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Why L Brands (LB) Shares Jumped Post July Sales Results

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Shares of L Brands, Inc. rose nearly 2.5% following better-than-expected comparable store sales (comps) for the four weeks ended Jul 30, 2016. Comps increased 2% year over year and also beat analysts’ expectations. Net sales for July improved 2% on a year-over-year basis to $777 million.

Moreover, sales for the 13 week-period ended Jul 30, 2016 jumped 5% to $2,890 billion from the year-ago period. Further, comps for the said period rose 3% year over year.

On the other hand, this specialty retailer recorded net sales of $5,504 billion for the period of 26 weeks ended Jul 30, 2016. The figure increased 4% from the year-ago period. Additionally, comps for the said period were up 3% on a year-over-year basis.

L Brands’ comps remained flat at Victoria’s Secret but increased 6% at Bath & Body Works in the month of July. For the 13 week-period, comps improved 2% and 5% at Victoria’s Secret and Bath & Body Works, respectively. Management now envisions August comps to be approximately flat.

Additionally, the company updated its guidance and expects second-quarter fiscal 2016 adjusted earnings at the high end of its previously issued guidance range of 50−60 cents a share. Earlier, management had pointed out that quarterly earnings might be impacted by foreign currency headwinds, incremental interest expense and pre-opening costs for the flagship Victoria’s secret store. The Zacks Consensus Estimate for the second quarter and fiscal 2016 is currently pegged at 60 cents and $3.71, respectively.

L Brands’ sustained focus on cost containment, inventory management, merchandise, and speed-to-market initiatives has kept it afloat in a soft consumer environment. Despite these positives, the competitive retail landscape and short-term challenges cannot be ignored.

Zacks Rank

Currently, L Brands carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same industry include Christopher & Banks Corporation , sporting a Zacks Rank #1 (Strong Buy), The Children's Place, Inc. (PLCE - Free Report) and American Eagle Outfitters, Inc. (AEO - Free Report) , both carrying a Zacks Rank #2 (Buy).

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