L Brands Reports Second Quarter 2016 Earnings
18 August 2016 - 6:15AM
L Brands, Inc. (NYSE:LB) today reported 2016 second quarter
results.
Second Quarter ResultsEarnings per
share for the second quarter ended July 30, 2016, were $0.87
compared to $0.68 for the quarter ended Aug. 1, 2015. Second
quarter operating income increased 1 percent to $408.2 million
compared to $402.9 million last year, and net income was $252.4
million compared to $202.5 million last year.
The reported results above include certain
significant items as detailed below:
- In 2016:
- A pre-tax gain of $108.3 million ($0.24 per share) related to a
cash distribution from Easton Town Center; and
- A pre-tax charge of $35.8 million ($0.08 per share) related to
the early extinguishment of the company’s July 2017 notes
Excluding the significant items above, adjusted
second quarter earnings per share increased 3% to $0.70 compared to
$0.68 last year, and adjusted net income increased 1% to $204.7
million compared to $202.5 million last year.
The company reported net sales of $2.890 billion
for the second quarter ended July 30, 2016, an increase of 5
percent compared to net sales of $2.765 billion for the quarter
ended Aug. 1, 2015. The company reported a comparable sales
increase of 3 percent for the second quarter ended July 30,
2016.
At the conclusion of this press release is a
reconciliation of reported to adjusted results, including a
description of the significant items.
2016 OutlookThe company stated
that it expects 2016 third quarter earnings per share to be $0.40
to $0.45. It expects to report full-year earnings per share
between $3.79 and $3.94, which includes a net $0.09 per share from
year-to-date significant items as detailed in the attached
reconciliation of reported to adjusted results. Excluding
these items, the company expects to report full-year adjusted
earnings per share between $3.70 and $3.85, versus its previous
guidance of $3.60 to $3.80.
Earnings Call InformationL Brands
will conduct its second quarter earnings call at 9 a.m. Eastern on
Aug. 18. To listen, call 1-866-363-4673 (international
dial-in number: 1-973-200-3978). For an audio replay, call
1-855-859-2056 (conference ID 33156271) (international replay
number: 1-404-537-3406 (conference ID 33156271)) or log onto
www.LB.com. Additional second quarter financial information
is also available at www.LB.com.
ABOUT L BRANDS:L Brands, through
Victoria’s Secret, PINK, Bath & Body Works, La Senza and Henri
Bendel, is an international company. The company operates
3,052 company-owned specialty stores in the United States, Canada,
the United Kingdom and Greater China, and its brands are sold in
more than 700 additional franchised locations worldwide. The
company’s products are also available online at
www.VictoriasSecret.com, www.BathandBodyWorks.com,
www.HenriBendel.com and www.LaSenza.com.
Safe Harbor Statement Under the Private
Securities Litigation Reform Act of 1995We caution that
any forward-looking statements (as such term is defined in the
Private Securities Litigation Reform Act of 1995) contained in this
press release or the second quarter earnings call or made by our
company or our management involve risks and uncertainties and are
subject to change based on various factors, many of which are
