L Brands crushes earnings despite the ongoing collapse at Victoria's Secret

L Brands spiked more than 10% late Wednesday after the company posted first-quarter results that topped Wall Street expectations.

The strong results surprised analysts given the ongoing weakness of the company's largest segment, Victoria Secret.

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L Brands showed surprising strength in its Bath & Body Works segment, driving strong first-quarter earnings results despite ongoing weakness at Victoria's Secret.

Overall, L Brands crushed consensus analyst estimates, as compiled by Bloomberg. The company reported net income of $40.3 million, almost triple that of the $14.6 million expected.

Revenue of $2.6 billion was in line with analyst estimates, though virtually flat from the first quarter of 2018. Surprising strength in the Bath & Body Works segment propelled the results as Victoria's Secret continued to struggle. The company's iconic Pink brand has been particularly weak, forcing the closure of dozens of VS stores over the past few years.

Same-store sales at Bath & Body Works were up 7% for the quarter, but were down 7% at Victoria's Secret. Because Victoria's Secret's sales are larger, overall same-store sales were down 3% year-on-year for the quarter.

“It is our view that VS will soon generate losses as PINK sales decline and fixed cost deleverage ensues,” wrote Jeffries equity analyst Randal Konik. “The BBW biz put up a solid quarter with great comps and better margins but we don't see this continuing into perpetuity and would sell LB shares on strength which we view as fleeting.”

Despite the challenges, management feels the situation is salvageable. It sees same-store sales for L Brands recovering to “low single digits” for the remainder of the year. Amid the strong first-quarter results, the company raised the low-end of its 2019 earnings-per-share guidance by $0.10 to between $2.30 and $2.60.

L Brands is down 9% this year.