L Brands Inc (NYSE:LTD) operates both Victoria’s Secret and Bath & Body Works. The company is heavily focused on expanding its brand internationally, returning cash to shareholders through share buybacks, along with store remodelings and expansion efforts. The company was able to grow earnings by 17% year-over-year in its most recent quarter. The growth in earnings was driven by effective cost management.
The favorable economic environment should help to boost L Brands Inc (NYSE:LTD)’ earnings toward the end of the year. Analysts anticipate the company to grow earnings by 7.5%. The low earnings growth is driven by capital expenditure spending, which will lower profitability for the full-year. Ignoring the spending for the year, the company still merits an investment. The company also offers a compelling 2.3% dividend yield.
Abercrombie & Fitch Co. (NYSE:ANF), a fashion retailer, similarly merits your attention. Unlike Sears Holdings, Abercrombie & Fitch Co. (NYSE:ANF) has been able to cut costs effectively and grow the business in fiscal year 2012. The company’s iconic preppy brand is being heavily built upon through international expansion. The company recently opened a flagship store in Singapore, and continues to focus heavily on opening its Hollister brand in Europe.
The company’s trailing 12-month growth is a staggering 82%, and it is likely to continue as analysts on a consensus basis anticipate the company to grow earnings by 16.7% on average over the next five-years. The company also comes with a 1.5% dividend yield at the time of writing.
The CEO Mike Jeffries’ commentary of selling products to only “cool” people recently brought media controversy that had negatively affected the company’s stock. Some even speculate that it was the CEO’s statement that led to the decline in the recent same-store sales performance year-over-year.
The company’s decline in revenue was attributable to the decline in inventory levels due to the strong winter sales season. The CEO stated in the latest quarterly earnings announcement that the decline in inventory accounted for 10% of the decline in comparable-store sales. Therefore, the 8.9% year-over-year decline in revenue will be addressed with stronger inventory levels in the following fiscal year.
Conclusion
I am highly optimistic about Sears Holdings Corporation (NASDAQ:SHLD). The company will continue to cut costs, sell real estate, and decrease its level of inventory. The effects will continue to hurt shareholders over the short term, but going into the holiday season, the company should be able to record some record profits per share. Assuming a positive holiday shopping season and continued cost cuts, the company will be on track to operate profitably again.
This is just one of those contrarian stories you can’t help but want to buy into. After all, Sears is a classic name. If you’re too classy for Sears, both L Brands Inc (NYSE:LTD) and Abercrombie & Fitch Co. (NYSE:ANF) should be in touch with your investment and fashion senses.
The article Is Sears a Screaming Buy? originally appeared on Fool.com.
Alexander is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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