The analyst moved after the fashion icon said it would return to its plan to separate Victoria’s Secret and Bath & Body Works into independent companies.
Boss has a $32 target for L Brands stock. It recently traded at $25.66, up 34%, hitting an almost one-year high earlier Wednesday. The stock is up 41% year to date.
Bath & Body Works would likely enjoy “a sustainable double-digit stand-alone bottom-line growth profile,” he said in a commentary cited by Bloomberg.
The Bath & Body Works division represents the “best current [comparison] story” in brick-and-mortar retail, Boss said.
He predicts merchandise margins should expand 2 percentage points for the second quarter, the first quarterly widening since 2017. And he expects free cash flow of $1.1 billion for each of the next two years.
L Brands said Tuesday that second-quarter sales are expected to show a 20% drop from a year earlier, including an increase of roughly 10% at Bath & Body Works and a 40% decline at Victoria’s Secret. It said most retail stores in North America are now open.
The second-quarter numbers were “significantly better than expected” at both chains, said MKM analyst Roxanne Meyer, according to Bloomberg.
Bath & Body Works stands “among the strongest in the retail sector as it benefits from the strength of its categories in a covid environment,” she wrote.
Meyer raised her share price target to $22 from $11 and maintained her neutral rating.