L Brands opts for spinoff over sale

Article Excerpt

L BRANDS INC., $66 is a spinoff buy. The merchant (New York symbol LB; Consumer sector; Shares outstanding: 277.8 million; Market cap: $18.3 billion; Dividend yield: 0.9%; Takeover Target Rating: Medium; www.lb.com) owns two retail chains: Victoria’s Secret stores (which sell lingerie); and Bath & Body Works outlets (personal-care products, including soaps and shampoos). L Brands has now decided to spin off Victoria’s Secret despite several offers to buy the chain. The company expects Victoria’s Secret to be valued at between $5 billion and $7 billion. That’s much higher than the offers of $3 billion it has reportedly received. That higher valuation is largely due to the chain’s improving prospects coming out of the pandemic. The company’s efforts have included changes in marketing, fewer promotions, and most importantly, new products such as more comfortable items. L Brands operates in very competitive markets. But the split will let both firms better focus on growth and have greater financial flexibility to adapt to a changing…

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