L Brands, Inc.’s (LB) sustained focus on cost containment, inventory management, merchandise and speed-to-market initiatives have kept it afloat in a sluggish consumer environment. The company’s foray into international markets is likely to bring long-term growth opportunities as these stores continue to give stellar performances and are generating increased sales volumes.
The company commands a market leading position in the lingerie, personal care and beauty segments. We believe that the company’s innovations in merchandise and exclusive assortments make it popular among consumers and set it apart from its peers. The company with its operational efficiencies as well as new and innovative assortments remains well positioned to capitalize on the same. This is evident from the company’s positive earnings surprise history. In the trailing 13 quarters, the company has surpassed the Zacks Consensus Estimate by an average of 3.7%, including 1.6% for the last concluded quarter.
L Brands posted second-quarter fiscal 2014 earnings of 63 cents a share that came a penny ahead of the Zacks Consensus Estimate, and rose 3.3% from the prior-year quarter earnings of 61 cents on the back of higher sales. This prompted management to raise its full-year earnings projection.
Management now forecasts earnings in the range of $3.03 to $3.18 per share for fiscal 2014, up from $3.00 to $3.15 projected earlier. For the third quarter, management has guided 26 cents to 31 cents a share in earnings. The current Zacks Consensus Estimate for the third quarter and fiscal 2014 are 31 cents and $3.19, respectively.
L Brands continues to revamp its business by improving store experience, localizing assortments and enhancing its direct business. We believe these measures will help it to generate incremental sales and increase store transactions through a higher conversion rate.
However, the competitive retail landscape and aggressive promotional strategy to gain market share may weigh upon margins. Moreover, the company’s customers remain sensitive to macroeconomic factors including interest rate hikes, increase in fuel and energy costs, credit availability, unemployment levels and high household debt levels, which may negatively impact their discretionary spending, and in turn the company’s growth and profitability.
The pros and cons embedded in the stock are well reflected in its Zacks Rank #3 (Hold).
Favorably Ranked Stocks
Stocks worth considering in the retail sector include Citi Trends, Inc. (CTRN) and Lithia Motors Inc. (LAD) both sporting a Zacks Rank #1 (Strong Buy), as well as Foot Locker, Inc. (FL) carrying a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment