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L Brands Stock Has Had a Disappointing Run in 2018

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Dec. 20 2018, Updated 11:30 a.m. ET

Lingerie business in trouble

Intimate apparel retailer L Brands has had a tough year. Its stock has shed 51.8% of its value as of December 18 and is currently trading at $29.01. The company’s flagship Victoria’s Secret and PINK lingerie businesses have been negatively affected by changes in consumer preferences.

Meanwhile, the stock price of Abercrombie & Fitch (ANF) has risen 8.1%. The stock prices of the Gap (GPS), American Eagle Outfitters (AEO), and Urban Outfitters (URBN) have fallen 25.0%, 2.0%, and 3.8%, respectively.

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A surge in the body positivity movement and the demand for more comfortable lingerie have put pressure on the brand’s top line growth. Victoria’s Secret was once considered the ultimate destination for lingerie shopping. The brand’s falling popularity can be gauged by the fact that the Victoria’s Secret Fashion Show, which aired on ABC on December 2, attracted just ~3.3 million viewers—a far cry from ~9.3 million viewers in 2014.

Millennials are a comfort-conscious demographic, which explains the strengthening sales of bralettes. The success of American Eagle Outfitters’ Aerie brand reflects these changing trends. Aerie offers a wide range of sizes, and it has hired plus-size models. These moves have been a hit with the masses. Also, Aerie’s strategy of not retouching its images has worked wonders. The brand is expected to top $1 billion in revenue in the near term.

What lies ahead for L Brands?

L Brands has been streamlining its operations. It has discontinued the Henri Bendel business and has found a buyer for its loss-making La Senza lingerie brand. L Brands is looking to re-enter certain categories, including swimwear, footwear, and eyewear, to boost sales. The company’s top line will likely benefit from momentum in its digital business. L Brands is also developing its beauty business, which consists predominantly of fragrances and mists.

Recently, L Brands slashed its dividend in half. The company stated that it would utilize the $325 million in savings to reduce its debt.

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