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Category: Stock Market and L Brands
Date: 24 May 2020 Stock Price: $15.08 We take a look at the 1st quarter 2020 earnings release of L Brands, the holding company of famous underwear brands Victoria's Secret and Bath & Body Works. Just how hard has the group been hit by the Covid-19 pandemic.
We are implementing significant cost reduction actions and performance improvements at Victoria’s Secret while continuing to drive strong growth at Bath & Body Works." |
About L Brands
L Brands, through Bath & Body Works, Victoria’s Secret and PINK, is an international company. The company operates 2,897 company-owned specialty stores in the United States, Canada, the United Kingdom and Greater China, and its brands are also sold in more than 700 franchised locations worldwide.
Overview of L Brands's 1st quarter 2020 earnings report
The data below refers to the latest quarter unless specified otherwise
US and Canada stores
Victoria's Secret and Pink
Bath & Body Works
International stores
Total L Brands Stores:2,897
- Net Sales: $1.654 billion (down from $2.628 billion for the same quarter of the prior year)
- Net sales decreased by -37.1% over the last 12 months
- Cost of goods sold: $1.365 billion ($1.694 billion for the same quarter of the prior year)
- Cost of goods sold decreased by -19.4% over the last 12 months
- Net loss: -$296.867 million (down from profit of -$40.255 million for the same quarter of the prior year)
- Diluted loss per share: -$1.04 (down from $0.14 for the same quarter of the prior year)
- Weighted average number of shares outstanding: 276.99 million (down from 278.165 million for the same quarter of the previous year)
- Cash and cash equivalents: $957.2 million
- Cash and cash equivalents per share: $3.45
- Cash and cash equivalents makes up 22.9% of L brands' market capital
- Cash and cash equivalents makes up 10.1% of L brands total assets
- Inventories of L Brands: $1.491 billion
- Inventories makes up 15.8% of L brands' total assets
- L Brands' inventories grew 9.9% over the last 12 months
- Goodwill in L Brands: $628.236 million
- Goodwill per share: $2.26
- Goodwill makes up 6.6% of L Brands total assets
- Comparable store sales per brand:
- Victoria's secret: -15%
- Bath and Body Works: 20%
US and Canada stores
Victoria's Secret and Pink
- Victoria's Secret U.S.: 889
- PINK U.S. 144: 144
- Victoria's Secret Canada: 32
- PINK Canada:5
- Total Victoria's Secret: 1,070
Bath & Body Works
- Bath & Body Works U.S.: 1,635
- Bath & Body Works Canada :102
- Total Bath & Body Works : 1,737
International stores
- Victoria's Secret U.K./Ireland: 21
- PINK U.K. : 5
- Victoria's Secret Beauty and Accessories: 40
- Victoria's Secret Greater China :24
- Total International : 90
Total L Brands Stores:2,897
L Brands management commentary on their 1st quarter 2020 earnings
COLUMBUS, Ohio, May 20, 2020 (GLOBE NEWSWIRE) -- L Brands, Inc. (NYSE: LB) today reported first quarter results. On May 4, 2020, the company outlined its go-forward strategy to drive long-term shareholder value. As part of this strategy, the company remains committed to establishing Bath & Body Works as a pure-play public company and is taking the necessary steps to prepare the Victoria’s Secret Lingerie, Victoria’s Secret Beauty and PINK businesses to operate as a separate, standalone company.
Below the going forward stratgety refered to above
COLUMBUS, Ohio, May 04, 2020 (GLOBE NEWSWIRE) -- L Brands, Inc. (NYSE: LB) today announced a mutual agreement with Sycamore Partners to terminate their previously announced transaction and outlined its go-forward strategy for the company to drive long-term shareholder value. As part of L Brands’ strategy, the company remains committed to establishing Bath & Body Works as a pure-play public company and is taking the necessary steps to prepare the Victoria’s Secret Lingerie, Victoria’s Secret Beauty and PINK businesses (collectively, Victoria’s Secret) to operate as a separate, standalone company. In addition, the company’s previously announced changes to the Board of Directors and leadership will take effect as of L Brands’ 2020 Annual Meeting of Stockholders.
Sarah Nash, current director and future Chair of L Brands’ Board, said, “Like all retailers, the company faces an extremely challenging business environment. Our Board believes that it is in the best interests of the company, our stockholders and our associates to focus our efforts entirely on navigating this environment to address those challenges and positioning our brands for success rather than engaging in costly and distracting litigation to force a partnership with Sycamore. We are implementing significant cost reduction actions and performance improvements at Victoria’s Secret while continuing to drive strong growth at Bath & Body Works. We will continue to make decisions and take actions with the best interests of all our stakeholders and the future of our company in mind.”
