(Filed Under wholesale Lingerie News). Combined November store and direct comparable sales increased 2% at Victoria’s Secret and Pink in the U.S. and Canada, perhaps heralding a modest turnaround. Last month the comps were flat. Last November they were down 6%.

The results also indicate a dramatic increase in the company’s direct business, no doubt helped by the recently restored print catalog. By themselves, store sales for the two brands in the two countries dropped 6% for the month; the combined results were obviously dragged into positive territory by a surge in direct sales.

Amie Preston, chief investor relations officer at parent company L Brands, stated the results were “driven by growth in lingerie and beauty, partially offset by a decline in Pink. Early holiday sales performance has been in-line with expectations with a record Cyber Monday. The merchandise margin rate was down significantly to last year, and below expectations, driven by increased promotional activity.”

As is its custom when reporting its monthly comps, L Brands also released a chart showing the changes so far this year in the number of its company-owned stores. And that chart emphasized that, unlike other major retailers facing sales challenges in the past few years, these two brands have not reacted with dramatic store closings.

As of December 1, there were 1,165 Victoria’s Secret and Pink stores in the U.S. and Canada, only five fewer than there were on February 3.

Lately, however, the question of how to manage its overall portfolio of stores has received a lot of attention at L Brands. The company recently announced it is about to close its money-losing Henri Bendel business, including all 23 stores. And it said it “is pursuing all alternatives” for its La Senza lingerie business (which it expects will have an operating loss of $40 million this year). There are currently 130 company-owned and operated La Senza stores in North America and about 188 non-company owned international stores. 12 of the La Senza stores are located in the U.S., with seven having been added here since February 3rd of this year.

But while L Brands is in the midst of evaluating all its next steps, is it also on the verge of massive closures of Victoria’s Secret and Pink stores? Listen to they key executives on the subject.

L Brands chairman and CEO said, in a statement that accompanied the third quarter results, the company is “looking at everything … our marketing, brand positioning, internal talent, real estate portfolio and cost structure.” But he prefaced that by saying, “during the quarter, we made some tough decisions that enable us to increase our focus on our core businesses and highest growth opportunities.”

During the conference call with analysts to discuss the quarter, CFO Stuart Burgdoerfer talked extensively about stores. He began by stating that for the two brands “everything is on the table” including real estate. He continued, “on international real estate, first and foremost we’ve had some important learning from our recent results so as it relates to opening new stores, the number of stores, the size of stores, et cetera, we’ve made, I think, significant adjustments in terms of what we’re doing for company-owned markets for Victoria’s Secret. Meaning smaller stores and a substantial reduction in activity at this time. So that’s the first point I’d want to register.”

He asked: “what can we do, what are our real practical options with respect to existing real estate?” He answered: “some of the lease terms internationally tend to be longer lease terms. Most of the lease terms, for example, in the UK are 15-year leases versus the more typical 10-year leases in the United States or Canada. So we don’t have as much flexibility. But with that said, we’re going to take a hard look at it. We’re taking a hard look at it. We’ll continue that review over the next several months and it’s an important part of the management of the business. But again, I would also reemphasize the first part which is as it relates to further real estate activity, opening new stores and the size and nature of stores that we continue to open, we’d made some important adjustments in China, smaller format stores and a meaningful reduction in CapEx for Victoria’s Secret in the United States, in Canada and the UK with a very substantial reduction.” But does that mean store closings or a slowdown in store openings?

Between February 3 and December 1, In the UK and Ireland, two Victoria’s Secret stores were opened, raising the total to 21. There remained five Pink stores in the UK. During the same period seven Victoria’s Secret stores were opened in China, raising the total to 14. There are also 29 Victoria’s Secret Beauty and Accessories stores in that country. With a total of 69, a net increase of nine international, company-owned locations for the two brands during the period.

In concluding her remarks about the November results at Victoria’s Secret and Pink, Preston reported, “in December we will focus on holiday gifting and newness in fashion. We are also excited for product inspired by the recently aired Victoria’s Secret fashion show including collaboration from Mary Katrantzou.”

Company-wide, L Brands, which also owns Bath & Body Works, reported “net sales of $1.596 billion for the four weeks ended December 1, 2018, compared to net sales of $1.267 billion for the four weeks ended November 25, 2017. Comparable sales increased 9 percent for the four weeks ended December 1, 2018 compared to the four weeks ended December 2, 2017.

The company reported net sales of $9.980 billion for the 43 weeks ended December 1, 2018, compared to net sales of $9.077 billion for the 43 weeks ended November 25, 2017. Comparable sales increased 4 percent for the 43 weeks ended December 1, 2018, compared to the 43 weeks ended December 2, 2017. — NM

A full transcript of the conference call can be found here: https://seekingalpha.com/article/4223649-l-brands-inc-lb-q3-2018-results-earnings-call-transcript?page=1.

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Published 12-07-2018 by Nick Monjo