KeyBanc, Credit Suisse Raise L Brands Price Targets After Retailer's Q2 Report

Victoria's Secret and Bath & Body Works parent company L Brands Inc LB reported Wednesday with second-quarter results that prompted two analysts to lift their price targets higher.

The L Brands Analysts: Credit Suisse analyst Michael Binetti maintained a Neutral rating on L Brands with a price target lifted from $24 to $31.

KeyBanc Capital Markets analyst Matthew DeGulis maintained an Overweight rating on L Brands with a price target lifted from $28 to $38.

Credit Suisse Says L Brands One Of The Strongest In Softline: L Brands reported one of the strongest reports in the softlines category so far, with a strong quarter that has signs of continued momentum, Binetti said in a note. Most notably, same-store sales at open Bath & Body Works stores — and online — were up 123%, while Victoria's Secret was up 28%, for total companywide comp growth of 63%.

L Brands said that second-quarter exit rates carried into the third quarter, including Bath & Body Works stores comping at a "strong double-digit" rate, the analyst said.

It is likely that trends are "tracking well ahead" of pre-second quarter consensus comp estimates for Bath & Body Works of 10% and Victoria's Secret of negative 15%, he said. 

New customer growth was strong, and L Brands has a favorable track record of pushing new Bath & Body Works customers to generate frequent purchases and higher basket sizes, Binetti said.

It's unclear if this will help the store next year, when Bath & Body Works will be up against difficult year-over-year comparisons, the analyst said. 

KeyBanc Sees 'Standout' Q2 From L Brands: L Brands reported a "standout" quarter in a difficult environment, as strong Bath & Body Works performance points to the "power of the brand," DeGulis said in a note.

The Victoria's Secret brand showed signs of stabilization, as the direct business rose 65% and total comps were down just 10%, the analyst said. 

Victoria's Secret has now closed 210 stores since the start of 2020, with another 40 in the pipeline, he said. 

L Brands expects a 30% to 40% store sales transfer rate from closed stores, and this is among the highest rates in the specialty retail category, DeGulis said. 

Looking forward to the fourth quarter, strong Victoria's Secret performance would make it easier for L Brands to divest the brand and achieve a higher selling price next year, the analyst said. 

LB Price Action: Shares of L Brands were trading slightly negative at $29.60 at last check Friday. 

Related Links:

L Brands Trades Up 30% On Victoria's Secret Update

L Brands Has Value Without Victoria's Secret Deal, BMO Says In Upgrade

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