L Brands to cut down weight to improve profits

L Brands (LB) announced its plans to close all 23 of its Henri Bendel stores, along with the Henri Bendel website, in January 2019. The division comprises only a small portion of total revenues and has been experiencing slow sales for a while, prompting the company to take this decision in order to focus on brands that are bigger and have higher growth potential, like Victoria’s Secret.

The Henri Bendel brand, founded in 1895, was acquired by L Brands in 1985, which then oversaw its expansion into several states. L Brands expects Henri Bendel to deliver revenues of around $85 million and an operating loss, excluding closing costs, of $45 million in 2018. The company is currently estimating the costs of closure for the division.

For its most recent quarter, L Brands met market estimates on both revenue and earnings, with the topline increasing 8% year-over-year. However, earnings dropped 29% due to higher costs and the company lowered its guidance for the full year of 2018.

Tough competition in the retail segment has been affecting L Brands, which has been seeing weakness in particular in its PINK brand. The stock is down over 54% so far this year. Looking at the past one month, the stock is down 16%.

Meanwhile, based on a report by Reuters, US retail sales posted the smallest gain in six months in August as clothing and automobile purchases saw a drop. Retail sales were up 0.1% as opposed to an estimate of a 0.4% increase. Compared to last year, August retail sales rose 6.6%. Sales at clothing stores saw a 1.7% drop.

L Brands stock dips on weak profit outlook