L BRANDS INC. $65 (New York symbol LB (old symbol LTD); Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 289.9 million; Market cap: $18.8 billion; Price-to-sales ratio: 1.8; Dividend yield: 1.8%; TSINetwork Rating: Average; www.limitedbrands.com) owns 1,096 Victoria’s Secret lingerie stores and 1,645 Bath & Body Works personal care products outlets. Smaller chains include 157 La Senza (lingerie) locations in Canada and 29 Henri Bendel (jewellery) stores in the U.S.
The company continues to see strong demand for its Victoria’s Secret Pink clothing line for younger women. In the current fiscal year, L Brands plans to open 50 new stand-alone Pink stores, while it continues to expand the brand in its existing outlets.
Currently, 25% of Victoria’s Secret stores carry the full Pink assortment. New soaps and home fragrances are also fueling sales at Bath & Body Works.
In its 2014 third quarter, which ended November 2, 2013, L Brands’sales rose 5.9%, to $2.2 billion from $2.05 billion a year earlier. Overall same-store sales gained 3%. Same-store sales rose 4% at Victoria’s Secret, while the chain’s online and catalogue sales declined 1%. Bath & Body Works’ same-store sales increased 3%.
Earnings improved 21.7%, to $92.0 million from $75.6 million. Per-share earnings rose at a slower pace of 19.2%, to $0.31 from $0.26, on more shares outstanding. The $1.20-a-share dividend yields 1.8%.
For all of 2014, L Brands estimates that it will earn $3.07 to $3.22 a share, up from its earlier prediction of $3.06 to $3.21. The stock trades at 20.6 times the midpoint of the new range. That’s a high p/e ratio for a retailer, particularly as the uncertain economy has prompted other competitors to cut their prices ahead of the Christmas shopping season.
L Brands is still a hold.
