Target price cuts
On January 10, L Brands (LB) reported sales of $2.48 billion for the five weeks ended January 5, 2019. L Brands’ net sales were lower than the $2.52 billion it reported for the five weeks ended December 30, 2017, which led to a 4.4% drop in the stock price yesterday.
Also, L Brands stock received two target price cuts after the announcement yesterday. Credit Suisse cut its target price for L Brands to $30.00 from $36.00 earlier. Wells Fargo lowered its target price to $45.00 from $50.00.
Analysts’ 12-month average price target for L Brands stock is $34.67, which reflects 28.5% upside to the stock price on January 10. Of the 29 analysts covering the stock, 28% rated it as a “buy,” and another 62% have rated it as a “hold.”
Comps were unchanged for the five-week period that ended on January 5, 2019, on a comparable basis. However, comps grew 3% for the 48 weeks ended January 5, 2019, compared to the 48 weeks ended January 6, 2018.
Bath & Body Works gives robust performance
The performance of L Brands’ Bath & Body Works remains robust. Comps for the five weeks grew 11% for Bath & Body Works. Though Victoria’s Secret still commands a large cut of the US lingerie market, the ongoing body positivity movement and the demand for comfortable lingerie has dented the top-line growth. For the five weeks ended January 5, 2019, comps for Victoria’s Secret fell 6%.
L Brands plans to re-enter certain categories including swimwear, footwear, and eyewear, to boost its sales. It has found a suitable buyer for its loss-making La Senza lingerie brand and discontinued its Henri Bendel brand. It is also developing its beauty business, which consists of fragrances and mists. Sales could benefit from its fast-growing digital operations.
For fiscal 2018, analysts forecast L Brands will report net sales growth of 5.1% YoY to $13.28 billion. However, for 2019, analysts expect sales to increase 1.4% to $13.40 billion on a YoY basis.