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L Brands hikes guidance as stimulus checks fuel demand for lingerie, candles and hand sanitizer

Brian Sozzi
·Editor-at-Large
·2 min read
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A good chunk of stimulus check dollars may be finding their way into the registers at lingerie seller Victoria's Secret and candle, hand sanitizer hawker Bath & Body Works.

Or so that's the vibe from L Brands, the parent company of each brand.

The retailer on Friday materially lifted its first quarter earnings guidance to $0.85 to $1.00 a share from $0.55 to $0.65 previously. L Brands cited "improved sales trends which the company believes are primarily driven by unusual shifts in consumer spending patterns, resulting from government stimulus payments, a relaxation of COVID-19 restrictions and other factors" as the cause of the guidance lift.

It marks the second time in the past five weeks L Brands has lifted its first quarter guidance. On its Feb. 24 earnings release, L Brands had guided to $0.35 to $0.45 a share in first quarter profits.

In this photo made on Wednesday, Feb. 24, 2021, shows the entrance to a Victoria's Secret store at a shopping mall in Pittsburgh. (AP Photo/Keith Srakocic)
In this photo made on Wednesday, Feb. 24, 2021, shows the entrance to a Victoria's Secret store at a shopping mall in Pittsburgh. (AP Photo/Keith Srakocic)

"It's been a busy five weeks since reporting 4Q and introducing the initial 1Q guide, and the frequency of these announcements is extraordinary (and, to be fair, somewhat puzzling)," said BMO Capital Markets retail analyst Simeon Siegel.

Continues Siegel, "With one-third of 1Q remaining and easier COVID compares ahead, surprising as it may be, it’s reasonable to assume still more upside to 1Q, and more importantly meaningful FY upside, making valuation look even cheaper. We’ve never felt so comfortable being so far ahead of consensus, with still meaningful profit opportunity ahead."

L Brands remains Siegel's top pick in the sector.

The guidance lift from L Brands comes as indications rise that consumers are quickly spending their latest round of stimulus checks.

Over the past seven days ending March 19 as more Americans have received their checks, spending on Chase credit cards skyrocketed 23.9%, according to data from J.P. Morgan Chase's research team. That's up sharply from growth rates under 10% from January right on up to the latest round of stimulus payments.

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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