Bear of the Day: L Brands (LB)

Founded in 1963 and headquartered in Columbus, Ohio, L Brands (LB) is a specialty retailer of women's intimate and other apparel, personal care, home fragrance and beauty products. They own Victoria’s Secret, PINK, Bath & Body Works, La Senza and Henri Bendel brands.

The company operates more than 3,000 owned specialty stores in the US, Canada, the UK and China, and its brands are sold in more than 800 additional franchised locations worldwide. Their products are also available online.

Weak Guidance Reflects Rising Challenges

The company posted quarterly earnings of 17 cents per share beating the Zacks Consensus Estimate of 15 cents. However, the earnings were down 48.5% year over year. Revenues were in-line with our estimate.

The management cut their FY 2018 guidance. They now expect earnings per share in the range of $2.70 to $3.00 from $2.95 to $3.25 previously.

Shares plunged about 7% in the after-hours trading and are now down about 37% this year even though they have rebounded a bit in the last couple days after better-than-expected May sales data.

Falling Estimates

Analysts have slashed their estimates for the company after weak guidance.  Zacks Consensus Estimates for the current and next fiscal year have fallen to $2.82 per share and $2.94 per share from $3.11 and $3.27 respectively, before the report.

L Brands, Inc. Price, Consensus and EPS Surprise

L Brands, Inc. Price, Consensus and EPS Surprise | L Brands, Inc. Quote

The Bottom Line

In addition to disappointing mall traffic, this retailer has been struggling with increased competition, and changing consumer preferences. With tightening labor markets, wage pressure has also started hurting retailers.

It would be better for investors to stay away from this stock for the time being.

 

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