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L Brands (LB) Stock Dips on Soft December Comps & View Cut

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Shares of L Brands, Inc. declined roughly 8% on Jan 5, 2016. The move came after this specialty retailer of women’s intimate and other apparel, beauty and personal care products reported soft comparable-store sales (comps) for Dec 2016 and trimmed its fourth-quarter fiscal 2016 earnings projection.

Coming to numbers, L Brands comps for the five-week period ended Dec 31, 2016, edged down 1% after increasing 4%, 1%, 3% and 2% in November, October, September and August, respectively. However, net sales for December rose 1% to $2.438 billion.

L Brands’ comps declined 4% at Victoria’s Secret, however increased 3% at Bath & Body Works. On the other hand, for the 48-week period ended Dec 31, 2016, net sales grew 4% to $11.769 from $11.343 billion in the prior-year period. Comps rose 2% over the same period.  

The company stated that merchandise margin rate fell considerably in December, in comparison to 2015, primarily due to flaring promotional expenses as well as a decline in the beauty category. As a result, the company is repositioning its beauty category.

This Columbus, OH-based company now expects Jan 2017 comps to be flat. The company has also lowered its profit outlook for fourth-quarter 2016. The company projects earnings per share to be at the lower end of its guidance range of $1.85–$2.00. The competitive retail landscape and short-term challenges, such as foreign currency headwinds, are likely to weigh upon the company’s performance.

The company’s shares have declined more than 35.7% in the past one year, underperforming the Zacks categorized Retail-Apparel/Shoe industry, which has decreased 11.1%.

Apart from L Brands, Costco Wholesale Corporation (COST - Free Report) , Zumiez Inc. (ZUMZ - Free Report) and Macy's, Inc. (M - Free Report) came out with their comps results. Comps of both Costco and Zumiez increased 3% and 3.4% for December, respectively. However, Macy’s comps, on an owned plus licensed basis, decreased 2.1% during the combined period of November and December; while on an owned basis, comparable sales fell 2.7%.

L Brands currently has a Zacks Rank #3 (Hold).

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