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L Brands (LB) Reports Dismal Comparable Sales in March

L Brands, Inc.LB witnessed a decline in comparable sales (comps) for the fourth consecutive month as the company reported March sales numbers. This specialty retailer of women's intimate and other apparel, beauty and personal care products posted 10% decline in comps for the five-week ended Apr 1 after registering a decline of 13%, 4% and 1% in February, January and December, respectively. Moreover, net sales for March slumped 7% to $951.4 billion.

The Zacks Rank #4 (Sell) company's March sales were hurt by nearly 2 to 3 points due to late Easter this year. Moreover, the exit from the swim and apparel categories had a 7 percentage points and 10 percentage points negative impact on overall company and Victoria's Secret comparable sales, respectively.

Dismal comps performances in the past four months have hurt the company's shares. We noted that the stock has plunged 33.3% in the past six months, compared with the Zacks categorized Retail-Apparel/Shoe industry's decline of 22.8%.

The company stated that merchandise margin rate fell in March, in comparison with the prior year, chiefly owing to flaring promotional expenses.

This Columbus, OH-based company expects comps for the month of April to be down low-single digit range, which comprises of nearly 3 percentage points positive impact from a late Easter this year. Meanwhile, exited categories will negatively impact the comps by 6 percentage points.

Earlier, management had provided tepid outlook for fiscal 2017 and the first quarter. The company expects fiscal first-quarter earnings in the range of 20-25 cents, which is well below the year-ago earnings of 59 cents per share. L Brands now expects comparable sales in the first quarter to decline in the range of high-single digit to low-double digits year over year.

Moreover, management projects earnings in the band of $3.05-$3.35 per share for fiscal 2017, sharply down from the fiscal 2016 earnings of $3.74 and fiscal 2015 earnings of $3.99. The earnings projection includes adverse impact of the company's decision to exit the swimwear category at Victoria's Secret, continued investment in China as well as investment in real estate at Victoria's Secret and Bath & Body Works.

For fiscal 2017, it envisions comparable sales to be down by low-single digit. Further, the company anticipates total sales growth to be about 3 to 4 points higher than comps on account of square footage growth and due to a 53rd week.

Stocks to Consider

Better-ranked stocks in the retail sector include Kate Spade & Company KATE , The Children's Place, Inc. PLCE and Foot Locker, Inc. FL . Children's Place sports a Zacks Rank #1 (Strong Buy) while Kate Spade & Company and Foot Locker carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

Kate Spade & Company delivered an average positive earnings surprise of 14.6% in the trailing four quarters and has a long-term earnings growth rate of 28.3%.

Children's Place delivered an average positive earnings surprise of 39% in the trailing four quarters and has a long-term earnings growth rate of 10.3%.

Foot Locker delivered an average positive earnings surprise of 2.2% in the trailing four quarters and has a long-term earnings growth rate of 9.7%.

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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 Nasdaq, Inc.


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

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