Jefferies Remains Bearish On L Brands Amid PINK's Slight Comp Positive, 'Far Off' Improving Trends

Jefferies analyst Randal Konik's bearish stance on L Brands Inc LB remains unchanged despite the retailer reporting a better-than-expected earnings report and issued strong forward looking guidance. The analyst maintains an Underperform rating on L Brands' stock with an unchanged $35 price target.

Speed Bumps In International Growth

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According to Konik, L Brands' upside to expectations came against an already lowered bar and the company's guidance implies a "hockey stick-like recovery" in the bottom half of the year. The analyst believes this represents a challenge for the company, especially with PINK comping higher by a low-single-digit at a time when one of its biggest rival, American Eagle Outfitters AEO's Aerie, is generating comps in excess of 25 percent.

Konik also noted PINK's comps came in at a higher-single digit in the fourth quarter, and it is "clear" the brand is seeing market erosion at the expense of Aerie.

Konik further noted that the bullish thesis for owning shares of L Brands was based on the company's international growth. But the analyst thinks this prospect is even "less clear" as international comps for Victoria's Secret declined in every part of the world, driven in part by the company's exit of swimwear and apparel but also due to weakness in beauty products.

Bottom line, L Brands' earnings report is helping shares move higher on Thursday but the analyst doesn't see this as a long-lasting trend given poor trends at PINK and visibility into improved trends at Victoria's Secret is "far off."

At time of publication, shares of L Brands were up 4.79 percent at $50.73.