Victoria's Secret gives things for free – but it does not work (LB)

• Victoria's parent company, Secret, L Brands, announced Thursday that comparable sales of the lingerie brand had declined in January.
• Victoria's Secret sells items at a greatly reduced price, but consumers do not respond, according to Jefferies.
• L Brands also announced that its first quarter dividend would be equal to half of the last quarter.
• Watch L Brands live.

The Victoria & # 39; s Secret brand is broken, says Jefferies.

The parent company of the lingerie brand, L Brands, announced Thursday that Victoria's Secret's total comparable sales (including stores and live) had decreased by 1% in January, under the influence of the company. effect of an 8% drop in in-store sales only. This figure was lower than the Wall Street consensus, an increase of 1%, according to UBS.

Thursday's report states that "brands are no longer sought after," said Randal Konik, an badyst at Jefferies, long-term bearer of Victoria's Secret and L Brands.

"Keep in mind that the offers remain negative despite very high promotions, which means that the actual demand for the brand is even worse than the reported one, with some consumers purchasing products bought for free or reduced by more than 50 to 75%. "

The big retailer promotions in January included a discount code "buy 2, get 1 free" for bras and sleep, $ 20 gift cards for future purchases after spending over 40 $ (compared to a $ 15 reward card with $ 75 + last January), and a catch-all with a $ 75 Angel card purchase.

Victoria & # 39; s Secret sales accounted for 52% of L Brand's total sales in January. The iconic brand has been under pressure over the past year as she struggled to attract orders and gain market share. Konik noted in March that Aerie of American Eagle Outfitters was stealing market share at Victoria's Secret and its Pink brand. In August, RBC said Victoria's Secret was trading at "a negative value".

But aggressive promotions make matters worse, warns Wall Street. As Victoria's Secret did not attract enough orders to offset its margin loss, the strong promotions likely had the effect of degrading its total revenue and generating an even lower profit. said Jay Sole, UBS badyst, on the eve of the report.

L Brands also announced Thursday that its quarterly dividend would be $ 0.30 per share in the first quarter, compared to $ 0.61 the previous quarter. The reduction in dividends shows that the company is struggling to generate cash, according to Konik.

"We still see a significant risk to cash flow and believe that over time, it may be necessary to reduce the entire dividend," he said.

Konik has an "underperformance" rating and a US $ 21 price target for L Brands that is 22% lower than the stock was trading on Thursday.

L Brands was down 45% in the last 12 months.