We believe that 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 perform well in addition to generating increased sales volumes.
L Brands 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, setting it apart from its peers.
Further, 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 L Brands’ positive earnings surprise history. In the trailing seven quarters, it has surpassed the Zacks Consensus Estimate by an average of 5%, including 1.7% for the last concluded quarter.
L Brands posted first-quarter fiscal 2015 adjusted earnings of 61 cents a share that came a penny ahead of the Zacks Consensus Estimate and surged 15% from the year-ago quarter’s earnings of 53 cents, on the back of higher sales.
Despite the earnings beat, this specialty retailer of women’s intimate and other apparel provided a subdued outlook for the second quarter and fiscal 2015. Management hinted that foreign currency headwinds are likely to impact the company’s results in fiscal 2015. Moreover, a competitive retail landscape also poses a concern.
Nevertheless, L Brands continues to revamp its business by improving store experience, localizing assortments and enhancing its direct business. We believe that these measures will help the company to generate incremental sales and increase store transactions through a higher conversion rate.
Currently, the stock carries a Zacks Rank #2 (Buy).
Stocks that Warrant a Look
Other well-ranked retail stocks that look promising include American Eagle Outfitters, Inc. AEO, sporting a Zacks Rank #1 (Strong Buy), Boot Barn Holdings Inc. BOOT and Bebe Stores Inc. BEBE, each carrying a Zacks Rank #2.
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