Shares of L Brands, Inc. (LB) hit a 52-week high of $93.32 last Friday, before closing at $92.96. The upsurge in the stock price was driven by the company’s strong comparable-store sales (comps) performance for the four-week period ended Jan 31, 2015, an upbeat outlook and shareholder-friendly moves, including a dividend hike and a new buyback program.
As announced on Feb 5, January comps of this specialty retailer of women’s intimate and other apparel, beauty and personal care products, climbed 7%, faring better than analysts’ expectations. Net sales for the month increased 7% to $783.1 million from $731.2 million in the prior-year period. We believe that the company’s operational efficiencies, together with its new and innovative collections, augmented sales.
Retailers benefited during the month under review from increasing consumer confidence and improving job prospects. Retailers such as Zumiez, Inc. (ZUMZ) and The Cato Corp. (CATO) saw their comps rising 12.3% and 14%, respectively, during the month.
L Brands, which competes with Hanesbrands Inc. (HBI), saw its comps for January increasing 4% at its Victoria’s Secret Stores & Victoria’s Secret Beauty, and 16% at Bath & Body Works & The White Barn Candle Co. However, sales declined 4% at Victoria’s Secret Direct.
For fourth-quarter fiscal 2014, net sales increased 7% to $4,069 million from $3,818 million in the year-ago period, while comps grew 6%. Comps advanced 4% at its Victoria’s Secret Stores & Victoria’s Secret Beauty, and 8% at Bath & Body Works & The White Barn Candle Co. However, sales declined 2% at Victoria’s Secret Direct.
Impressive sales results prompted management to raise its fourth quarter earnings guidance. L Brands now projects earnings between $1.78 and $1.80 per share, up from $1.61–$1.71 forecasted earlier. The current Zacks Consensus Estimate for the quarter is pegged at $1.83.
L Brands, in order to enhance shareholders’ returns, raised its quarterly dividend by 47% to 50 cents a share and also declared a special dividend of $2.00 per share. The dividends are payable on Mar 6 to shareholders of record as of Feb 20.
In addition, the company’s Board of Directors authorized a new share buyback program of $250 million, including $91 million under the earlier announced authorization. In 2014, the company bought back $84 million worth of shares.
L Brands, which currently carries a Zacks Rank #2 (Buy), operates about 2,969 company-owned stores. It commands a market-leading position in the lingerie, personal care and beauty segments. We believe that the company’s innovation in merchandise and exclusive assortments remains popular among consumers and sets it apart from its peers. L Brands, with its operational efficiencies as well as new and innovative assortments, remains well positioned to capitalize.
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