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Retail Sector's Valuation Price Multiples: Are the Outliers Justified?

PART:
1 2 3 4 5 6
Part 2
Retail Sector's Valuation Price Multiples: Are the Outliers Justified? PART 2 OF 6

L Brands Is an Outlier in the Apparel Retail Industry

About the company

L Brands (LB) is one of the prominent specialty retailers in the US. It focuses on apparel, personal care, and beauty care products. It sells products mainly through its 2,969 company-owned retail stores in the US as of fiscal 2015. The rest of its revenue comes from franchises and online retail.

Victoria’s Secret and Bath & Body Works are the two major brands under its banner. Other brands like La Senza and Henri Bendel have also been contributing to its performance. Let’s look at its fundamental performance and its performance on Wall Street over the years.

L Brands Is an Outlier in the Apparel Retail Industry

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As you can see in the above chart, L Brands has always had impressive performances. Have L Brands’ performances been so phenomenal that it earned a high multiple compared to its peers? For the answer to this question, we need to dig deep into its performances.

L Brands’ peers

L Brands’ peers are TJX Companies (TJX), Urban Outfitters (URBN), Ross Stores (ROST), and GAP (GPS). They’re all part of the SPDR S&P Retail ETF (XRT). The exposure of all the companies mentioned above in XRT include L Brands at 1.02%, TJX Companies at 0.97%, Urban Outfitters at 1.12%, Ross Stores at 1.02%, and GAP at 0.94%.

In the next part, we’ll look at the price multiple between L Brands and the apparel retail industry.

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