L Brands Analysts Review Q1 Print; Wells Fargo Says Bath And Body Works 'One Of The Brightest Spots In Retail'

Embattled L Brands Inc LB is having a good week: shares of the retailer were up 12.84 percent at the close Thursday after the company reported a first-quarter sales beat the day before. 

Victoria’s Secret continues to be a drag on L Brands results, with same store sales down 5 percent in the quarter, but Bath and Body Works carried the company, with same-store sales that were up 13 percent in the quarter.

Wells Fargo 

Stabilization is setting in at L Brands, and second-half hope is now building, analyst Ike Boruchow said in a Wednesday note. 

Victoria’s Secret showed some level of stability, and Bath and Body Works' strengths are among the brightest spots in retail, he said. 

“While in absolute terms, VS is still clearly struggling, the biggest take-away we gleaned from our call with management was that VS is no longer in free fall, and the brand has found relative ‘stability’ in the near term, with new lingerie/PINK leadership looking to make ‘substantive changes’ to the business in the coming months.”

Wells Fargo maintained an Outperform rating and lowered the price target from $42 to $35.

Credit Suisse 

Analyst Michael Binetti is not fully convinced, maintaining a Neutral rating with a $25 price target.

The first quarter was another early signal of stabilization in L Brands' negative trends, he said.

Yet L Brands hasn't shown any consistency in marketing or product traction that would make Credit Suisse more constructive on the company, Binetti said.

A positive earnings revision cycle could be "extreme" on any sign of Victoria's Secret comps returning to continued positive territory, the analyst said. 

Bank Of America Merrill Lynch 

Analyst Lorraine Hutchinson reiterated a similar sentiment, maintaining a Neutral rating with a $30 price target.

The analyst said she sees little sign of change at Victoria’s Secret, where poor performance continues to pressure results.

“The story was similar to prior quarters, with weakness at Victoria’s Secret more than offset by continued strength at Bath & Body Works,” the analyst said. 

The company disclosed that 20 percent of its products are from China, and it is working on strategies to mitigate exposure to any further tariff increases, Hutchinson said. 

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