L Brands (NYSE:LB) Clash
The L Brands (NYSE:LB), parent company for big names like Victoria’s secret and Bath & Body Works have recently announced their October sales and it seems the company has done better than was expected of them, by the analysts. There was a 3% rise in the net sales with figures rounding up to $700 million. Other comparable store sales also rose 3%, slight ahead of the analysts’ prediction of 2.5%. The company was able to present moderate results despite the stagnant condition of the Victoria’s Secret stores sales growth. However Bath & Body works reports a 5% rise in their store sales.
These results come as a surprise for the world’s known lingerie brand, as well as for the analysts, as their figures were not accurate. The winters could be partially blamed for it, as the company shifted focus to its winter collection, the weather somewhat stayed warm. Victoria’s Secret wasn’t the only apparel retailer that piled up their shelves with winter stock, when winter never really came. Hence the consumers never bought the winter apparel. In the past many years, we have seen Victoria’s secret display a healthy sale rate hence this fall back would easily be recovered in the near future. Victoria’s Secret holds a good position in terms of the intimate market and doesn’t have as much competition as apparel market. To date, Victoria’s Secret has favorable response from its customers, especially to PINK brand. Its lingerie and fragrance have been among the top selling products. So this dent in its growth won’t have much effect on the brand as it could easily recover from it.
On the other hand Bath & Body Works growth was in the personal care market. Which led to impressive numbers. Speculators believe that a rise in the job market and consumer sentiment also had a hand in driving up the brand’s sales. The unemployment rate and consumer sentiment recently has taken a positive shift and in result, retail growth has doubled. It was witnessed that unemployment rate was down to a five year low, whereas consumer confidence figures rose high, which led to a 4% increase in retail sales. But the buying pattern was somewhat different, consumers were making more online purchases and those purchases were made in bulks. Also winter clothing were less in demand due to weather changes, but Bath & Body Works isn’t effected by weather changes, as its main product line ranges include home fragrances, soaps, beauty products and sanitizers.
Other news regarding the L Brands (NYSE:LB) is that the company along with its affiliates has decided to sell off its sourcing business, MGF Sourcing Holdings to Sycamore Partners at $85 billion. The deal at this stage is under development, attached with some terms and conditions, and is expected to close within the first quarter of 2015. Majority of MGF Sourcing Holdings was sold off back in October 2011.
At this stage, L Brands (NYSE:LB) price estimate up to $70 with a 10% discount to the current market place.