While visiting Victoria's Secret stores the analyst found several changes that could prove to drive a positive comp inflection over the coming few months. Specifically, stores allocated a much smaller space for lower-priced bralettes while allocating a bigger share of the sales floor for higher-priced and high-fashion products.
Meanwhile, L Brands' other property, Bath & Body Works, continues to look attractive despite concerns of a slowdown, the analyst continued. The store's brand will likely continue to comp positively and be able to defend its market share through reinvestment in marketing along with continued innovation.
Also, a meeting with the retailer's management team expressed a "high belief" in Victoria's Secret ability to turnaround, but more important, management is equally committed to improve profitability through a sales turnaround, or an expense base reset.
Finally, L Brands' dividend yield of around 6 percent is "safe in our view" and the stock price itself is "very depressed" at a 12.8x multiple. However, once Victoria's Secret shows signs of improvements the stock will rerate back towards a high-teens PE multiple.
"Having observed the changes to the VS store assortment and the new product/collection launches this month, we are confident that the sales trend at VS will inflect through year-end and return to a solidly positive pace through 2018," the analyst argued.
At time of publication, shares of L Brands were up 3.99 percent at $42.53.
Related Links:L Brands: 4 Reasons For Concern
Victoria's Secret Issues Are 'Self-Inflicted,' But L Brands Can Bounce Back
________
Image Credit: By Dwight Burdette, CC BY 3.0, via Wikimedia Commons
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Comments
date | ticker | name | Price Target | Upside/Downside | Recommendation | Firm |
---|
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.