beyond our control. Accordingly, our future performance and
financial results may differ materially from those expressed or
implied in any such forward-looking statements. Words such as
“estimate,” “project,” “plan,” “believe,” “expect,” “anticipate,”
“intend,” “planned,” “potential” and any similar expressions may
identify forward-looking statements. Risks associated with the
following factors, among others, in some cases have affected and in
the future could affect our financial performance and actual
results and could cause actual results to differ materially from
those expressed or implied in any forward-looking statements
included in this press release or the second quarter earnings call
or otherwise made by our company or our management:
- general economic conditions, consumer confidence, consumer
spending patterns and market disruptions including severe weather
conditions, natural disasters, health hazards, terrorist
activities, financial crises, political crises or other major
events, or the prospect of these events;
- the seasonality of our business;
- the dependence on mall traffic and the availability of suitable
store locations on appropriate terms;
- our ability to grow through new store openings and existing
store remodels and expansions;
- our ability to successfully expand internationally and related
risks;
- our relationships with independent franchise, license and
wholesale partners;
- our direct channel businesses;
- our ability to protect our reputation and our brand
images;
- our ability to attract customers with marketing, advertising
and promotional programs;
- our ability to protect our trade names, trademarks and
patents;
- the highly competitive nature of the retail industry and the
segments in which we operate;
- consumer acceptance of our products and our ability to keep up
with fashion trends, develop new merchandise and launch new product
lines successfully;
- our ability to source, distribute and sell goods and materials
on a global basis, including risks related to:
- political instability, significant health hazards,
environmental hazards or natural disasters;
- duties, taxes and other charges;
- legal and regulatory matters;
- volatility in currency exchange rates;
- local business practices and political issues;
- potential delays or disruptions in shipping and transportation
and related pricing impacts;
- disruption due to labor disputes; and
- changing expectations regarding product safety due to new
legislation;
- our geographic concentration of supplier and distribution
facilities in central Ohio;
- fluctuations in foreign currency exchange rates;
- stock price volatility;
- our ability to pay dividends and related effects;
- our ability to maintain our credit rating;
- our ability to service or refinance our debt;
- our ability to retain key personnel;
- our ability to attract, develop and retain qualified employees
and manage labor-related costs;
- the ability of our manufacturers to deliver products in a
timely manner, meet quality standards and comply with applicable
laws and regulations;
- fluctuations in product input costs;
- fluctuations in energy costs;
- increases in the costs of mailing, paper and printing;
- claims arising from our self-insurance;
