Victoria’s Secret parent L Brands Inc (NYSE:LB) is an intriguing buy, and not just because Valentine’s Day is right around the corner.
L Brands, which also holds Bath and Body Works, is up about 57% over the past six months, compared with an S&P 500 that’s actually down 7% over the same time period.
But more importantly for new money: L Brands is only showing signs of more growth for 2015.
L Brands recently released fourth-quarter earnings guidance that beat the Street’s expectations. The company lifted its profit range from $1.61 to $1.71 per share to $1.78 to $1.80; Wall Street was looking for $1.78 per share.
And there are a few more reasons why LB stock looks like a no-brainer buy:
International Expansion
With more than 800 stores outside of the U.S., L Brands is poised for international success in 2015. L Brands sees this international expansion as a trigger for more long-term growth.
International growth was a big part of its most recent earnings report, as L Brands gained about 33% year-over-year in international sales.
L Brands Has Very Little Competition
There are very few, if any, stores that sell the specialty products that Victoria’s Secret and Bath and Body Works sell. For instance, American Eagle Outfitters (AEO) has tried to jump into Victoria Secret’s space with its Aerie stores, and you only have a few competitors such as Yankee Candle and The Body Shop going up against Bath and Body Works.
In short: L Brands has a pair of disconnected niches, but they’re kings of their respective spaces — Victoria’s Secret especially, at a commanding 35% of the lingerie market.
Everyone Wants to Shop at L Brands Stores
L Brands has the premium name in the space when it comes to women’s lingerie — so much so that consumers began petitioning Victoria’s Secret to sell more plus-size lingerie.
Sure, that means would-be customers are unhappy with the Victoria’s Secret brand, but the key is “would-be.” There are scores of women who want to don Victoria’s Secret products … they just can’t right now, and want to change that.
Should Victoria’s Secret cave, its potential market will become even more lucrative.
Special Dividend
L Brands’ excellent performance has allowed the company to provide shareholders a special dividend of $2, payable March 6 to shareholders of record as of Feb. 20. This is on top of its modest quarterly dividend of 34 cents per share, which translates into a 1.5% yield. (The special dividend adds about 2% of annual yield.)
Bottom Line
L Brands’ growth has been breathtaking, with LB stock jumping 350% in five years, and there’s little reason to think the company’s brands are going anywhere soon — unless you expect lingerie and fragrances to go out of style.
So this Valentine’s Day, make the gift-giving a little more mutual. You buy something from Victoria’s Secret or Bath and Body Works, and ask your loved one for a little LB stock in return.
As of this writing, Dana Kobilinsky did not hold a position in any of the aforementioned securities.
