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.
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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