L Brands (LB) Comps Decline In May, Dismal Run Continues

L Brands, Inc. (NYSE:LB) witnessed a decline in comparable sales (comps) for the sixth consecutive month as it reported May sales numbers. This specialty retailer of women’s intimate and other apparel, beauty and personal care products posted 7% decline in comps for the four-week ended May 27 after registering a decline of 5%, 10%,13%, 4% and 1% in April, March, February, January and December, respectively. Moreover, net sales for May decreased 5% to $774.3 million.

L Brands’ comps declined 14% at Victoria’s Secret, while increased 6% at Bath & Body Works. The exit from the swim and apparel categories had a 10 percentage points and 14 percentage points adverse impact on overall company and Victoria’s Secret comparable sales, respectively.

Moreover, for the 17-weeks ended May 27, the company’s comps had declined 9% while sales decreased 6% to $3.211 billion. L Brands expects comps to decline in the range of mid to high-single digits in the months of June. The exit from the swim and apparel categories will impact the comps by nearly 7%. Management had earlier projected comparable sales (excluding Victoria's Secret swim and apparel) to decline in the mid-single digit range in the second quarter.

Dismal comps performances in the past six months and weaker-than-expected sales in the trailing three quarters have hurt the company’s shares in the past one year. We noted that the stock has plunged 25.5%, wider than the Zacks categorized Retail-Apparel/Shoe industry’s decline of 16.4%.

However, shares of this Columbus, OH-based company have taken a U-turn after the company reported seventh straight quarter of earnings beat when it posted first-quarter fiscal 2017 results and provided robust outlook. Ever since the announcement of results on May 17, the stock has gained 8.3%.

Following better-than-expected bottom-line performance, the company raised fiscal 2017 guidance. Management now projects earnings in the band of $3.10–$3.40 per share for fiscal 2017, up from the previous guidance of $3.05–$3.35. We believe that the company’s operational efficiencies, together with its new and innovative collections, provided a boost to the sales. Further, its foray into international markets is likely to provide long-term growth opportunities and generate increased sales volumes.

Apart from L Brands, Costco Wholesale Corporation (NASDAQ:COST) , Zumiez Inc. (NASDAQ:ZUMZ) and The Buckle, Inc. (NYSE:BKE) came out with comparable sales results for the month of May. While comparable sales for Costco and Zumiez increased 4.1% and 3.3%, respectively, that of Buckle declined 9%.

L Brands currently carries a Zacks Rank #3 (Hold).

You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

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