L Brands Rises Despite Guidance Cut by Victoria's Secret Parent

L Brands, which also owns Bath & Body Works and Pink along with Victoria's Secret, reports a 3% drop in same-store sales for the holiday season.
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Investors snapped up shares of L Brands (LB) - Get Report on Thursday, even as the corporate parent of Victoria's Secret reported disappointing holiday sales and lowered its earnings guidance for the fourth quarter.

L Brands jumped 3.84% to $18.84 a share, with investors apparently unfazed after the retailer slashed its earnings guidance for the fourth quarter to $1.85 a share, down from $2 a share previously. Analysts surveyed by FactSet have pegged L Brands earnings for the quarter at $1.97 a share.

The retailer, which also owns Bath & Body Works and Pink, reported a drop in sales to $3.9 billion for the holiday season, roughly the nine weeks ended Jan. 4, down from $4 billion during the same period in 2018.

Comparable-store sales fell 3% during the nine-week holiday season period. Same-store sales were down 2% for the 48 weeks ended Jan. 4, compared with the same year-earlier period.

Still, L Brands recently won an upgrade from a Bank of America analyst, with Lorraine Hutchinson raising her rating on the retailer's stock to buy from neutral while boosting her price target to $25 a share, up from $21 previously.

L Brands could quickly bolster earnings at Victoria's Secret and Pink by bringing back a swimwear line, which would boost store traffic as well as the amount spent by customers, the Bank of America analyst noted.

L Brands also needs to look at a revamp of the Victoria Secret's brand, with the cancellation of its annual fashion show not enough on its own to win over millennial shoppers, Hutchinson noted.