We maintained our Neutral recommendation on
L Brands, Inc.
), a specialty retailer of women's intimate and other apparel,
with a target price of $61.00. The stock currently carries a
Zacks Rank #2 (Buy).
We believe that L (formerly Limited) Brands' sustained focus
on cost containment, inventory management, merchandise and
speed-to-market initiatives have kept it afloat in a sluggish
consumer environment. The company's foray into international
markets is likely to provide long-term growth opportunities.
L Brands commands a leading position in the lingerie, personal
care and beauty segments. We believe that the company's
innovation in merchandise and exclusive assortments remain
popular among consumers and sets it apart from peers.
The company's strength was well evident from its
second-quarter fiscal 2013 results, wherein earnings of 61 cents
a share came a penny ahead of the Zacks Consensus Estimate and
rose 22% from the prior-year period. The consumers, who cut back
on their discretionary spending during the recession, are now
gradually opening their wallets.
The company also raised its fiscal 2013 earnings guidance to a
range of $3.06 to $3.21 per share. The company had earlier
projected earnings between $2.95 and $3.15 per share.
However, in the near-term, margins are likely to remain muted
on account of probable pressure on merchandise margins. Going
forward, management expects gross margins to be down year over
year both for the third quarter and fiscal 2013. Moreover, stiff
competition and erratic consumer behavior still remain major
causes of concern.
Given the pros and cons, risk and reward fairly balance each
Other Stocks to Consider
Other stocks worth considering in the retail sector includes
Citi Trends, Inc.
), which holds Zacks Rank #1 (Strong Buy), and
), both of which carry a Zacks Rank #2 (Buy).
ANN INC (ANN): Free Stock Analysis Report
CITI TRENDS INC (CTRN): Free Stock Analysis
DSW INC CL-A (DSW): Free Stock Analysis
L BRANDS INC (LTD): Free Stock Analysis
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