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Alberto Abaterusso
Alberto Abaterusso
Articles (1919) 

L Brands Trades Higher on Improved Near-Term Outlook

The fashion retailer matches 3rd-quarter earnings forecasts

November 21, 2019 | About:

Shares of L Brands Inc. (NYSE:LB) were up 3.40% at $16.43 in extended trading on Wednesday after the fashion retailer issued adjusted earnings of 2 cents per share for the third quarter. Results were in line with estimates, but down from earnings of 16 cents per share a year ago.

Third-quarter revenue of $2.68 billion, which was down 3.2% year over year, fell $10 million short of expectations.

By segment, L Brands reported the following year-over-year changes in total sales and same-store sales, including retail stores owned by the company in North America and overseas (the U.K. and China) and direct sales.

Victoria’s Secret sales declined 7.6% to $1.41 billion and Bath & Body Works’ sales dropped 11.3% to $1.06 billion. International sales for the two flagship brands, which include Chinese direct sales, wholesale sales and royalties on sales from franchised retail stores, decreased 0.4% to $133.4 million. Further, other sales fell 57% to $67 million.

Victoria’s Secret’s same-store sales slid 500 basis points to a 7% decrease in the third quarter of fiscal 2019 from a 2% decrease in the prior-year quarter. Bath & Body Works’ same-store sales deteriorated 400 basis points to a 9% increase versus a 13% increase. Thus, L Brands’ same-store sales fell 600 basis points to a 2% decrease.

Additionally, the operating income margin  was -5.65% of total net sales in the third quarter compared to 1.96% of total net sales a year ago.

Looking ahead, the company is expecting to post adjusted earnings per diluted share of $2 in the final quarter of fiscal 2019 versus estimates of $1.97 and to close the year with earnings of $2.40 per share versus estimates of $2.39. The previous earnings guidance for the year was $2.30 to $2.60 per share.

While shares rose on the back of the updated guidance on Wednesday, the stock has fallen 38% so far this year to below the 120-day simple moving average line. The closing price of $15.89 on Wednesday is still near the 70- and 50-day lines. L Brands has a market capitalization of $4.39 billion.

The 52-week range is $15.8 to $34.89.

The 14-day relative strength index of 35 suggests the stock is close to oversold levels.

Moreover, the company will pay a quarterly cash dividend of 30 cents per common share on Dec. 6 to its shareholders of record as of Nov. 22, generating a 6.98% forward yield and 9.44% trailing 12-month yield as of Wednesday, Nov. 20.

Disclosure: I have no positions in any securities mentioned.

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About the author:

Alberto Abaterusso
If somebody asks what being a value investor means, Alberto Abaterusso would answer, “The value investor is not just the possessor of the security that represents the company, but he is the owner of that company. As an owner of the company the value investor is actively involved in the dynamics of that company and his first concern is how to have sales progressively growing. Also, the value investor is probably one of the most demanding persons in the world concerning sales.”

Abaterusso is a freelance writer based in The Netherlands. He primarily writes about gold, silver and precious metals mining stocks. His articles have also been widely linked by popular sites, including MarketWatch, Financial Times, 24hGold, Investopedia, Financial.org, CNBS, MSN Money, Zachs, Reuters and others. Alberto holds an MBA from Università degli Studi di Bari (Italy), Aldo Moro.

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