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L Brands Recovery in Progress, Shares Cheap

With recovering comparable sales pointing to intact brand strength, the stock price is unjustified.

Although wide-moat

Victoria’s Secret, 55% of fourth-quarter revenue, is still a work in progress, but pockets of light can be seen. Fourth-quarter comp sales decreased 1%, including a 6% decline in store comps. Digital sales performed well, up 20%, while bra initiatives showed traction with an increase in constructed bra comps and total bra average unit retail. That said, product resets are needed for “3 for” and single-ticket panties as well as Pink loungewear. We feel that our estimates calling for flat average annual revenue growth in this segment over the next five years adequately accounts for secular brick-and-mortar traffic headwinds offset by product improvements.

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About the Author

Bridget Weishaar

Senior Equity Analyst

Bridget Weishaar is a senior equity analyst for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. She covers apparel retailers.

Before joining Morningstar in 2013, Weishaar spent five years as an equity analyst on the Internet research team at J.P. Morgan. She also worked as a retail analyst for Bear Stearns.

Weishaar holds a bachelor’s degree in science pre-professional studies from the University of Notre Dame and a master’s degree in business administration from The Wharton School of the University of Pennsylvania.

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