Leadership and Governance Changes
The previously announced leadership and governance changes will go into effect as of the 2020 Annual Meeting of Stockholders, which will be held in a virtual-only format on May 14, 2020:
Below the going forward stratgety refered to above
COLUMBUS, Ohio, May 04, 2020 (GLOBE NEWSWIRE) -- L Brands, Inc. (NYSE: LB) today announced a mutual agreement with Sycamore Partners to terminate their previously announced transaction and outlined its go-forward strategy for the company to drive long-term shareholder value. As part of L Brands’ strategy, the company remains committed to establishing Bath & Body Works as a pure-play public company and is taking the necessary steps to prepare the Victoria’s Secret Lingerie, Victoria’s Secret Beauty and PINK businesses (collectively, Victoria’s Secret) to operate as a separate, standalone company. In addition, the company’s previously announced changes to the Board of Directors and leadership will take effect as of L Brands’ 2020 Annual Meeting of Stockholders.
Sarah Nash, current director and future Chair of L Brands’ Board, said, “Like all retailers, the company faces an extremely challenging business environment. Our Board believes that it is in the best interests of the company, our stockholders and our associates to focus our efforts entirely on navigating this environment to address those challenges and positioning our brands for success rather than engaging in costly and distracting litigation to force a partnership with Sycamore. We are implementing significant cost reduction actions and performance improvements at Victoria’s Secret while continuing to drive strong growth at Bath & Body Works. We will continue to make decisions and take actions with the best interests of all our stakeholders and the future of our company in mind.”
Leadership and Governance Changes
The previously announced leadership and governance changes will go into effect as of the 2020 Annual Meeting of Stockholders, which will be held in a virtual-only format on May 14, 2020:
- Leslie Wexner will step down as Chief Executive Officer and Chairman of the Board of L Brands. He will remain a member of the Board as Chairman Emeritus;
- Andrew Meslow, CEO of Bath & Body Works, will become CEO of L Brands and join the Board;
- Sarah Nash will become Chair of the Board; and
- Allan Tessler, current lead independent director, Gordon Gee and Raymond Zimmerman will retire from the Board.
Positioning Victoria’s Secret for Long-Term Success
The Board has appointed Stuart Burgdoerfer, current Chief Financial Officer of L Brands, as Interim Chief Executive Officer of Victoria’s Secret, effective immediately. Burgdoerfer will also continue to serve as CFO of L Brands and will have a dual reporting relationship to Nash as the incoming Board Chair and Meslow as the new CEO of L Brands.
The company will continue to take proactive measures to appropriately manage costs and expenditures to ensure liquidity in light of the ongoing COVID-19 pandemic, while also continuing to take steps to improve the brands’ performance. L Brands will provide further details on go-forward plans on the scheduled earnings call on May 21 at 9 a.m. Eastern.
Driving Strong Growth for Bath & Body Works
Bath & Body Works has a consistent track record of delivering strong results, including another record year in 2019. It is continuing to build on its pre-pandemic momentum to fuel greater long-term growth and profitability. Despite the fact that nearly all Bath & Body Works stores are temporarily closed due to COVID-19, it is continuing to serve customers through its direct channel, www.BathandBodyWorks.com.
Bath & Body Works has a powerful and proven leadership team that is continuing to make decisions to create innovative merchandise that resonates with customers, while managing expenses and making appropriate investments to drive growth in the business.
Termination of Litigation
In connection with the termination of the Victoria’s Secret transaction, L Brands and Sycamore Partners agreed to settle all pending litigation and mutually release all claims.
The Board has appointed Stuart Burgdoerfer, current Chief Financial Officer of L Brands, as Interim Chief Executive Officer of Victoria’s Secret, effective immediately. Burgdoerfer will also continue to serve as CFO of L Brands and will have a dual reporting relationship to Nash as the incoming Board Chair and Meslow as the new CEO of L Brands.
The company will continue to take proactive measures to appropriately manage costs and expenditures to ensure liquidity in light of the ongoing COVID-19 pandemic, while also continuing to take steps to improve the brands’ performance. L Brands will provide further details on go-forward plans on the scheduled earnings call on May 21 at 9 a.m. Eastern.
Driving Strong Growth for Bath & Body Works
Bath & Body Works has a consistent track record of delivering strong results, including another record year in 2019. It is continuing to build on its pre-pandemic momentum to fuel greater long-term growth and profitability. Despite the fact that nearly all Bath & Body Works stores are temporarily closed due to COVID-19, it is continuing to serve customers through its direct channel, www.BathandBodyWorks.com.
