Expect Sustained Top And Bottom Line Growth From L Brand (LB)

L Brands (NYSE:LB) recently released its first quarter results for the fiscal year of 2015 with their EPS climbing by 15% to $0.61 from $0.53 in the same quarter last year. The rise in EPS was driven by a 5% increase in the top line as net sales grew by 5% to $2.511 billion from the same quarter last year as the company’s infamous brands Victoria’s Secret and Bath Body Works showed promising growth in operating income, growing by 10.6% and 17.3% respectively. Despite the latest performance the company stock failed to show any positive reaction as share prices have gone down by as much as $2.25 per share since the company released its quarterly report.

This lack of positive movement in the stock price can be attributed to the company’s disappointing guidance. The company believes that the upcoming period will show slow comparable sales growth in two of its major brands, Victoria’s Secret and Bath Body Works, even though net sales figures will remain rather satisfactory. The Columbus, Ohio based company expects comparable sales growth to remain in the lower single digits owing mostly to the strengthening value of the dollar. a secondary reason is that the company’ Victoria’s Secret division is facing restricted revenue growth and is being forced to sell goods at discounted prices. It seems like the company will have to resort to increasing its square footage of the lingerie retailer by 4% by the end of this year while it also plans to increase the square footage of its Bath Body Works division by opening 24 new stores and remodeling 83 of the already existing ones. This is going to be beneficial in especially for its operations in the US considering that the US economy has been showing signs of fairly robust economic recovery, especially with the Federal Reserve’s chairman, Janet Yellen, announcing that she expects the central bank to begin raising interest rates “at some point this year”. This rise in borrowing rates will signify that the US economy has improved to the point where consumers’ buying power has improved, a scenario which should prove fruitful for fashion retailing brand such as L Brands.

Similarly the company is looking elsewhere for potential growth prospects, particularly beyond Europe and in the Middle East. L Brands plans to expand its international market presence in the coming years as it plans to open a further 8 Victoria’s Secret stores in the Middle East and 4 stores in the UK. Just this past quarter the company opened up 29 more stores in international locations taking the total international store count to 420.

Unfortunately, despite the fairly promising aspects the company has to offer there are a number of institutions which are choosing to downgrade the stock to a hold or sell. However earlier today Goldman Sachs’ equities research analysts upgraded L Brands stock to “conviction buy”. Goldman Sachs justified their reevaluation stock by stating the record performances of the company’s chains in the United States, particularly its Victoria’s Secret and Bath Body Works divisions which recorded robust double digit growth figures in their operating incomes. It also further pointed out that the company’s expanding international presence will help secure its revenue structure to the extent that it could potentially double its revenue over the next decade.

Nonetheless the company has posted a guidance EPS of $3.50-$3.70 which has been upgraded from the $3.45-$3.65 it posted at the end of last year. Considering the strong gains the company made in its revenue growth and its market presence, the current guidance is a bit of a disappointment for investors. Both Victoria’s Secret and Bath Body Works are renowned brands and are considered prime choices for consumers across the world and their recent gains reflect the brands’ superiority. So when we take a closer look at other possible reasons behind the company’s dismal guidance we also find out that the company expects to pay taxes at the rate of 37.5% as compared to the 36.3% rate it paid in 2014. The company believes this rate will negatively affect the earnings per share by $0.07. When you couple that with the expected negative impact of $0.10 to $0.12 on EPS by foreign exchange headwinds you can understand why the company announced a conservative guidance.

Over the past 2 months L Brands’ share prices have gone from a high of $95 per share to its current position of $87.28 per share. On 21st May the company announced its regular quarterly dividend of $0.50 per share which marked the 162nd consecutive quarter the company has paid a dividend. As far as the company’s performance goes it has its focus set on driving growth regardless of the negative external influences which are expected to hamper EPS growth. This determination to expand its operations (including the increasing focus in the Middle East) will help the company in the long run. Sure for short term investors the last 3 months might have been worrying since the stock remained rather flat and sometimes even seemed to show signs of declining. We might even see this pattern continue throughout this year however that should not discourage long term investors who have a healthy appetite for risk. Once the US economy stabilizes we can expect sustained top and bottom line growth from L Brand in the coming years.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More…)The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

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Sullivan | FIFA follies make easiest of targets – The Courier

If you’re programming for the testosterone demographic, “Men In Blazers” is probably not as catchy a title as, say, “Women In Lingerie,” but the NBCSN soccer show’s co-host has provided us with the most vivid image of embattled FIFA President Sepp Blatter.

“He’s part James Bond baddie, part Mayor Daley-style machine politician writ large,” Roger Bennett told the New York Times.

There were so many colorful comments about FIFA’s culture of corruption this week, You Can Say That Again struggled to narrow the field of quotable quips. A week rich in scandalous headlines, capped by a tone-deaf election in which the 79-year-old Blatter won a fifth term, came as a second Christmas for pundits worldwide. It provided priceless material for the likes of John Oliver and Jon Stewart, roused the America-phobic indignation of Russian President Vladimir Putin — talk about your Bond villains — and prompted The Guardian’s Marina Hyde to provide crucial context for soccer-phobic Americans such as ourselves.

