FBR Capital Thinks L Brands’ Stock is Going to Recover

By Carrie Williams

FBR Capital analyst Susan Anderson assigned a Buy rating to L Brands (NYSE: LB) today and set a price target of $58. The company’s shares closed yesterday at $36.06, close to its 52-week high of $77.55.

Anderson commented:

“LB reported August SSS of –4%, versus FBR/consensus estimates of –3.8%/–4.4% and guidance of –LSD/–MSD. Comps were affected by about –2% due to cycling the apparel/swim product exit LY . August’s merch margin remained flat, compared to LY , driven by a positive VS and negative BBW due to more clearance. Inventories per square foot are very clean, with August down –7% YOY . LB guided September comps to –LSD, with a negative impact of –2% from apparel/swim category exits. We estimate LB September SSS to be –2.2%, versus +3.0 LY . We like the improvement in VS comp and merch margin and expect SSS to continue to improve as we cycle the swim/apparel exit and bralette ramp. We believe LB’s solid brands continue to resonate well with consumers and expect more normalized results in 2H once these pressures ease.”

According to TipRanks.com, Anderson is a 1-star analyst with an average return of -0.9% and a 47.9% success rate. Anderson covers the Services sector, focusing on stocks such as Lululemon Athletica Inc, Ascena Retail Group, and Abercrombie Fitch.

Currently, the analyst consensus on L Brands is Moderate Buy and the average price target is $44.78, representing a 24.2% upside.

In a report issued on August 17, Deutsche Bank also maintained a Buy rating on the stock with a $56 price target.

Based on L Brands’ latest earnings report for the quarter ending July 31, the company posted quarterly revenue of $2.76 billion and quarterly net profit of $139 million. In comparison, last year the company earned revenue of $2.89 billion and had a net profit of $252 million.

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L Brands, Inc. engages in the retail business. It is focused on women’s intimate and other apparel, personal care and beauty categories. It operates its business through Victorias Secret and Bath & Body Works International segment. Its brands include Victorias Secret, Bath and Body Works, Pink, La Senza, and Henri Bendel.