There seems to be no respite for L Brands, Inc. (LB - Free Report) , which slipped 12.1% following the release of its June 2018 sales results. This is because comparable sales (comps) fell 1% at Victoria’s Secret despite an extended sale and slashed prices.
Management admitted that the semi-annual sale had seen a soft start which had impelled it to extend it by two more weeks compared to last year to clear inventory. This led to a substantial decline in merchandise rate compared to the year-ago period.
Although net sales increased 6% to $1.282 billion in June, it compared unfavorably with May’s net sales growth of 10%. Further, after reporting comps growth of 5% in May, this Zacks Rank #4 (Sell) company registered 3% comps growth for the five weeks ended Jul 7. This 3% growth was backed by 10% comps year-over-year increase in Bath & Body Works for two straight months. However, the merchandise margin rate declined.
The company had earlier provided bleak second-quarter outlook and trimmed view for fiscal 2018 in the wake of stiff competition from brick-&-mortar and e-retailers. We note that the stock has declined 10.6% in the past three months against the industry’s rise of 7.1%.
L Brands anticipates second-quarter and fiscal 2018 comps growth in low-single digits. Further, gross margin, an important metric which shows a company’s financial health, has been constantly decelerating in the past few quarters. In the first quarter, gross margin contracted 120 basis points to 35.9% year over year and is expected to decline again in the second quarter.
Earnings per share in the second quarter are expected in the range of 30-35 cents versus 48 cents in the year-ago quarter. Management lowered fiscal 2018 earnings per share guidance to a range of $2.70-$3.00 from $2.95-$3.25. In the year-ago period, the company reported earnings per share of $3.20.
3 Retail Stocks Hogging the Limelight
Urban Outfitters (URBN - Free Report) delivered an average positive earnings surprise of 19.8% in the trailing four quarters. The stock has a long-term earnings growth rate of 12% and flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Shoe Carnival (SCVL - Free Report) delivered an average positive earnings surprise of 21.3% in the last four quarters. This Zacks Rank #1 company has a long-term earnings growth rate of 12%.
Fossil Group (FOSL - Free Report) came up with an average positive earnings surprise of 54.1% over the preceding four quarters. The Zacks Rank #2 (Buy) company has a long-term earnings growth rate of 5%.
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