- our ability to implement and maintain information technology
systems and to protect associated data;
- our ability to maintain the security of customer, associate,
supplier or company information;
- our ability to comply with regulatory requirements;
- legal and compliance matters; and
- tax matters.
We are not under any obligation and do not intend
to make publicly available any update or other revisions to any of
the forward-looking statements contained in this press release or
the second quarter earnings call to reflect circumstances existing
after the date of this press release or to reflect the occurrence
of future events even if experience or future events make it clear
that any expected results expressed or implied by those
forward-looking statements will not be realized. Additional
information regarding these and other factors can be found in Item
1A. Risk Factors in our 2015 Annual Report on Form 10-K.
L BRANDSSECOND QUARTER
2016
Comparable Sales Increase (Decrease) (Stores and
Direct): |
|
|
|
|
|
|
Year- |
|
Year- |
|
|
|
Second |
|
Second |
|
to- |
|
to- |
|
Quarter |
Quarter |
Date |
Date |
2016 |
2015 |
2016 |
2015 |
|
|
|
|
|
|
|
|
|
|
|
|
Victoria’s Secret1 |
|
|
2 |
% |
|
|
1 |
% |
|
|
2 |
% |
|
|
2 |
% |
|
Bath & Body
Works1 |
|
|
5 |
% |
|
|
6 |
% |
|
|
6 |
% |
|
|
6 |
% |
|
L
Brands2 |
|
|
3 |
% |
|
|
3 |
% |
|
|
3 |
% |
|
|
3 |
% |
|
|
|
1 –
Results include company-owned stores in the U.S. and Canada and
direct sales. |
2 –
Results include company-owned stores in the U.S., Canada and the
U.K. and direct sales. |
|
|
|
|
|
|
Comparable Sales Increase (Decrease) (Stores
Only): |
|
|
|
|
|
|
Year- |
|
Year- |
|
|
|
Second |
|
Second |
|
to- |
|
to- |
|
Quarter |
Quarter |
Date |
Date |
2016 |
2015 |
2016 |
2015 |
|
|
|
|
|
|
|
|
|
|
|
|
Victoria’s Secret1 |
|
|
1 |
% |
|
|
3 |
% |
|
|
1 |
% |
|
|
4 |
% |
|
Bath & Body
Works1 |
|
|
3 |
% |
|
|
5 |
% |
|
|
4 |
% |
|
|
5 |
% |
|
L
Brands2 |
|
|
1 |
% |
|
|
4 |
% |
|
|
2 |
% |
|
|
4 |
% |
|
|
|
1 –
Results include company-owned stores in the U.S. and Canada. |
2 –
Results include company-owned stores in the U.S., Canada and the
U.K. |
|
Total Sales (Millions): |
|
|
|
|
|
|
|
Year- |
|
Year- |
|
Second |
Second |
to- |
to- |
|
Quarter |
Quarter |
Date |
Date |
|
2016 |
2015 |
2016 |
2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Victoria’s Secret
Stores1 |
$ |
1,469.10 |
|
|
$ |
1,437.50 |
|
|
$ |
2,850.30 |
|
|
$ |
2,783.10 |
|
Victoria’s Secret
Direct |
|
398.3 |
|
|
|
368.9 |
|
|
|
757.9 |
|
|
|
707.2 |
|
Total Victoria’s Secret |
$ |
1,867.40 |
|
|
$ |
1,806.40 |
|
|
$ |
3,608.20 |
|
|
$ |
3,490.30 |
|
Bath & Body
Works1 |
$ |
709.10 |
|
|
$ |
672.00 |
|
|
$ |
1,295.70 |
|
|
$ |
1,226.00 |
|
Bath & Body Works
Direct |
|
92.3 |
|
|
|
76.2 |
|
|
|
165.9 |
|
|
|
135.5 |
|
Total Bath & Body Works |
$ |
801.40 |
|
|
$ |
748.20 |
|
|
$ |
1,461.60 |
|
|
$ |
1,361.50 |
|
VS & BBW
International2 |
$ |
99.70 |
|
|
$ |
88.70 |
|
|
$ |
195.00 |
|
|
$ |
180.20 |
|
Other |
$ |
121.20 |
|
|
$ |
121.90 |
|
|
$ |
238.80 |
|
|
$ |
245.20 |
|
L
Brands |
$ |
2,889.70 |
|
|
$ |
2,765.20 |
|
|
$ |
5,503.60 |
|
|
$ |
5,277.20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 – Results include company-owned stores in the United States
and Canada. |
2 – Results include retail sales from company-owned stores
