Risk, Reward Balances L Brands - Analyst Blog

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We have maintained our Neutral recommendation on L Brands, Inc. ( LTD ), the specialty retailer of women's intimate and other apparel, with a target price of $60.00. The stock currently carries a Zacks Rank #2 (Buy).

Why Reiterate?

We believe that 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.

Limited Brands commands a market 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 it 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.

Other Stocks to Consider

Other stocks worth considering in the retail sector includes, Citi Trends, Inc. ( CTRN ), which holds Zacks Rank #1 (Strong Buy), and ANN INC. ( ANN ) and The Buckle, Inc. ( BKE ), both of which carry a Zacks Rank #2 (Buy).



ANN INC (ANN): Free Stock Analysis Report

BUCKLE INC (BKE): Free Stock Analysis Report

CITI TRENDS INC (CTRN): Free Stock Analysis Report

L BRANDS INC (LTD): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: ANN , BKE , CTRN , LTD

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