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L Brands (LB) Dismal Comparable Sales Run Persists in August

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L Brands, Inc. continues to disappoint investors with dismal comparable sales performance for the ninth straight month. This specialty retailer of women’s intimate and other apparel, beauty and personal care products reported 4% drop in comps for the four-week ended Aug 26, 2017 following declines of 7%, 9%, 7%, 5%, 10%,13%, 4% and 1% in July, June, May, April, March, February, January and December, respectively. Moreover, net sales for August decreased 1% to $842.1 million.

L Brands’ comps declined 7% at Victoria’s Secret but increased 4% at Bath & Body Works. The exit from the swim and apparel categories had 2 percentage points and 3 percentage points adverse impact on overall company and Victoria’s Secret comparable sales, respectively.

For the 30-week ended Aug 26, 2017, the company’s comps had declined 8%, while sales decreased 5% to $6.034 billion. The exit from the swim and apparel categories had 6 percentage points and 8 percentage points adverse impact on overall company and Victoria’s Secret comparable sales, respectively.

Apart from L Brands, Costco Wholesale Corporation (COST - Free Report) , The Cato Corporation (CATO - Free Report) and The Buckle, Inc. (BKE - Free Report) came out with comparable sales results for the month of August. While comparable sales for Costco increased 7.3% that of Cato and Buckle declined 10% and 7.9%, respectively.

Merchandise margins

Victoria’s Secret merchandise margin rate increased in August. The company announced that in September it will concentrate on the sexy impressive collections and Pink wear everywhere bra.

However, in case of Bath & Body Works merchandise margin rate was down in August compared with last year owing to rise in promotional and product mix. In September, the company will focus on new seasonal collections in body care, home fragrance, and soap and sanitizer business.


L Brands expects comps to decline in low-single digits in September. The exit from the swim and apparel categories would hurt the comps by 2%.

The company has underperformed the industry in a year as it continues to face short-term challenges due to its decision to exit the swimwear category, which according to analysts have failed to generate desired results. In fact, the stock has plunged 51.2% in a year, wider than the industry’s fall of 36.9%.

The effect of the short-term challenges can easily be seen in the company’s sale performance which has declined year over year and also missed the Zacks Consensus Estimate in the past few quarters. The stock is unlikely to bounce back in the near term as investor sentiment was further hurt following the company’s trimmed fiscal 2017 guidance. Management now projects earnings in the band of $3.00-$3.20 per share for fiscal 2017, down from the previous guidance of $3.10-$3.40.

L Brands currently carries a Zacks Rank #5 (Strong Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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