L Brands stock price rose 3.02% to $20.58 after an analyst at Barclays boosted her rating on the retailer's stock by two notches to overweight.
Barclays analyst Adrienne Yih Tennant cited the potential for a shakeup of the struggling retailer by James Mitarotonda's activist investment firm Barington Capital. The Barclays analyst raised her price target on L Brands to $30.
Barington last March called for a breakup of the company to unlock shareholder value, by either spinning off Victoria's Secret, which has been a drag on L Brands bottom line, or through an initial public offering of Bath & Body Works, which has been performing well..
L Brands managed to hold off a dramatic overhaul when it brought Barington on board as a special adviser in April. Under the deal, Barington withdrew its candidates for L Brands board and was prohibited from publicly disparaging the company.
However, that agreement is set to run out on Feb. 18, the Barclays analyst wrote, kicking off a critical period through March 17 during which Barington can put forward candidates for the retailer's board of directors.
While L Brands has made some changes in response to pressure from Barington, including bringing in a new marketing chief, adding two women to its board, and taking steps to make Victoria's Secret more inclusive, the changes may fall short of what the activist hedge fund is looking for, analysts say.
"We believe there is meaningful upside to LB shares if either management or the activist announce measures to improve the business and unlock inherent asset value," the Barclays analyst wrote.