L Brands jumps on September comp sales rise, La Senza review

Shares of L Brands (LB) surged after the parent of Victoria's Secret and Bath & Body Works said it would pursue alternatives for its La Senza business. Separately, the company said comparable store sales for September were up 5%, while total sales for the period rose 8%. LA SENZA NEWS: L Brands said on Thursday that it will pursue all alternatives for La Senza, which currently has 126 company-owned and operated stores in North America and 188 non-company owned international stores, as part of an ongoing effort to drive shareholder value and in order to focus on its larger core businesses. The company also said it expects La Senza to post an operating loss of about $40M on revenue of approximately $250M in 2018. WHAT'S NOTABLE: In September, L Brands said it would close all 23 of its Henri Bendel stores and the Henri Bendel e-commerce website in January. "We are committed to improving performance in the business and increasing shareholder value. As part of that effort, we have decided to stop operating Bendel to improve company profitability and focus on our larger brands that have greater growth potential," Leslie Wexner, chairman and CEO of L Brands, said at the time. The company cut its forecast for the fiscal year in August, citing declining demand for its PINK line. Along with the guidance cut, the company announced that PINK CEO Denise Landman made the decision to retire at the end of this year. Amy Hauk, president for merchandising and product development of Bath & Body Works, was announced as Landman's replacement. SEPTEMBER RESULTS: Separately, L Brands said same-store sales for the September period were up 5%, while total sales for the five-week period rose 8% to $1.06B. On the company's sales call, management said SSS were up 1% at Victoria's Secret, driven by growth in lingerie and beauty partially offset by a decline in PINK. Bath & Body Works comparable sales were up 13%, it said. ANALYST COMMENTARY: In a research note to investors, Loop Capital analyst Laura Champine maintained a Sell rating and $24 price target on L Brands following another promotional month at Victoria's Secret that failed to clear inventory. Champine noted that she has been calling for the company to pursue alternatives for La Senza "over the past several years," and said that 2018 estimates for the segment were worse than she expected. Champine told investors in a research note that it is "no wonder that management never grew the brand much outside of its core Canadian market. It remains to be seen whether there will be a buyer for La Senza; there was none for the storied Henri Bendel brand." PRICE ACTION: In morning trading, shares of L Brands are up 9.4% to $31.22.

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