L Brands reported a quarter 2c better than expected but lowered guidance for the fourth quarter from $2.03 to a range of $1.85-$2.00.

The stock sold off hard at the open but has rebounded to up slightly. I expect the stock to drift lower as analysts lower estimates and discuss the negative trends in Victoria’s Secret stores.

Management warned that profit margins would remain under pressure in the fourth quarter and well into the first half of next year. Despite repeated attempts by analysts to get further detail on performance in Victoria’s Secret, management offered little concrete evidence of a turnaround in that business.

Despite an increase in units of bras sold, the company noted that total dollars of bra sales declined from last year due to the much lower average prices of bralettes and sports bras. This is a very difficult trend for the company to overcome.

I expect the business to deteriorate in its critical holiday quarter.

Hold the January 20, 2017 puts on L Brands with a strike price of $68.5 Symbol (LB170120P68.5)