outside of the United States and Canada, royalties associated with
franchised stores and wholesale sales. |
|
Total Company-Owned Stores: |
|
|
|
|
Stores |
|
|
|
|
|
Stores |
|
|
Operating |
|
|
|
|
Operating |
|
|
at 1/30/16 |
|
|
Opened |
Acquired |
Closed |
at 7/30/16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Victoria's Secret
U.S. |
|
990 |
|
|
7 |
|
- |
|
|
(4 |
) |
993 |
PINK U.S. |
|
128 |
|
|
2 |
|
- |
|
|
- |
|
130 |
Victoria's Secret
Canada |
|
37 |
|
|
- |
|
- |
|
|
- |
|
37 |
PINK Canada |
|
9 |
|
|
- |
|
- |
|
|
- |
|
9 |
Total Victoria’s Secret |
|
1,164 |
|
|
9 |
|
- |
|
|
(4 |
) |
1,169 |
|
|
|
|
|
|
|
|
|
|
|
Bath & Body Works
U.S. |
|
1,574 |
|
|
12 |
|
- |
|
|
(3 |
) |
1,583 |
Bath & Body Works
Canada |
|
98 |
|
|
4 |
|
- |
|
|
- |
|
102 |
Total Bath & Body Works |
|
1,672 |
|
|
16 |
|
|
(3 |
) |
1,685 |
|
|
|
|
|
|
|
|
|
|
|
Victoria’s Secret
U.K. |
|
12 |
|
|
1 |
|
- |
|
|
- |
|
13 |
PINK U.K. |
|
2 |
|
|
1 |
|
- |
|
|
- |
|
3 |
Victoria’s Secret
Beauty and Accessories |
|
- |
|
|
2 |
|
26 |
|
|
- |
|
28 |
Henri Bendel |
|
29 |
|
|
- |
|
- |
|
|
- |
|
29 |
La Senza Canada |
|
126 |
|
|
- |
|
- |
|
|
(1 |
) |
125 |
Total L Brands
Stores |
|
3,005 |
|
|
29 |
|
26 |
|
|
(8 |
) |
3,052 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Noncompany-Owned Stores: |
|
|
|
|
|
Stores |
|
|
|
|
|
|
|
|
Stores |
|
|
|
Operating |
|
|
|
|
|
|
|
|
Operating |
|
|
|
at 1/30/16 |
|
|
Opened |
|
Closed |
|
Transferred |
|
at 7/30/16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Victoria’s Secret
Beauty & Accessories |
|
373 |
|
|
25 |
|
(7 |
) |
|
(26 |
) |
|
365 |
|
|
Victoria’s Secret |
|
16 |
|
|
2 |
|
- |
|
|
- |
|
|
18 |
|
|
PINK |
|
3 |
|
|
1 |
|
- |
|
|
- |
|
|
4 |
|
|
Bath & Body
Works |
|
125 |
|
|
16 |
|
(1 |
) |
|
- |
|
|
140 |
|
|
La Senza |
|
221 |
|
|
1 |
|
(9 |
) |
|
- |
|
|
213 |
|
|
Total |
|
738 |
|
|
45 |
|
(17 |
) |
|
(26 |
) |
|
740 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
L BRANDS, INC. AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF
INCOME |
THIRTEEN WEEKS ENDED JULY 30, 2016 AND AUGUST
1, 2015 |
(Unaudited) |
(In thousands except per share
amounts) |
|
|
|
|
|
|
|
|
|
2016 |
|
|
|
2015 |
|
|
Net Sales |
$ |
2,889,744 |
|
|
$ |
2,765,237 |
|
|
Costs of Goods Sold, Buying and Occupancy |
|
(1,776,840 |
) |
|
|
(1,651,391 |
) |
|
Gross Profit |
|
1,112,904 |
|
|
|
1,113,846 |
|
|
General,
Administrative and Store Operating Expenses |
|
(704,688 |
) |
|
|
(710,920 |
) |
|
Operating Income |
|
408,216 |
|
|
|
402,926 |
|
|
Interest Expense |
|
(101,172 |
) |
|
|
(77,777 |
) |
|
Other Income (Loss) |
|
73,014 |
|
|
|
(1,921 |
) |
|
|
|
|
|
|
|
Income
Before Income Taxes |
|
380,058 |
|
|
|
323,228 |
|
|
Provision for Income Taxes |
|
127,636 |
|
|
|
120,751 |
|
|
|
|
|
|
|
|
Net Income |
$ |
252,422 |
|
|
$ |
202,477 |
|
|
|
|
|
|
|
|
Net Income Per Diluted Share |
$ |
0.87 |
|
|
$ |
0.68 |
|
|
|
|
|
|
|
|
Weighted Average Shares Outstanding |
|
290,986 |
|
|
|
296,913 |
|
|
|
|
|
|
|
|
|
|
|
|
|
L BRANDS, INC. AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF
INCOME |
TWENTY-SIX WEEKS ENDED JULY 30, 2016 AND AUGUST
1, 2015 |
(Unaudited) |
(In thousands except per share
amounts) |
|
|
|
|
|
|
|
|
2016 |
|
|
|
2015 |
|
Net Sales |
$ |
5,503,560 |
|
