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L Brands Inc LB

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Morningstar’s Analysis

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Economic Moat

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L Brands Declares Debt Repayment, Stock Buyback Authorization, Reinstated Dividend; but Shares Rich

Jaime M. Katz, CFA Senior Equity Analyst

Analyst Note

| Jaime M. Katz, CFA |

No-moat L Brands announced several initiatives designed to highlight the cash flow gains it has achieved, even as it continues to search for a suitable sale option for the capricious Victoria’s Secret brand. It intends to repay more than $1 billion in debt (2022 and 2025 maturities), which should reduce debt service costs by more than $60 million. It also announced a $500 million share repurchase plan, signaling the access to cash flow it expects ahead, and the reinstatement of the firm’s dividend (at $0.60 annually), a step we don’t believe management would have undertaken without a fair level of visibility regarding future performance.

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Company Profile

Business Description

L Brands is a women's intimate, personal-care, and beauty retailer operating under the Victoria's Secret, Pink, and Bath & Body Works brands. The company generates the majority of its business in North America, with about 5% of sales coming from international markets in fiscal 2020. Distribution channels include more than 2,600 stores and online, which represented about 35% of total sales in 2020. The company still plans to break Bath & Body Works into a stand-alone business, which we expect to be executed by August 2021.

Contact
Three Limited Parkway
Columbus, OH, 43230
T +1 614 415-7000
Sector Consumer Cyclical
Industry Apparel Retail
Most Recent Earnings Jan 31, 2021
Fiscal Year End Jan 29, 2022
Stock Type Cyclical
Employees 92,300

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