L Brands (LB) Gains Momentum, Hits 52-Week High

Shares of L Brands, Inc. (LB) hit a 52-week high of $84.22 on Dec 11, 2014 before eventually closing at $83.15. The stock has been gaining momentum since it reported strong sales results for November last week. Sales for the month improved on the back of robust performance turned in by Victoria’s Secret continuing strong through the Thanksgiving and Black Friday events and a steady improvement in merchandise margin.

We believe that the company’s operational efficiencies, together with its new and innovative collections, augmented sales. L Brands stressed the importance of the short cycles by effectively maintaining a high inventory turnover which allowed it to be flexible and adaptable to volatile macroeconomic conditions. Moreover, PINK at Victoria's Secret was implemented successfully and in-store product launches at Bath & Body Works, ensured that L Brands emerged as a winner this holiday season.

This Columbus, OH-based retailer witnessed comparable-store sales (comps) increase of 8% for the four weeks ended Nov 29, 2014 due to astounding same-store sales at Bath & Body Works and Victoria’s Secret that escalated 11% and 6%, respectively, for the month. Sales for the four weeks ended Nov 29, 2014 jumped 9% to $1.80 billion.

Further, sales of this specialty retailer of women’s intimate and other apparel, beauty and personal care products, remained strong even through the third quarter fiscal 2014. The company posted net sales of $2,318.9 million, up 6.8% from $2,171.1 million reported in the prior-year quarter, and ahead of the Zacks Consensus Estimate of $2,315 million.

Earnings of $0.44 per share for the third-quarter surpassed the Zacks Consensus Estimate of $0.40 and surged 42% from the prior-year earnings of $0.31, on the back of higher sales.

Additionally, the company’s foray into international markets is likely to provide long-term growth opportunities as these stores continue to perform better than the U.S. stores. Moreover, these are generating increased sales volumes amid a tough promotional environment.

Currently, L Brands carries a Zacks Rank #3 (Hold) given the competitive retail landscape and the aggressive promotional strategies undertaken to gain market share may weigh upon the company’s margins.

Apart from L Brands, Lowe's Companies Inc. (LOW), Build-A-Bear Workshop Inc. (BBW) and Dollar General Corporation (DG) also hit 52-week highs of $67.27, $21.22 and $70.25 respectively, on Dec 11, 2014.

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