- Victoria's Secret's PINK line is peaking as the company sees slower sales growth and smaller market share by other players, a Jefferies analyst found.
- Shares of
- The company still beat Wall Street's expectations, posting an adjusted $2.11 earnings per share on revenue of $4.82 billion.
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Victoria Secret's biggest driver of growth is 'peaking' (LB)
Once it's biggest driver of sales, Victoria's Secret's PINK line is peaking, according to a Jefferies analyst.
Victoria's Secret's PINK line — considered the company's strongest growth engine — is "peaking," a Jefferies analyst said.
Its parent company L Brands' choice to keep giving out promotions is devaluing the brand and raising customers' expectations that they can keep buying cheap products at Victoria's Secret stores, said Jefferies Analyst Randal Konik.
The lingerie chain is "losing pricing power" because it is offering cheaper bra options that "is driving [average revenue per unit] pressure, while training customers to pay less," he said.
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He was also critical of the company's use of promotions for its PINK brand, which does not need as many promotions as Victoria's Secret lesser known and more expensive products, Konik maintained.
Much of this weakness is reflected in L Brands' fourth-quarter earnings released on Wednesday. "In 4Q at VS, store traffic remained challenged, lingerie comps remained weak, merch. margins declined due to incremental promos, and PINK barely posted positive comps," he said.
L Brands' stock took a hit despite the company posting quarterly earnings that topped Wall Street's expectations. The company reported adjusted earnings of $2.11 per share, above analysts' expectations of $2.04 per share, and revenue of $4.82 billion that was in-line with forecasts, according to Bloomberg data.
However, the company said that it expects 2018 full-year earnings to be between $2.95 and $3.25 per share, and first-quarter earnings to be between $0.15 and $0.20 per share, below Wall Street's expectations.
"This forecast reflects the benefitof a lower tax rate due to tax reform legislation and an incremental investment in wages and benefits, principally for hourly associates, of approximately $100 million," the company said in a statement.
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