|
$ |
5,277,176 |
|
Costs of Goods Sold, Buying and Occupancy |
|
(3,347,701 |
) |
|
|
(3,107,372 |
) |
Gross Profit |
|
2,155,859 |
|
|
|
2,169,804 |
|
General,
Administrative and Store Operating Expenses |
|
(1,424,255 |
) |
|
|
(1,395,036 |
) |
Operating Income |
|
731,604 |
|
|
|
774,768 |
|
Interest Expense |
|
(198,501 |
) |
|
|
(157,725 |
) |
Other Income (Loss) |
|
79,934 |
|
|
|
75,774 |
|
|
|
|
|
|
Income
Before Income Taxes |
|
613,037 |
|
|
|
692,817 |
|
Provision for Income Taxes |
|
208,309 |
|
|
|
239,874 |
|
|
|
|
|
|
Net Income |
$ |
404,728 |
|
|
$ |
452,943 |
|
|
|
|
|
|
Net Income Per Diluted Share |
$ |
1.39 |
|
|
$ |
1.52 |
|
|
|
|
|
|
Weighted Average Shares Outstanding |
|
291,882 |
|
|
|
298,028 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
L BRANDS, INC. AND SUBSIDIARIES |
ADJUSTED FINANCIAL INFORMATION |
THIRTEEN WEEKS ENDED JULY 30, 2016 AND AUGUST
1, 2015 |
(Unaudited) |
(In thousands except per share
amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
|
2016 |
|
|
|
2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported |
|
Adjustments |
|
Adjusted |
|
Reported |
|
Net Sales |
$ |
2,889,744 |
|
|
|
|
|
|
$ |
2,765,237 |
|
|
Costs of Goods Sold, Buying & Occupancy |
|
(1,776,840 |
) |
|
|
|
|
|
|
(1,651,391 |
) |
|
Gross Profit |
|
1,112,904 |
|
|
|
|
|
|
|
1,113,846 |
|
|
General,
Administrative and Store Operating Expenses |
|
(704,688 |
) |
|
|
|
|
|
|
(710,920 |
) |
|
Operating Income |
|
408,216 |
|
|
|
|
|
|
|
402,926 |
|
|
Interest Expense |
|
(101,172 |
) |
|
|
|
|
|
|
(77,777 |
) |
|
Other Income (Loss) |
$ |
73,014 |
|
|
$ |
(72,483 |
) |
|
$ |
531 |
|
|
$ |
(1,921 |
) |
|
|
|
|
|
|
|
|
|
|
|
Income
Before Income Taxes |
|
380,058 |
|
|
|
(72,483 |
) |
|
|
307,575 |
|
|
|
323,228 |
|
|
Provision for Income Taxes |
|
127,636 |
|
|
|
(24,724 |
) |
|
|
102,912 |
|
|
|
120,751 |
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
$ |
252,422 |
|
|
$ |
(47,759 |
) |
|
$ |
204,663 |
|
|
$ |
202,477 |
|
|
|
|
|
|
|
|
|
|
|
|
Net Income Per Diluted Share |
$ |
0.87 |
|
|
|
|
$ |
0.70 |
|
|
$ |
0.68 |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Shares Outstanding |
|
290,986 |
|
|
|
|
|
|
|
296,913 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Reconciliation of GAAP Financial Measures
to Non-GAAP Financial Measures. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
L BRANDS, INC. AND SUBSIDIARIES |
ADJUSTED FINANCIAL INFORMATION |
TWENTY-SIX WEEKS ENDED JULY 30, 2016 AND
AUGUST 1, 2015 |
(Unaudited) |
(In thousands except per share
amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016 |
|
|
|
2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported |
|
Adjustments |
|
Adjusted |
|
Reported |
|
Adjustments |
|
Adjusted |
Net
Sales |
$ |
5,503,560 |
|
|
|
|
|
|
$ |
5,277,176 |
|
|
|
|
|
Costs of
Goods Sold, Buying & Occupancy |
|
(3,347,701 |
) |
|
$ |
11,103 |
|
|
$ |
(3,336,598 |
) |
|
|
(3,107,372 |
) |
|
|
|
|
Gross
Profit |
|
2,155,859 |
|
|
|
11,103 |
|
|
|
2,166,962 |
|
|
|
2,169,804 |
|
|
|
|
|
General, Administrative
and Store Operating Expenses |
|
(1,424,255 |
) |
|
|
23,442 |
|
|
|
(1,400,813 |
) |
|
|
(1,395,036 |
) |
|
|
|
|
Operating Income |
|
731,604 |
|
|
|
34,545 |
|
|
|
766,149 |
|
|
|
774,768 |
|
|
|
|
|
Interest
Expense |
|
(198,501 |
