Market Overview

L Brands Upgraded By Goldman Sachs On Victoria's Secret Results

L Brands Upgraded By Goldman Sachs On Victoria's Secret Results
After Strong Week, Market Comes Under Pressure From China As Earnings Begin
55 Biggest Movers From Yesterday
The U.S. Week Ahead (Feb 25-Mar 1) (TalkMarkets)

Goldman Sachs’ Lindsay Drucker Mann mentioned that the 2Q results reported by L Brands Inc (NYSE: LB) have “eased...concerns about how disruptive the new promotional strategy at Victoria's Secret (VS) would be on the business." The analyst continued by stating, "[W]e believe a bottom is visible for productivity and margins.”

Drucker Mann upgraded the rating on the company from Neutral to Buy, while raising the price target from $73 to $94.

Victoria’s Secret

The analyst believes Victoria's Secret would be able to achieve sequential improvement in margins as it laps the transient headwinds, while being able to contain comp declines in the near term.

“Longer term, LB remains a compelling secular growth story, with outstanding brand equity, best in class operating capabilities and high visibility growth drivers supporting mid-to-high-teens total return potential annually with no multiple expansion,” Drucker Mann stated.

Related Link: Oppenheimer On L Brands: "Transition Presents Opportunity," Upgraded To Outperform

L Brands has meaningfully lowered promotions at Victoria's Secret in April/May, a move that had created material uncertainty for comps.

However, a few months after that, visibility into the negative impact has improved, and Drucker Mann believes the company will be able to contain comp declines to the low single digits during 2H.

Margin Improvement

Drucker Mann expects margins to improve sequentially, given that “(1) LB will anniversary sharp declines in the high margin Beauty business mid-3Q, (2) the drag from preopening costs for the NYC flagship subsides once the store opens in 4Q, and (3) clearance volume is substantially lower in 3Q and beyond.”

In addition, L Brands’ new growth initiatives appear promising, and the analyst expects Sport, White Barn and International to together contribute incremental EPS growth of 600 bps.

Full ratings data available on Benzinga Pro.

Do you have ideas for articles/interviews you'd like to see more of on Benzinga? Please email with your best article ideas. One person will be randomly selected to win a $20 Amazon gift card!

Latest Ratings for LB

Feb 2019B. Riley FBRMaintainsBuyBuy
Jan 2019JP MorganMaintainsNeutralNeutral
Jan 2019Wells FargoMaintainsOutperformOutperform

View More Analyst Ratings for LB
View the Latest Analyst Ratings

Posted-In: Goldman Sachs Lindsay Drucker MannAnalyst Color Long Ideas Upgrades Price Target Analyst Ratings Trading Ideas Best of Benzinga


Related Articles (LB)

View Comments and Join the Discussion!

USD/JPY Gains Erode

A Master Mentalist Reveals The 'Ridiculously Simple' Trick To Public Speaking