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L Brands’ February Comps Rise, Share Buyback Plan Announced


L Brands, Inc. LB witnessed an increase in comparable sales (comps) for the third consecutive month as it reported February sales numbers. Comps for the four-week period (ended Mar 3, 2018) rose 3%, after registering an increase of 7% and 1% in January and December, respectively. We note that rate of comps growth has decelerated from the month of January.

Net sales, in the month under review, also surged 11.5% to $853.9 million. While, comps increased 2% at Victoria’s Secret, the same at Bath & Body Works improved 7%.

Victoria’s Secret merchandise margin rate decreased significantly in February primarily due to rise in promotional activities. However, in case of Bath & Body Works, merchandise margin rate was flat in the same time period compared with last year.

Moreover, L Brands announced new share buyback program worth $250 million, which includes $23.1 million remaining under the previous program.

Stock Performance

Ever since the company announced fourth-quarter results on Feb 28, shares of this specialty retailer of women’s intimate and other apparel, beauty and personal care products have declined 15.6%. Moreover, in a month, the stock has declined 14.5% wider than the industry’s decrease of 0.5%. The decrease in stock price can be primarily attributed to soft first-quarter and fiscal 2018 outlook.

Per L Brands, first-quarter comps are anticipated to be in low-single digits. Sales are projected to be nearly 5 points higher than comps. Further, gross margin is expected to decline marginally due to a fall in merchandise margin rate, somewhat offset by lower buying and occupancy expenses. Earnings per share are envisioned in the range of 15-20 cents versus 33 cents in the year-ago quarter.

For fiscal 2018, this Zacks Rank #3 (Hold) company’s Gross margin rate is anticipated to remain flat compared with the prior-year tally. Management projects earnings per share in the band of $2.95-$3.25 compared with $3.20 last year.

Key Picks

Abercrombie & Fitch Co. ANF has a long-term earnings growth rate of 11.5% and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Children's Place, Inc. PLCE pulled off an average positive earnings surprise of 14% in the trailing four quarters. It has a long-term earnings growth rate of 9% and a Zacks Rank #2.

Foot Locker, Inc. FL posted earnings beat in the trailing two quarters.

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