The L Brands Inc (LB) name doesn’t really do its current stores much of a service. You would think that a company that sports the Victoria’s Secret and Bath & Body Works brands would have a more … appealing name, wouldn’t you?
Regardless, in recent weeks, it has been very visible in the financial press.
On the bright side, LB finished its final quarter of 2015 strong. Sales were up 8% year-over-year, and comparable-store sales were up 6%. Those numbers are very strong for retailers, and the company is guiding higher for 2016.
Then CEO Sharen Turney, who has been with the company for 16 years, surprised everyone by stepping down immediately. Press releases state that she wishes to focus on her family, which is usually diplomatic cover.
Stepping in for the departing CEO is the founder and once-CEO of LB, Les Wexner. He has seen his $1 million investment in 7 niche brands turn into a $7.7 billion pop culture mainstay. Wexner first launched a unique store concept in 1963. He started selling a select number of shirts and pants when everyone else was selling as much variety as they could.
The concept caught on. He called his stores The Limited. And that is where L Brands comes from: It was initially called Limited Brands. He then bought niche clothiers Abercrombie & Fitch, Lerner and Lane Bryant in the decades to follow. So, Wexner is not a newbie to this game.
Reasons to Worry About LB Stock
But the question is, why would a CEO who was at the top of her game and who brought the company so far just walk away?
On the one hand, it could be health reasons, in which case discretion is the better part of valor. But then, why not wait until after the Feb. 24 earnings announcement?
The less generous view of the leadership change is that something is brewing that no one has heard or seen yet; like bad numbers or an accounting problem. LB stock has fallen 13% in a month and a half, most of it after reporting January numbers. Maybe LB wants to move in an entirely different direction and Turney wasn’t on board for the transition.
On top of this this uncertainty, add the uncertainty of the global economy. It’s no surprise LB did well during the holiday season, since consumers are more willing to buy up for presents. But in a tight economy, will consumers fork over the money just for style? Will consumers pay up for premium bath and body supplies?
These are the nagging questions that are hamstringing the stock now.
And since there are no answers until Feb. 24, it’s best to step aside, since things at LB could be getting worse than better. Bargain hunters beware.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