Calling Blatter, “The most successful non-homicidal dictator of the past century — certainly since Marshal Tito,” Hyde was also among those who heard echoes of Richard Nixon in his not-a-crook narrative.

“Decades on, those coming fresh to the Watergate legend are often surprised to learn that Nixon still won by one of the largest landslides in American political history,” she wrote. “And so to (Friday’s) presidential re-election in Zurich, which produced a result that new converts to FIFA-watching may find puzzling, given what we know. A president brazened it out, having dismissed any untoward activity by his underlings as nothing to do with him.”

To suggest “The Beautiful Game” has lately acquired a matching set of black eyes is to imagine that the people who pay close attention ever imagined it to be innocent. Complaints about FIFA’s corruption — so obvious in the awarding of World Cups to places as ill-suited as Qatar — are of long-standing and little impact.

Yet as FIFA insiders strive to cut deals with prosecutors by incriminating others, Blatter’s ability to insulate himself from the bribery and money-laundering beneath him could be sorely tested. That the FIFA electorate would grant him another term under these circumstances is a sign of just how much heavy lifting is left for the world’s most popular sport.

“If Mr. Blatter were minimally concerned about football, he would have given up the re-election,” said Portugal’s Luis Figo, a former FIFA presidential candidate. “”If he has a minimal of decency, he will resign in the next few days.”

While we’re holding our breath on soccer’s leadership to develop a sense of shame, here follow the week’s Top 10 sports quotes:

10. Ruben Amaro Jr., Philadelphia Phillies general manager, on impatient fans: “They don’t understand the game. They don’t understand the process. There’s a process. And then they bitch and complain because we don’t have a plan. There’s a plan in place and we’re sticking with the plan. We can’t do what’s best for the fan. We have to do what’s best for the organization so the fan can reap the benefit of it later on. That’s the truth.” (CSNPhilly.com)

9. Rich Rodriguez, University of Arizona football coach, on NCAA cost-of-attendance stipends: “There are some SEC schools that have a really high cost of attendance, even though they’re in a relatively small town. So I’d like to see the formula that they’re coming up with. … That’s a frontier that has some coaches concerned. I’m not going to bitch too much about it because it’s still extra money for the student-athlete.” (CBS Sports.com)

8. John Madden, Hall of Fame NFL coach, on innovation: “You know those gloves receivers wear? It’s making it very easy to catch a ball. You see more one-handed catches where guys are pushing off with the other hand. No one looks at those gloves. I saw them when I was at a meeting in Indy. They passed them around and somebody made the comment that, ‘Pretty soon, these gloves are going to be able to catch a ball without a hand in them.’” (Los Angeles Times)

7. Chris Mullin, St. John’s head basketball coach, on placing his reputation at risk: “So as far as the legacy thing, this is the first time I’m coaching. I’m starting a new career and if it doesn’t go well I don’t think they’ll take me out of the Hall of Fame as a player.” (CBS sports.com)

6. Mike Slive, retiring Southeastern Conference commissioner, on the league’s changing attitude about compliance: “If somebody, like a booster, breaks a rule then our schools are now very quick to move away from that individual. When things happen — and they will — the way our schools handle it has changed. We knew we couldn’t be the best league that we could possibly be if we didn’t change.” (SEC.com)

5. James Harden, Houston Rockets guard, on his record-setting 13 turnovers against Golden State Warriors: “I put so much pressure on myself to be really good every single night. And in some cases, you’re not going to do that. You’re not going to be good. Tonight was a case.” (Post-game interview)

4. Max Scherzer, Washington Nationals pitcher, on teammate Bryce Harper: “Bryce is a better hitter now than he was even at the beginning of the season. When you start to see him use the opposite field with power, that’s the kind of elite stuff I saw in Detroit (with Miguel Cabrera). The scary part is he still has room for improvement. It’s like he’s starting to understand the game at a higher level.” (ESPN.com)

3. Bill Laimbeer, basketball provocateur, choosing between LeBron James and Michael Jordan: “There’s no question I would take LeBron James. He can do more. Michael Jordan could score and make big shots and look spectacular at times with wild flying dunks, but LeBron can get you 18 rebounds, get you 15 assists or score 50 if he wants to. The triple threat that he poses is just phenomenal, and the size, he just physically dominates.” (Dan Patrick Show)

2. Richard Weber, Internal Revenue Service criminal investigation division, on FIFA: “This really is the World Cup of fraud, and today we are issuing FIFA a red card.” (Press conference)

1. Sepp Blatter, FIFA President, upon his reelection: “We will take our boat back into calmer water and take the FIFA ship back into tranquility and happiness. … The fallout of this storm is still here. It hasn’t attained hurricane strength but it has been strong.” (Acceptance speech)

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