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Strength in the Beauty Business Drives L Brands’ 2Q Top Line

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L Brands beats on 2Q top-line expectations

L Brands (LB) reported financial results for the second quarter of 2018 on August 22. The company’s total sales increased 8.3% YoY (year-over-year) to $2.63 billion, driven by 3% growth in same-store sales, square footage growth, a calendar shift, and the adoption of the new accounting standard for revenue recognition.

Strong results from the company’s Bath & Body Works brand and Victoria’s Secret beauty line were partially offset by weak performances from the Pink brand and Victoria’s Secret lingerie line.

The beauty business saw comps in the high-teens range both in stores and the digital channel. Q2 marked L Brands’ fifth consecutive quarter of positive comps for the beauty business.

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The performance of key brands in 2Q

Victoria’s Secret’s comparable sales were down 1% during Q2 driven by a 5% decline in store comps. Lingerie comps for the brand were down in the low-single digits.

However, Victoria’s Secret’s total sales increased 5% YoY during the quarter to $1.725 billion driven by changes in the revenue recognition accounting standard and a calendar shift. Total digital sales improved by 22% YoY.

Pink comps declined in the mid-single-digit range during the quarter driven by weakness in lingerie as well as loungewear. The brand’s exit from swimwear negatively impacted comps by two percentage points during the quarter.

Bath and Body Works, the company’s second largest brand, once again posted strong results. Same-store sales improved 10%, fueled by store-only comps growth of 7%. Net sales of the brands were up 12% to $964 million. Bath and Body Works also recorded an impressive increase in its operating income. In the next part, we’ll discuss the company’s profitability and margins of its major product lines.

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