Bath & Body Works has a powerful and proven leadership team that is continuing to make decisions to create innovative merchandise that resonates with customers, while managing expenses and making appropriate investments to drive growth in the business.
Termination of Litigation
In connection with the termination of the Victoria’s Secret transaction, L Brands and Sycamore Partners agreed to settle all pending litigation and mutually release all claims.
L Brands stock price history
The image below, obtained from Google shows the stock price history ofL Brands (NYSE:LB) for the last 5 years. As the image shows it's been a pretty horrible time for the stockholders of L Brands over the last 5 of years. 5 years ago the stock of L Brands was trading at $86.50 a stock and its currently trading at $15.08 a stock. That's a loss of -82.5% suffered by L Brands
The stock of L Brands is trading at a lot closer to its 52 week low of $8 than it is to its 52 week high of $28/02 which to us is a clear indication that the short term sentiment and momentum of L Brands stock is overwhelmingly negative
The stock of L Brands is trading at a lot closer to its 52 week low of $8 than it is to its 52 week high of $28/02 which to us is a clear indication that the short term sentiment and momentum of L Brands stock is overwhelmingly negative
Recent Google search trends for LB stock price
The graphic below shows the search trends for LB stock price and L Brands stock price over the last 12 months in the United States as obtained from Google Trends. As the graphic shows the searches for LB stock is more popular than that of L Brands stock price. There is pretty consistent interest for FL stock price
L Brands (NYSE: LB) stock vs Ulta Beauty (NASDAQ: ULTA)
The image below shows the stock price performance of L Brands (LB) compared to Ulta Beauty (ULTA)) over the last 3 years. As the graphic shows Ulta Beauty stock has comfortably outperformed the stock of L Brands over the last 3 years, with it declining by -28.36% compared to a -70.52% decline in the stock price of L Brands
Recent coverage of L Brands
The extract below covers the latest regarding L Bands as obtained from Fool.com
What happened
Shares of retail-chain operator L Brands (NYSE:LB) were sharply higher on Thursday, after the company reported a wider-than-expected first-quarter loss and said that it will follow through on separating its troubled Victoria's Secret chain into a stand-alone company. As of 12:15 p.m. EDT, L Brands' shares were trading up about 16.2% from Wednesday's closing price.
So what
Consumer-discretionary investors were bidding up L Brands' shares on Thursday after the company said during its quarterly earnings call that it will go forward with its plan to separate its Bath & Body Works and Victoria's Secret chains into separate companies. A planned sale of Victoria's Secret to a private-equity company fell through earlier this month; the sale had been well-received by investors concerned about ongoing losses at the lingerie chain.
Read the full article here
What happened
Shares of retail-chain operator L Brands (NYSE:LB) were sharply higher on Thursday, after the company reported a wider-than-expected first-quarter loss and said that it will follow through on separating its troubled Victoria's Secret chain into a stand-alone company. As of 12:15 p.m. EDT, L Brands' shares were trading up about 16.2% from Wednesday's closing price.
So what
Consumer-discretionary investors were bidding up L Brands' shares on Thursday after the company said during its quarterly earnings call that it will go forward with its plan to separate its Bath & Body Works and Victoria's Secret chains into separate companies. A planned sale of Victoria's Secret to a private-equity company fell through earlier this month; the sale had been well-received by investors concerned about ongoing losses at the lingerie chain.
Read the full article here
L Brands (NYSE:LB) stock valuation
So what is L brands stock worth based on their latest earnings report? Based on L brands latest earnings report and the fact that they are losing making right now it has to value their stock, especially since we cannot use their stockholders equity per share as a valuation as they have a stockholders deficit as their assets is far less than their liabilities at this point. So for this valuation we will use gross profit for the base of our valuation. Our valuation model provides a target price of $16.60. We therefore believe that the stock of L Brands is undervalued at its current price.
We usually recommend that long term and fundamental investors look to enter a stock at least 10% below our target price (full value price) which in this case is $16.60 . A good entry point into L Brands would therefore be at $14.90 or below
With the news of the group looking to split their operations into two separately listed entities should be good news for investors and provide impetus for the stock price going forward.
We usually recommend that long term and fundamental investors look to enter a stock at least 10% below our target price (full value price) which in this case is $16.60 . A good entry point into L Brands would therefore be at $14.90 or below
With the news of the group looking to split their operations into two separately listed entities should be good news for investors and provide impetus for the stock price going forward.
Next earnings release of L Brands (NYSE: LB)
It is expected that L Brands will release their 2nd quarter 2020 earnings report towards the end of August 2020