Jump to content
  • 0

L Brands


Trevor Neal
 Share

Question

5 answers to this question

Recommended Posts

  • 0

Hello Michael, thank you for coming here. 

The reason why shares of L Brands jumped higher yesterday was that the Bank of Montreal (BMO) upgraded the L Brands stock from “market perform” to “outperform”. This came after L Brands, the owner of the fashion brand Victoria Secret, announced it terminated an agreement to sell the brand.

“It will become harder to ignore underlying fundamental value. Although, we expect further COVID-19 driven challenges and negative sentiment [surrounding the stock],” BMO analysts wrote.

Moreover, shares of the company were boosted as stores of Victoria Secret have started reopening across the globe. 

Link to comment
Share on other sites

  • 0

Hi Trevor, thanks for the question. 

Your question is time-specific but I think still very much relevant given the recent developments concerning L Brands. 

Near the end of the last month, L Brands reported that sales dropped 46% year-over-year for the fiscal first quarter that ended on May 2. As a result, the fashion brand reported a loss of $300 million for the quarter. 

Given the deal to sell Victoria's Secret to Sycamore Partners, a private equity firm, for approximately $525 million fell through, and a reported loss, the fashion brand is in urgent need of funding. Therefore, the company has issued a bond offering totaling $1.25 billion for cash to help its struggling business.

“We are all focused and energized by our opportunities to drive long-term shareholder value, including implementing a profit improvement plan at Victoria's Secret; separating the Victoria's Secret and Bath & Body Works businesses; and continuing to drive strong growth at Bath & Body Works,” said Andrew Meslow -- Chief Executive Officer, L Brands / Bath & Body Works.

As a result, it’s not a surprise that shares of the company hit 11-year lows in March. Despite the modest recovery in price since March, shares are still trading near lows. Hence, I’d advise staying away from the stock until the long-term security of the company is secured.


 

Link to comment
Share on other sites

  • 0

Hi Trevor,

Since its last closing price, shares of L Brands, Inc. (NYSE: LB) climbed by 1.03%.

Brokerage companies have already issued their reports on the LB stock, with Telsey Advisory Group rating the stock to Market Perform once again. The investment banking company set the price target of $15 for LB stock. 

Another financial services organization, Wedbush, on the other hand, raised their price target on LB stock to $12, up from the previous target of $10. However, Wedbush rated L Brands stock as Neutral. 

The American fashion retailer secured $1.25 billion in its first bond sale after losing a very important deal with Sycamore Partners that would have provided the private equity firm with control of Victoria’s Secret.

L Brands recently sold $750 million in secured notes at a yield 6.875% plus $500 million in unsecured bonds at a yield of 9.375%, compared to original price discussions of nearly 8% and 10.5%, said a person familiar with the matter. L Brands will use the funds to pay off debt and inject cash to the balance sheet, the person stated. 

Last year, the retailer secured $500 million in unsecured 10-year bonds at a yield of 7.75%. The company has been making modifications since the deal with Sycamore Partners fell apart. If the deal went through, Sycamore Partners would have gained majority stake of the Victoria Secret.  

“The now-abandoned deal, in which Sycamore was poised to take a 55% stake in Victoria’s Secret for about $525 million, was thrown into jeopardy in late April when Sycamore sued to terminate the transaction, arguing that Columbus, Ohio-based L Brands violated the terms of the agreement by failing to pay rent and furloughing thousands of workers amid the coronavirus pandemic. The pact to terminate the deal was mutual.”
 

Link to comment
Share on other sites

  • 0

Hello Trevor,

Great question.

There are several reasons behind the wild swings. For starters, the COVID-19 outbreak has reduced global apparel demand.  In Q1 2020, company earnings plummeted by 37% to reach $1.6 billion. Another notable event is the fall out with Sycamore Partners over a 55% Victoria Secret stake. The announcement to terminate the $525 million agreement caused an 11% dip in company shares.
The good news is its Bath & Body Works division grew 41% with its digital side reporting an 85% increase in revenues. This is thanks to the heightened soap and sanitizer demand. What’s more, closing almost 250 Victoria Secrets outlets came in handy to push the stock movement.
June 25 saw L Brands’s shares climb 1.95%. After hitting $14.31, the stock descended to $13.18 before stopping at $13.86 when the day ended. This brings its range to $8.00-$28.01 over 52 weeks. As it stands, the losses outweigh the profits. However, there’s no telling what the post-COVID-19 market holds.
 

Link to comment
Share on other sites

  • 0

Hi Trevor,

 

Shares of Limited Brands Inc (NYSE: LB) soared over 20% in after-hours trading following the company’s announcement to cut 850 jobs. The stock has climbed to $23 per share, a new 5-month high.

The mother company of Victoria’s Secret and Bath & Body Work said it will cut 850 jobs at its home office at Columbus, Ohio. 

The move comes as a part of the cost-cutting campaign to ease the blow from the coronavirus pandemic. L Brands hopes to retain $400 million annually, $175 million of which will be achieved in this fiscal year.

“Decisions relating to our workforce are incredibly difficult and not taken lightly, but these actions are necessary to best position our company for the long-term. On behalf of the Board and management team, I’d like to extend our deepest appreciation to the impacted associates for their contributions and dedication over the years,” Andrew Meslow, CEO of Limited Brands.

Link to comment
Share on other sites

Join the conversation

You can post now and register later. To reply to this question, sign in or create a new account.

Guest
Reply to this question

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

 Share

×
×
  • Create New...