Shares of L Brands (NYSE: LB) gained over 9% last week after the U.S. fashion retailer raised its profit outlook for the ongoing quarter and announced it would be reinstating an annual dividend, cutting its debt pile, and buying back shares.
Fundamental analysis: The visibility improves
The company said it would be repaying $1.03 billion of debt using $1.1 billion in cash. L Brands also announced a new share buyback program of $500 million to replace the current one, which has $79 million in shares remaining.
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The owner of Victoria’s Secret also announced it would reinstate its annual dividend of 60 cents per share, starting with the quarterly dividend payment in June. The company hiked its profit outlook for this quarter, estimating earnings per share to range between 55-65 cents in Q1, compared to the previous forecast of 35-45 cents.
While the uncertainty remains due to the persistent coronavirus pandemic, L Brands was able to raise its outlook thanks to the strong sales and profits the retailer has recorded quarter-to-date, said the company’s CEO Andrew Meslow.
The U.S. fashion retailer still plans to separate its lingerie business Victoria’s Secret from Bath & Body Works, either via a spinoff or through a sale to another entity. L Brands reached a deal with Sycamore Partners last year to sell Victoria’s Secret for $525 million, but the deal fell apart as the pandemic forced the company to close its stores.
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Technical analysis: New multi-year highs printed
L Brands stock price has soared to trade above the $60 mark for the first time in more than 3 years. The price action is up over 11% in March after gaining over 34% last month.
L Brands stock price is now approaching the key 61.8% Fibonacci resistance line at $65.50, an area that is likely to offer strong resistance. On the downside, the broken 100-MMA is providing support in case a pullback takes place.
Summary
L brands raised its profit outlook for Q1 2021 and said it plans to reinstate annual dividend, pay off debt, and launch a new share buyback program. As a result, shares are trading at the highest levels seen since 2018.
