Competitors
Major competitors include Ann Inc (NYSE:ANN), Chico’s FAS, Inc. (NYSE:CHS), Ascena Retail Group Inc (NASDAQ:ASNA), and The Wet Seal, Inc. (NASDAQ:WTSL). All of these companies operate in the specialty retail industry and target women as one of their main demographics, as well as compete with L Brands.
Ann Inc (NYSE:ANN) is valued at $1.39 billion, does not pay out a dividend, and carries a price to earnings ratio of 14.20. Ann’s core business consists of the brands of Ann Taylor and LOFT, which target women in the apparel, shoes, and accessories industries. Ann Inc (NYSE:ANN)’s TTM profit margin has held steady around 4% since 2011, and is currently sitting at 4.32%, with expectations placing the profit margin at 4.9% by 2018. Mid-single digit rate growth is anticipated for revenue fueled by store expansion, however this growth is contingent on innovative product offerings. Ann does not pose a major threat to L Brands Inc (NYSE:LTD) as they compete mainly in different sub-sectors of the industry.
Chico’s FAS, Inc. (NYSE:CHS) is valued at $3.00 billion, pays out a dividend yielding 1.20%, and carries a price to earnings ratio of 17.08. High-single digit growth is projected in the revenue department, with the same projected in the earnings statistic. The company’s TTM profit margin has recovered from its 2008-2009 slump and is currently a strong 6.98%. Year to date, Chico’s FAS, Inc. (NYSE:CHS) is slightly down, despite no majorly negative news.
Ascena Retail Group Inc (NASDAQ:ASNA) is valued at $2.97 billion, does not pay out a dividend, and carries a price to earnings ratio of 20.99. The company’s business model has experienced a substantial contraction as the company’s profit margin has decreased from 6% to the current 3.45% level, which has caused a drop in earnings, however this trend is projected to reverse by 2014. Revenue is expected to grow nearly 50% from 2012 to 2013, with a mid-single growth rate anticipated for years after 2013.
The Wet Seal, Inc. (NASDAQ:WTSL) is valued at $303.13 million, does not pay out a dividend, and carries a negative price to earnings ratio. The Wet Seal, Inc. (NASDAQ:WTSL) is a much smaller and volatile company than other mentioned in this article, and is one that has experienced a history of inconsistent earnings. Because of this, the company trades with a cheap valuation (price to sales ratio of 0.52 and a price to book ratio of 2.36).
Foolish bottom line
Financially, the company is strong disregarding its rather substantial debt position. L Brands possesses a track record of consistent revenue growth, a growing dividend, and a reasonable valuation. The company’s weaknesses include a major segment of their business being unprofitable and the gradual decay of the company’s assets. Looking forward, the company is likely to drive fast-paced growth from its international segment while seeing slower-paced growth domestically. All in all, L Brands Inc (NYSE:LTD) is a cyclical company, and should prosper as long as the economic picture improves, and at least in the short-term will provide attractive returns.
The article A Seductive Company Trouncing The Overall Market originally appeared on Fool.com and is written by Ryan Guenette.
Ryan Guenette has no position in any stocks mentioned. The Motley Fool recommends Ascena Retail Group. Ryan 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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