Shares of L Brands, Inc. LB declined roughly 6% during the after-market trading session on Oct 31. The move came after this specialty retailer of women’s intimate and other apparel, beauty and personal care products provided soft comparable-store sales forecast for October and trimmed its third-quarter fiscal 2016 earnings projection.
This Columbus, OH-based company now expects October comparable-store sales to inch up 1%. However, that is below analysts’ expectations and lower than 3% growth registered in the month of September. Further, management now envisions a 2% decline in comparable-store sales at Victoria’s Secret but an increase of 6% at Bath & Body Works. L Brands had earlier projected comparable-store sales to be approximately flat year over year in the third quarter.
Apart from lower-than-expected October comparable-store sales forecast, L Brands now expects third-quarter earnings to be 40 cents a share, reflecting a year-over-year decline of approximately 27% from 55 cents delivered in the year-ago period. Management had previously projected earnings in the band of 40–45 cents a share.
The Zacks Consensus Estimate for the third quarter is currently pegged at 45 cents, which is likely to witness a downward revision in the coming days, following the company’s trimmed guidance.
L Brands’ sustained focus on cost containment, inventory management, merchandise and speed-to-market initiatives has kept it afloat in a soft consumer environment. However, the competitive retail landscape and short-term challenges such as foreign currency headwinds are likely to weigh upon the company’s performance.
L Brands, which carries a Zacks Rank #3 (Hold), is slated to release its third-quarter fiscal 2016 results on Nov 16.
Stocks to Consider
Investors interested in the retail space may consider some better-ranked stocks such as American Eagle Outfitters, Inc. AEO, DSW Inc. DSW and Boot Barn Holdings, Inc. BOOT, all carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
American Eagle Outfitters delivered an average positive earnings surprise of 9.3% over the trailing four quarters and has a long-term earnings growth rate of 11.8%.
DSW delivered an average positive earnings surprise of 24% over the trailing four quarters and has a long-term earnings growth rate of 8.3%.
Boot Barn Holdings has a long-term earnings growth rate of 14.5%.
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