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L Brands Outperforms, So Why Isn't The Street Impressed?

Courtesy of Benzinga.

L Brands Outperforms, So Why Isn't The Street Impressed?

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L Brands Inc (NYSE: LB) CEO Les Wexner put it quite bluntly in his Q4 earnings recap: "We achieved our best year ever in 2015."

This follows its earnings report that posted a top-line beat of $4.395 billion against the estimated $4.37 billion. The specialty retailer guided Q4 EPS at around $2.05, up from the $1.85-$1.95 estimate that was previously guided by the company.

That wasn't the only positive news given by L Brands:

  • New $500 million share repurchase program
  • Raised quarter dividend from $0.40 to $0.60 per share
  • Announced special dividend of $2.00 per share

Related Link: L Brands: Good News For Shareholders In Sales Report, Less Excitement On Wall Street

The market reacted unfavorably to the release, however, as the stock traded down from a high of $97.37 to a low of $89.84.

What Do Analysts Think?

FBR Retail Analyst Susan Anderson told Benzinga that both same-store sales as well as merchandise margin were disappointing, despite the strong quarter.

Brean Capital Senior Analyst Liz Pierce echoed the same-store sales disappointment, noting that L Brands guided same-store sales up single digits in January. The dividend and buybacks were to "cushion the blow."

However, Pierce followed this by noting the market may be "profit taking," as the specialty retailer continues to perform better than other retailers.

"L Brands has been executing great over the past year," Pierce said. "It's hard to find anything [wrong] from a fundamental perspective. At this point, it's more of a struggle with valuation."

When asked about other catalysts, Pierce said the PINK and White Barn Collection brands still have domestic potential, while international growth is still possible considering L Brands differentiated products.

Anderson noted that her catalyst going forward would be increasing market size, while improving supply chain efficiency and reducing promotional pricing: "The question going forward is, 'Can they continue to expand margin?'"

Posted-In: Analyst Color Earnings News Guidance Dividends Retail Sales Buybacks Top Stories Best of Benzinga

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