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Will L Brands' Revival Plans Help to Keep the Stock Afloat?

Zacks Equity Research

L Brands, Inc. LB is leaving no stone unturned to get back on track. In this regard, the company’s sustained focus on cost containment, inventory management, merchandise and speed-to-market initiatives bode well. Furthermore, the company’s focus on tapping international markets is likely to provide long-term growth opportunities and generate increased sales volumes. Management is committed to improve Victoria’s Secret’s performance in North America.

Buoyed by such well-chalked efforts, this specialty retailer of women’s intimate and other apparel, beauty and personal care products, home fragrance products and accessories retained its positive earnings surprise history in the first quarter of fiscal 2019 as well. We note that impressive performance at Bath & Body Works brand aided the quarterly results. In fact, this brand has been touted as the knight in shining armor. During the quarter, Bath & Body Works sales improved 15% to $870.7 million, with 13% rise in comparable sales and 7% in comparable store sales. Sales were fueled by robust performance in the three key categories — body care, home fragrance, and soaps & sanitizers.

Per sources, the brand has also impressed customers by bringing in new products to the shelves such as bath bombs and face masks, among others. With growing popularity of organic skincare among women mostly, the company opened 14 Bath & Body Works stores during the quarter. Going ahead, management expects the positive momentum to continue and aid the company’s top line.

That said, there’s more to the story as L Brands’ fate depends on the recovery of its largest brand, Victoria’s Secret. The company focuses on improving Victoria’s Secret’s performance by staying customer focused, enriching assortments, and improving store and online experiences.

These apart, the relaunch of swimwear category have given investors a measure of comfort. Also, the CEO of Victoria Secret’s lingerie, John Mehas, has revealed plans of revamping marketing and pricing strategies along with remodeling stores.  In a bid to focus on its core brands, L Brands have off-loaded La Senza, its luxury lingerie brand, and announced plans to close operations at luxury fashion accessories store, Henri Bendel.

We note that the stock has lost 6.4% in the past six months compared with the industry’s decline of 12.9%. Hence, this Zacks Rank #2 (Buy) company have certainly showed modest signs of progress. Additionally, management lifted the lower end of fiscal 2019 earnings view range. It now envisions fiscal 2019 earnings of $2.30-$2.60 per share compared with $2.20-$2.60 previously anticipated.


 

All said, L Brands is expected to regain its lost glory with these measures.

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