L Brands Tops Q1 Expectations, Backed by Continued Momentum

L Brands, Inc. (LB) reported better-than-expected first-quarter results, backed by continued momentum at both Bath & Body Works and Victoria’s Secret. L Brands is an international fashion retailer offering fragrance and body care products, soaps, women’s apparel, and beauty care products.

The company reported adjusted earnings of $1.25 per share compared to a loss of $0.99 per share recorded in the same period last year, and surpassed the Street’s expectations of $1.21 per share.

The company’s net sales came in at $3.02 billion, up 83% year-over-year, and beat the Street’s estimates of $3.01 billion. Shares of the company fell 3.1% to close at $67.31 on May 19. (See L Brands stock analysis on TipRanks)

Looking at the company’s individual properties, net sales at Bath & Body Works were up 93% at $1.47 billion year-over-year. Victoria’s Secret reported net sales of $1.55 billion.

Commenting on the results, Andrew Meslow, CEO of L Brands, said, “We are pleased that the momentum in both businesses has continued, driven by positive customer responses to our assortments, which allowed us to reduce promotional activity and deliver substantial increases in our merchandise margin rates.”

The company is not giving any guidance for full year 2021 owing to the uncertainty surrounding the COVID-19 situation and also the pending separation of Victoria’s Secret and Bath & Body Works into two distinct companies.

However, the company does forecast Q2 earnings to fall between $0.80 and $1.00 per share. The Street predicts earnings at $0.76 per share.

Following the Q1 results, Guggenheim analyst Robert Drbul maintained a Hold rating on the stock and stated, “We believe both the tailwinds (Bath & Body Works strength) and headwinds (Victoria’s Secret turnaround, challenging mall trends overall) facing the company today are appropriately reflected in the shares, with continued strength at Bath & Body Works and signs of improvement at Victoria’s Secret in 1Q.”

The rest of the Street is cautiously optimistic about the stock with a Moderate Buy consensus rating. That’s based on 10 Buys versus 7 Holds. The average analyst price target of $78.65 implies 23.9% upside potential to current levels. Shares have gained around 70% year-to-date.

L Brands scores an 8 out of 10 from TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.

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