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After a Rough June, Shares for Victoria's Secret Operator L Brands Fell More Than 10 Percent

Interestingly, the company chalked up the sales dip to the elimination of the retailer's swimwear and apparel categories.
Photo: Timur Emek/FilmMagic

Photo: Timur Emek/FilmMagic

It's a tumultuous time for retail, and no one is exempt from the ebbs and flows of the apparel market — not even Victoria's Secret, a retailer that's built its entire model on social-media-savvy babes clad in underwear. In the past year, the lingerie giant has experienced its fair share of hiccups, from having to pay $12 million to retail workers subjected to controversial "on-call" shifts to reorganizing its categories, effectively eliminating both swimwear and clothing. But as has been the case for so many retailers confronting their own woes, is it going to get worse before it gets better?

Judging from Victoria's Secret operator L Brands's June 2017 earnings, released on Thursday, it already has. In the five weeks ending July 1, 2017, the company reported a 6 percent dip in net sales to $1.213 billion, as compared to the same period last year, with a 9 percent drop in comparable sales. But most triggering is its drop in shares: seven percentage points for the entire group and 10 for Victoria's Secret, specifically. 

In a release, the Columbus, Ohio-based company chalked this up to Victoria's Secret's exit of swim and apparel, precisely one of the moves it made to cut costs in the first place. This dip shouldn't — and likely doesn't — come as a surprise to the company, though: In its first-quarter earnings report last year, L Brands was aware that these eliminations would hurt the bottom line in the short term. Swim and apparel contributed roughly $525 million in sales in 2015, and that's a big hole to have to fill immediately. So, it won't — but it's going to be a process.

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Now, last we checked in on Victoria's Secret in May of last year, sales were up 2 percent — but profits were down 7 — and the brand was set on cutting down on promotions. Judging by Victoria's Secret's-branded desert bonanza during Coachella and all-out Fashion Show in Paris last November, we certainly haven't noticed the latter, but perhaps that means they're doing it right. 

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