L Brands (LB 4.83%) says Congress has unleashed a wave of consumer spending by opening up the spigot of stimulus checks. The third installment, totaling nearly $2 trillion, alongside an economy that's reopening, is allowing it to raise its earnings guidance for the first quarter.
The owner of Victoria's Secret and Bath & Body Works said it now expects to earn $0.85 to $1 per share for the period, well above the $0.55 to $0.65 per share it previously guided toward.
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Mall-based retailers are still facing difficult times as consumer shopping habits have been significantly altered by the global pandemic. While shopping malls were already experiencing dwindling foot traffic, the coronavirus outbreak shut them down completely and consumers were forced to turn almost exclusively to online retailers. That stores were eventually allowed to reopen was not enough -- retailers continue to shutter stores.
In February, L Brands said it would close an additional 30 to 50 Victoria Secret stores after closing 250 of them in 2020. It's also still trying to unload the lingerie chain, either by spinning it off into a stand-alone business or selling it to someone. A deal with private equity firm Sycamore Partners fell through last year after the pandemic began.
While it's up for debate whether the economy actually needs stimulating or just for governments to allow businesses to operate normally again, it's clear the massive influx of billions of dollars into consumer bank accounts will alter spending patterns once more.
Yet even L Brands realizes the guidance increase is likely a one-off event as it points out, "the environment remains uncertain, and there is no assurance that these improved trends will continue."
