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E Down Nearly 60% From Its 52-Week High, Is L Brands Worth Purchasing?

By Kurt Osterberg · On September 3, 2018

L Brands’ (LB ) stock, a member of the Wilshire 5000 Total Market Index, has struggled this year, declining 56.1%. After such a drastic drop, are shares of L Brands a bargain today? Let’s look at the company’s background, earnings results and dividend to see.

Company Background

L Brands was born in 1963 as “The Limited”. By 1976, The Limited had opened 100 stores around the U.S. In 1982, the company made perhaps its most important purchase when it added Victoria Secret for the small sum of $1 million. Today, L Brands, which also include Bath & Body Works, has a market cap of $7.3 billion.

2^nd Quarter Earnings Results

L Brands released 2^nd quarter earnings results on August 22^nd. The company earned $0.36 per share, topping analysts’ expectations by $0.02. This, however, was a 25% decline from the 2^nd quarter of 2017. Revenue increased 8% to $2.98 billion, beating estimates by $50 million.

Comparable same-store sales companywide increased 3% during the quarter, compared to an 8% decline in second quarter of the previous year. Victoria Secret grew of 1% to nearly $1.4 billion. While the physical stores had anemic growth, Victoria Secret Direct, L Brand’s direct to consumer program, saw sales climb 22% to $360 million.

While Victoria Secret has weighed down results for L Brands, the company’s Bath & Body Works division continues to shine. In the 2^nd quarter, Bath & Body Works saw revenue increase 9.5% to $825 million. Bath & Body Works direct to consumer line also showed strong growth, improving 30% to $1.39 million year over year.

International sales for L Brands improved almost 28% as the company continues to pursue store openings in countries around the world. China is one area where L Brands is trying to expand, having already opened seven stores and looking to add as many as ten more in the country this year.

While direct to consumer and international sales accounted for just 21.6% of sales in the most recent quarter, the growth rates are very high. This shows that management has made the correct decision in focusing on e-commerce as a way to drive revenue gains.