guidance from a range of $3.10- $3.40 down to $3.00-$3.20. Additionally, L Brands called for quarterly earnings of $0.25 to $0.30 per share.
The takeaway? Right now, it doesn’t seem like there will be a turnaround happening anytime soon. Even though shares might look cheap and attractive, I would avoid this stock if you’re a retail investor until comps and earnings stabilize.
Featured Image: depositphotos/AntonioGravante
