Henri Bendel closure a loss for consumers however could drive gains at L Brands


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Henri Bendel will shutter after 123 years in business

News that the division retailer Henri Bendel can be closing its doorways for good in January 2019 after 123 years in business would possibly make consumers weep, however Wells Fargo analysts say it’s a step on the trail to progress at L Brands Inc.

Shares of L Brands

LB, +5.58%

 , whose portfolio additionally contains Victoria’s Secret and Bath & Body Works, ended Friday up 5.6% after the information.

L Brands announced that it would close all 23 Henri Bendel shops, including the enduring New York City location, and shut down the e-commerce website after the 2018 vacation season. The choice is an effort to enhance the efficiency of the business, stated L Brands Chief Executive Leslie Wexner in an announcement.

The firm has struggled, cutting its guidance in late August for the second time this year. Same-store gross sales at Pink, a model centered on college-aged ladies, fell into the mid-single-digit vary. And Victoria’s Secret continued to really feel the pinch from its exit from the swim class, in addition to the buyer shift to lower-priced, much less padded bras.

Read: Millennials love Victoria’s Secret – but they sure aren’t shopping there

L Brands shares have sunk almost 52% for the year thus far because the SPDR S&P Retail ETF

XRT, +0.23%

  and the S&P 500 index

SPX, +0.03%

  have rallied 14.6% and eight.7% respectively for the interval.

“We view this initiative favorably, as we believe it reflects management’s willingness to take a critical eye to the business in light of persistent, multi-year weakness,” wrote Wells Fargo analysts led by Ike Boruchow, “and hope that it is a harbinger of additional profit-conserving measures to come.”

Wells Fargo highlighted plenty of different methods the corporate could in the reduction of, including an evaluation of its real estate, which incorporates greater than 1,100 Victoria’s Secret shops and greater than 1,600 Bath & Body Works shops within the U.S.; decreasing the prices of flagship areas, just like the Bond Street location within the U.K. and shops alongside New York City’s expensive Fifth Avenue; and taking one other have a look at the televised Victoria’s Secret Fashion Show, which has declined within the scores and, due to this fact, lost a few of its advertising worth.

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Analysts say they’d prefer to see extra strikes like this newest announcement.

“Though Bath & Body Works continues to generate robust results (its strength must be commended) and we commend their recent Bendel announcement, Victoria’s Secret’s struggles seem to have no end in sight and we would remain sidelined until there is greater visibility into a turnaround at the beleaguered company,” analysts wrote.

Wells Fargo charges L Brands inventory market carry out with a $30 price target.

Instinet says that determining the issues with the Pink model must be a precedence.

“Management has not called out growth in Pink since January, with another decline in August,” analysts wrote in a notice printed September 6. “With the business having generated ~$2.8 billion last year (~39% of Victoria’s Secret’s revenues), the brand’s health and understanding the downside risk are critical.”

Instinet charges L Brands shares impartial with a $30 price target.

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