L Brands reported weak December sales figures and cut its prediction for fourth-quarter profits, joining other retailers who had a disappointing holiday season.
Columbus-based L Brands, formerly known as Limited Brands, reported sales for December of $2.1 billion, up from sales of $1.9 billion at the same time the year before.
Comparable-store sales, a key indicator of a retailer’s health, were up 2 percent. Analysts had expected a 3.7 percent rise, according to Retail Metrics.
“Mall traffic was sluggish virtually all season with modest upticks immediately pre- and post-Christmas,” said Ken Perkins, president of Retail Metrics, a research firm.
Overall, heavy discounting cut into profit margins, L Brands officials said.
“The merchandise margin rate was down significantly to last year, and below expectations, driven by incremental promotional activity across all businesses,” said Amie Preston, chief investor relations officer.
As a result of the heavy discounting, L Brands had to lower its fourth quarter earnings estimate to $1.60 per share, down from the retailer’s previous forecast of $1.67 per share and well down from analysts’ expectations of $1.79 per share.
Retailers were faced with a “Faustian choice” this holiday season, Perkins said. “Either jump on the band wagon and discount heavily at the expense of margins,” he said, “or not participate and experience steep revenue and traffic declines.”
L Brands’ chains all posted disappointing comparable-store sales.
Victoria’s Secret saw an increase of 3 percent, driven by good sales in lingerie and the chain’s youth-oriented Pink brand. But analysts had expected a 4.4 percent increase.
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