L Brands Inc. was downgraded to underperform from hold at Jefferies on Monday on concerns that Victoria’s Secret is in danger of losing its dominant position in the intimates industry. Jefferies lowered the price target to $50 from $70. “Now, the industry is becoming more fragmented (including the rise of Aerie), creating unprecedented hurdles for Victoria’s Secret,” Jefferies wrote in a note. Aerie is an American Eagle Outfitters Inc.’s brand. The bralette trend is also hurting L Brands. “Victoria’s Secret has been able to drive higher tickets by convincing consumers to trade up for push-up and padding,” Jefferies said. “However, the rise of the bralette (priced about 60% lower than regular bras) is driving average unit retail pressure, while training consumers to pay less. We estimate that every 10% shift in mix to bralettes equates to about a 7 cents hit to L Brands earnings per share and think the risk of broader price deflation is real.” Bath & Body Works, L Brands’ purveyor of soaps, candles and other fragrance items, has done well and Jefferies analysts expect the brand to have a good holiday season. But they wonder how long it can “support the business.” L Brands shares are up 1% in Monday trading, but down 31.5% for the year to date. The S&P 500 Index is up 3.8% for 2016 so far.
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