) |
|
|
|
|
|
|
(157,725 |
) |
|
|
|
|
Other
Income (Loss) |
|
79,934 |
|
|
|
(72,483 |
) |
|
|
7,451 |
|
|
|
75,774 |
|
|
$ |
(78,057 |
) |
|
$ |
(2,283 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Income Before Income
Taxes |
|
613,037 |
|
|
|
(37,938 |
) |
|
|
575,099 |
|
|
|
692,817 |
|
|
|
(78,057 |
) |
|
|
614,760 |
|
Provision for Income Taxes |
|
208,309 |
|
|
|
(11,549 |
) |
|
|
196,760 |
|
|
|
239,874 |
|
|
|
(9,079 |
) |
|
|
230,795 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income |
$ |
404,728 |
|
|
$ |
(26,389 |
) |
|
$ |
378,339 |
|
|
$ |
452,943 |
|
|
$ |
(68,978 |
) |
|
$ |
383,965 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income Per Diluted Share |
$ |
1.39 |
|
|
|
|
$ |
1.30 |
|
|
$ |
1.52 |
|
|
|
|
$ |
1.29 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
Average Shares Outstanding |
|
291,882 |
|
|
|
|
|
|
|
298,028 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Reconciliation of GAAP Financial Measures
to Non-GAAP Financial Measures. |
|
L BRANDS, INC. AND
SUBSIDIARIESNOTES TO RECONCILIATION OF
GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL
MEASURES(Unaudited)
The “Adjusted Financial Information” provided in
the attached reflects the following non-GAAP financial
measures:
Fiscal 2016
In the second quarter of 2016, adjusted results
exclude the following:
- A $108.3 million pre-tax gain ($70.2 million net of tax of
$38.1 million), included in other income (loss), related to a
$124.4 million cash distribution from Easton Town
Center.
- A $35.8 million pre-tax loss ($22.4 million net of tax of $13.4
million), included in other income (loss), associated with the
early extinguishment of our July 2017 notes.
In the first quarter of 2016, adjusted results
exclude the following:
- Pre-tax charges of $34.5 million ($21.4 million net of tax of
$13.1 million) related to previously announced actions at
Victoria’s Secret, including severance charges, fabric
cancellations and the write-off of catalogue paper.
Fiscal 2015
In the second quarter of 2015, there were no
adjustments to results.
In the first quarter of 2015, adjusted results
exclude the following:
- A $78.1 million pre-tax gain ($69.0 million net of tax of $9.1
million) included in other income (loss), related to the sale of
our remaining interest in the third-party apparel sourcing
business.
The Adjusted Financial Information should not be
construed as an alternative to the reported results determined in
accordance with generally accepted accounting principles.
Further, the Company’s definition of adjusted income information
may differ from similarly titled measures used by other
companies. While it is not possible to predict future
results, management believes the adjusted information is useful for
the assessment of the ongoing operations of the Company. The
Adjusted Financial Information should be read in conjunction with
the Company’s historical financial statements and notes thereto
contained in the Company’s quarterly reports on Form 10-Q and
annual report on Form 10-K.
For further information, please contact:
L Brands:
Investor Relations
Amie Preston
(614) 415-6704
apreston@lb.com
Media Relations
Tammy Roberts Myers
(614) 415-7072
communications@lb.com
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