L Brands reports surprise profit on demand for soaps, lingerie By Reuters

© Reuters. Products are displayed in L Brands Inc., Bath & Body Works retail store in Manhattan, New York

(Reuters) – L Brands Inc (N:) on Wednesday reported a surprise quarterly profit boosted by strong demand for Bath & Body Works’ sanitizers and soaps, as well as higher online sales of Victoria’s Secret lingerie during coronavirus-led lockdowns.

The pandemic-fuelled temporary store closures, which have pushed many retailers into bankruptcy, led to 850 jobs cuts at L Brand’s home office and permanent closing of some Victoria’s Secret stores, after a stake sale in the unit fell apart.

The company’s direct channel, which includes its online store that remained open throughout the quarter, proved to be a bright spot as customers flocked to shop virtually.

That helped comparable sales for Bath & Body Works surge 123%, while that for Victoria’s Secret rise 28%.

Overall comparable sales rose 63% for L Brands, crushing the average analyst estimate of an 18% fall, according to IBES data from Refinitiv.

“Q2 2020 was much stronger than expected… The key question for management will be whether the company will be able to maintain this strength through holiday,” Bernstein analyst Jamie Merriman said.

With the busy holiday season soon approaching, L Brands said it was testing ideas to spread its holiday merchandise to a broader time period, and to introduce some merchandise into the current quarter.

It also forecast “meaningful expense pressure” due to higher store costs that include payroll and supplies, due to social distancing protocols, wage rate inflation and higher shipping costs.

Excluding one-time items, the company earned 25 cents per share in the quarter ended Aug. 1, compared with the expectation of a 42 cents loss.

Net sales fell about 20% to $2.32 billion, but were above Wall Street estimates of $2.21 billion.

Shares of the Columbus, Ohio-based company were up 4% in extended trading.

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