L Brands, Inc. (LB) has sustained its focus on cost containment, inventory management, merchandise, and speed-to-market initiatives. It is this focus that we believe has helped it to stay afloat in a sluggish consumer environment. The company’s foray into international markets is likely to bring long-term growth opportunities as overseas stores continue to perform better and generate increased sales volumes.
L Brands 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 have made it a popular name among consumers and set it apart from its peers. The company with its operational efficiencies as well as innovative assortments remains well positioned to capitalize on the same. This is evident from the company’s sales performance so far in the year.
From April to September, L Brands has consistently registered comparable-store sales growth. Within this period, comps growth touched a low of 2% and hit a high of 8%, thereby recording average growth of approximately 5%. Comparable-store sale increased 8% in April, 3% in May, 2% in June, 6% in July, 5% in August and 6% in September.
Given the current macroeconomic environment, monthly sales data for L Brands is also encouraging, reflecting steady growth. The company, within the span of April to September, registered sales growth in the range of 4–9%, reflecting average growth of approximately 7.7%. The company registered sales growth of 9% in April, 4% in May, 7% in June, 8% in July and 9% in both August and September.
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.
L Brands currently carries a Zacks Rank #2 (Buy).
Other Favorably Ranked Stocks
Other stocks worth considering in the retail sector include Citi Trends, Inc. (CTRN) and DSW Inc. (DSW) sporting a Zacks Rank #1 (Strong Buy), and Foot Locker, Inc. (FL) with a Zacks Rank #2.
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