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Shares of L Brands Drop 10% After Sales Data Fails to Impress

Daniel Miller, The Motley Fool

What happened

Shares of L Brands (NYSE: LB), a women's personal care and beauty retailer with brands Victoria's Secret, Pink, and Bath & Body works, among others, are down 10% as of 11:15 a.m. EDT Thursday, after its sales pace slowed in June.

So what

L Brands announced that net sales increased 6% to $1.282 billion for the five weeks ended July 7, 2018 over the prior year period. The 6% rise was a slow down from May's 10% increase. Comparable store sales for the five weeks ended July 7, 2018 increased 3% compared to the prior year. Again, despite the year-over-year gain, the stock's sell-off likely stems from the slowing pace, as May's comparable store sales jumped 5%, compared to the prior year.

A rack of lingerie in a store aisle.

Image source: Getty Images.

Now what

It's been an extremely tough year for L Brands, which has shed 45% of its value year to date. Despite its well-known brands, the company is struggling to revive its gross margins, operating margins, and net income margins, which have slowly declined over the past five years. It could force the company to increase advertising to improve store and e-commerce results, which would increase costs. It's even caused some investors to question if its dividend is sustainable if these conditions continue. With those factors as context, it's easier to understand why a slowing sales pace, even only from May to June, could cause some investors to sell on Thursday.

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Daniel Miller has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.