A record-breaking quarter, driven by exceptional results and continued strength at Bath & Body Works, is the reason L Brands Inc. (NYSE:LB) is flirting with record highs in the market. Top and bottom line grew year over year in Q3, helped by improved performance at Victoria's Secret.
Q3 Earnings Beat
The solid performance in Q3 should continue in the busy holiday season. In addition, the company remains focused on containing costs, managing inventory, and optimizing capital expenditures. The company intends to achieve $400 million annual savings as it looks to strengthen its bottom line even further.
L Brand rallied by more than 10% after reporting earnings of $330.6 million or $1.17 a share compared to a net loss of $252 million reported a year ago. Sales climbed 14% to $3.06 billion, above analysts’ forecasts of $2.7 billion.
Victoria Secret Struggles
Sales were mostly driven by a surge in e-commerce operations as sales of personal hygiene products increased by 55%, helping offset a decline in clothing and lingerie sales. Personal hygiene products made up of hand sanitizers, and soaps climbed to $1.7 billion. While the Victoria Secret brand had higher sales in sleepwear and Loungewear, total sales fell 14% to $1.35 billion.
The Victoria Secret brand has been a big letdown in L Brands' portfolio. The brand has been struggling a great deal even before the pandemic struck. A deal to sell the unit for $525 million to private equity firm Sycamore Partners fell through after the equity firm sued, claiming that store closings and failure to pay rent were not part of the deal.
A resilient Bath & Body Works continues to shrug weakness in the Victoria Secret brand. The unit had an impressive third-quarter with sales growing 56% year over year, including 3% at physical location as Victoria Secret posted a 10% decline.
The pandemic has been a blessing in disguise, having allowed the Bath & Body Works segment to sell more soap and hand sanitizers. The big question now is how long L Brands will continue to depend on personal hygiene products for sales as the world moves past the pandemic.