Piper Jaffray Cuts Price Target on L Brands (LB) as Guidance Shows Softening Trends

Piper Jaffray reiterated an Underweight rating on L Brands (NYSE: LB), and cut the price target to $47.00 (from $65.00), following the company's 1Q earnings report. Although the company reported stronger than expected results, with EPS of $0.59 (ahead of guidance for the "high end of $0.50 to $0.55), guidance shows a continued softening trend at Victoria's Secret. For FQ2, EPS guidance of $0.50 to $0.60 versus consensus of $0.68. For the year, FY17/2016 guidance of $3.60 to $3.80 compares with the company's prior range of $3.90 to $4.10.

Analyst Neely Tamminga commented, "We are lowering our estimates in view of what appears to be a continued softening trend at Victoria's Secret in that guidance for both the month of May and the full-year outlook are below expectations. For May, original monthly guidance was offered on 5/5/16 for "flat" comparable store sales; this afternoon, this outlook has been lowered to a range of (LSD%) to (MSD%) declines. For the full-year, EPS guidance moves from a range of $3.90 to $4.10 to a range of $3.60 to $3.80. Guidance for FQ2 calls for EPS in a range of $0.50 to $0.60; consensus is currently at $0.68. We remain concerned the broader demand for Victoria's Secret as informed by our own proprietary survey work (previously published insights; email us for specifics) may be softening. As such, we remain Underweight LB, the stock, given the potential for valuation compression and underlying earnings deceleration. We are lowering our PT to $47 ($65 prior)."

For an analyst ratings summary and ratings history on L Brands click here. For more ratings news on L Brands click here.

Shares of L Brands closed at $63.78 yesterday.

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