Why is the stock falling?
On January 10, L Brands (LB) stock fell 8.2% as of 9:58 AM EST following the announcement of its sales data for the five weeks ending January 5. The holiday season is crucial for retailers. Retailers earn most of their yearly revenues during the holiday season.
For the five weeks ending January 5, L Brands’ net sales were $2.48 billion—short of $2.52 billion reported for the five weeks ending December 30, 2017.
The comps (comparable store sales) remained unchanged for the five-week period. Victoria’s Secret’s comps fell 6%, while Bath & Body Works’ comps grew 11%.
According to L Brands, the comps grew 3% for the 48 weeks ending January 5, 2019—compared to the 48 weeks ending January 6, 2018.
Weakness in L Brands’ flagship Victoria’s Secret and Pink lingerie businesses concerned investors and analysts. Although L Brands still commands a large share of the US lingerie market, an increase in the body positivity movement and the demand for comfortable lingerie impacted its sales growth. Less traffic at malls added to the troubles.
Given the difficulties, L Brands stock fell 57.4% in 2018. As of January 9, the stock has risen ~10%. So far in January, we’ve already seen four target price cuts for L Brands. We can expect some target price and rating changes for L Brands on January 10. Currently, analysts’ 12-month average target price for L Brands stock is $34.93, which reflects 23.7% upside to the stock price on January 9. Among the 29 analysts covering the stock, 62% recommended a “hold,” while 28% recommended a “buy.”
L Brands expects its fiscal 2018 adjusted EPS (exclusive of expected pre-tax charges, mainly related to the sale of La Senza) to come in at the higher end of the earlier guided range of $1.90–$2.10.