L Brands (LB) Leaves No Stone Unturned to Woo Investors - Analyst Blog
L Brands, Inc. LB is making all possible efforts to woo investors. This is evident from the company’s shareholder-friendly moves and strategic endeavors to keep itself on the growth trajectory. L Brands’ latest attempt was highlighted by the approval of a $250 million share repurchase program. Prior to this, in February, the company raised its quarterly dividend by 47% to 50 cents per share and also declared a special dividend of $2.00 per share.
These initiatives, which reflect the company’s efforts to persuade investors either to buy or hold the scrip instead of selling it, would not have been possible without its operational efficiencies. L Brands’ sustained focus on cost containment, inventory management, merchandise and speed-to-market initiatives have kept it afloat in a sluggish consumer environment, and is further reflected by the company’s May comparable-store sales (comps) performance. Comps for the month increased 5%, following a 1% decline in April.
L Brands commands a market-leading position in the lingerie, personal care and beauty segments. We believe that the company’s innovation in merchandise and exclusive assortments remains popular among consumers, setting it apart from its peers. Further, the company, with its new and innovative assortments, remains well positioned to capitalize on the same. This is evident from its positive earnings surprise history. In the trailing seven quarters, L Brands has surpassed the Zacks Consensus Estimate by an average of 5%, including 1.7% in the last concluded quarter.
Despite the earnings beat, this specialty retailer of women’s intimate and other apparel provided a subdued outlook for the second quarter and fiscal 2015. Management hinted that foreign currency headwinds are likely to impact the company’s results in the fiscal. Moreover, a competitive retail landscape poses a concern.
Nevertheless, L Brands continues to revamp its business by improving store experience, localizing assortments and enhancing its direct business. We believe that these measures will help the company to generate incremental sales and increase store transactions through a higher conversion rate.
Currently, the stock carries a Zacks Rank #3 (Hold).
Stocks that Warrant a Look
Better-ranked retail stocks that look promising include American Eagle Outfitters, Inc. AEO, Boot Barn Holdings Inc. BOOT, both sporting a Zacks Rank #1 (Strong Buy), and Bebe Stores Inc. BEBE, carrying a Zacks Rank #2 (Buy).
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