Things are going from bad to worse at Victoria's Secret
April sales declined for both Victoria's Secret and PINK brands.
This marks the second month of declining sales at PINK, which is worrying because the brand accounts for 40% of Victoria's Secret segment sales.
Victoria's Secret's PINK, which had become one of parent company L Brands' only areas of growth, is struggling.
April marked the second straight month of declining sales. Before the two-month skid, sales had never fallen. And given the flat sales at Bath & Body Works, Jefferies analyst Randal Konik expects only more bad news to come for L Brands.
"It all means share losses are mounting and promos are being used to drive sales which are still weak," Konik wrote in a note to clients. He lowered his 12-month price target for L Brands down to $23 from $30 and recommended clients keep selling shares.
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The negative trend at PINK was especially worrying as the more than $3 billion brand accounts for 40% of Victoria's Secret segment sales. Konik blames L Brands' other store, Aerie, for stealing market share. He also notes that same-store-sales at PINK declined despite promotions, which means the failures at Victoria's Secret are now spreading to its sister store.
Unfortunately for L Brands, competition is only starting to heat up as Venture Capitalists target opportunities in the lingerie market. In the event that L Brands' declines accelerate, Konik wrote free cash flow may "wane enough to put the dividend in question."
L Brands said in a press release Thursday that it expects to report first-quarter earnings at the lower end of its $0.15-$0.20 per share guidance, sending shares tumbling by more than 7%.
L Brands is down nearly 47% this year.
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