Victoria’s Secret had trouble selling merchandise in the month of June, even when it was at a discount.
Same-store sales at the retail chain were down 1% for the month, with increases in the beauty segment offset by declines in lingerie and the Pink brand.
“Semiannual sale had a soft start with negative traffic level,” said Amie Preston, chief investor relations officer for L Brands Inc. LB, -12.05% on the pre-recorded monthly sales call, according to a FactSet transcript. Victoria’s Secret is part of the L Brands portfolio.
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“In response, we extended the sale time period versus last year by about two weeks and reduced pricing to drive traffic and clear inventory, which resulted in merchandise margin rates to [be] down significantly,” the transcript said.
L Brands shares sank 12% in Thursday trading after the June sales report.
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According to a Cowen report, June traffic was down 1.1% year-over-year, which was an improvement on May (down 3.5%) and April (down 7.3%).
Victoria’s Secret has had sales challenges over recent quarters, as customers shift their preference to less expensive bralettes, which don’t have padding, as opposed to the higher-priced ‘constructed’ bras, like the Very Sexy line that the brand is known for.
Victoria’s Secret has faced competition from brands like American Eagle Outfitters Inc.’s AEO, -3.65% Aerie brand in the bralette category. And Amazon.com Inc. AMZN, +2.37% which has a growing roster of private labels, is selling low-cost bras.
The company’s exit from the swim category has also been a challenge.
The Pink business, which targets a younger, college-aged consumer had been a bright spot, but seems to be faltering now as well.
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L Brands reported net sales of $1.28 billion for the five weeks ending July 7, 2018 up from $1.21 billion for the five weeks ending July 1, 2017.
Same-store sales at Bath & Body Works were up 10% driven by that brand’s semiannual sale, Preston said.
L Brands shares are down more than 46% for the year so far, while the S&P 500 index SPX, +0.87% is up 4.7% for the period.