Things were rough for most nonessential retailers in March and April, thanks to coronavirus-related shutdowns. For L Brands (NYSE:LB) and its Victoria's Secret business, though, they were downright horrible. Total sales at the lingerie brand fell 46% year over year for the fiscal first quarter that ended on May 2, leading it rather deep into the red during the three-month stretch in question.

This of course makes the impending sale, spinoff, or public offering (we still don't know which) of Victoria's Secret an even tougher task. Who would want to own an already struggling lingerie retailer that may have been further damaged by COVID-19? Private-equity firm Sycamore Partners certainly didn't. After it had agreed to buy a little more than half of Victoria's Secret in February, before the novel coronavirus made landfall in the United States, L Brands let Sycamore off the hook earlier this month. This brings L Brands back to square one: trying to figure out how to most effectively shed the increasingly struggling lingerie name.

Doing that was never going to be easy, but it just became much more difficult.

The exterior of a Victoria's Secret store on Bond Street in London

Image source: L Brands

From bad to worse

As a whole, it could have been worse. Last quarter's total revenue of $1.65 billion was down 37% year over year, steering the company to a loss of nearly $300 million. In-store comparable sales slumped 5% year over year. L Brands is unfortunate in that its fiscal quarters don't quite follow the typical calendar. By beginning the recently ended quarter in February, the company suffered nearly two full months of coronavirus devastation within North America, its largest market.

Still, this company is a curious tale of two different retailers on two very different paths.

L Brands' other business -- Bath & Body Works -- did reasonably well last quarter. Its total revenue slipped from $870.7 million to $712.7 million year over year, while direct (online) revenue surged 85% to $288.9 million. Same-store sales in North America managed to grow to the tune of 20% but only for the period when stores were open. Adjusted operating income fell from $154.8 million to only $69.1 million, but again, consider the environment. It was awful for most retailers.

Historical revenue, operating income and same-store sales growth for Bath & Body Works.

Data source: L Brands investor reports. Revenue and operating income in thousands ($USD). Q1 2020 same-store sales based on period when stores were open. Chart by author.

Victoria's Secret, on the other hand, fell apart. Its fiscal first-quarter top line fell from $1.51 billion a year ago to $821.5 million. Direct sales also fell 15% to $307.6 million. Adjusted operating income of $32.7 million for the first quarter of 2019 slipped to a loss of $203.1 million. In-store comps in North America tumbled 15%. Perhaps most alarmingly, the poor quarter not only extended troubling trends but accelerated them. The following graphic tells the tale.

Historical revenue, operating income and same-store sales growth for Victoria's Secret.

Data source: L Brands investor reports. Revenue and operating income in thousands ($USD). Q1 2020 same-store sales based on period when stores were open. Chart by author.

It was the first time Victoria's Secret has suffered a loss during the fiscal first quarter in years and even bigger than the fiscal third-quarter loss that's become something of the norm.

In short, either Victoria's Secret goods are tough to sell online, it needs brick-and-mortar stores to support the direct-sales effort, or consumers continue to lose interest. It could be a combination of all three. Whatever the case, it all further lowers the odds of the lingerie brand digging its way out of trouble.

Looking ahead

Victoria's Secret's rough quarter hasn't derailed L Brands' plans to shed it. The official statement unveiling the latest quarterly results made that clear, as management explained in the very first paragraph that "the company remains committed to establishing Bath & Body Works as a pure-play public company and is taking the necessary steps to prepare the Victoria's Secret Lingerie, Victoria's Secret Beauty and PINK businesses to operate as a separate, stand-alone company."

We still don't know exactly what that means. But we do know it's going to be even tougher than it was before, for reasons beyond last quarter's disastrous results. During the earnings call, Victoria's Secret interim CEO Stuart Burgdoerfer confirmed that the retailer is planning to permanently shutter around 250 of its 1,091 stores this year alone, with more likely to be closed for good next year. Investors cheered the news by bidding the stock up on Thursday and Friday, but the smaller footprint ultimately diminishes the brand's capacity to drive much-needed sales regardless of its future form.

Given the couple billion dollars' worth of lease obligations Victoria's Secret still seems to be saddled with on top of its fiscal trajectory, one can't help but wonder if -- on a net basis -- the brand and its stores are ultimately worth nothing.