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L Brands Updates Guidance and Shares Drop 14%

By Daniel Miller - Jan 4, 2018 at 12:12PM

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Management announced December sales and updated fourth-quarter guidance which failed to impress investors.

What happened?

Shares of L Brands (BBWI -5.10%), a retailer known for its Victoria's Secret, PINK, and Bath & Body Works brands, among others, are declining 14% as of 11:00 AM EST after the company announced disappointing December sales and updated its fourth-quarter guidance.

So what

It was a reversal from Tuesday when analysts at Baird Equity Research raised its price target on the retailer, and likely a shock to investors hoping L Brands would produce a solid holiday sales month. L Brands reported net sales of $2.5 billion for the five weeks ended Dec. 30, 2017, which was a modest 3% increase over the prior year. Comparable sales checked in even lower with a 1% gain for the same time period. Management now expects earnings-per-share to check in at about $2.00 for the fourth-quarter, which is at the lower end of its prior guidance of $1.95 per share to $2.10 per share and below analysts' estimates calling for $2.04 per share.

Woman shopping at bath accessories store.

Image source: Getty Images.

Now what

Business has definitely been choppy for L Brands' comparable sales, especially as it exited the swim and apparel categories which had a negative impact of roughly 300 basis points on the company's total comparable store sales. It's still going to be a tough battle in the near-term trying to offset declining mall traffic with its online business, but it might have strong enough brands to make it happen -- and it does have a 4% dividend yield for investors willing to wait on a potential turnaround.

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