Promotions Helped Boost L Brands Comps In August, Baird Ups September Comp Target

L Brands Inc (NYSE: LB) reported better-than-expected August comps, but Baird stays on the sidelines, saying the risk/reward looks balanced against the backdrop of negative EPS growth. However, the brokerage increased its September comp estimate.

L Brands reported 2 percent rise in August comps, ahead of consensus estimate of 0.4 percent upside and primarily fueled by upside at Bath & Body Works and promotional activity at Victoria's Secret.

The company expects September comps to be about flat (versus +8 percent last year; +200bp more difficult comparison sequentially).

"While monthly comparisons do get more difficult in September and the company guided to ~flat comps, we felt comfortable raising our September comp estimate to +1 percent given recent comp out-performance," analyst Mark Altschwager wrote in a note.

Related Link: Mixed August Sales Numbers From Buckle, The Gap And L Brands

The analyst maintains his Neutral rating and $80 price target as sales/margin overhangs pressure near-term earnings growth.

"We believe the company is one of the better-positioned retailers in our coverage universe with differentiated brands, quality management, and compelling long-term growth opportunities. However, with valuation near 18–19x, expectations currently reflect upside to management's guidance, in our view, supporting balanced risk/reward today," Altschwager added.

At time of writing, shares of L Brands were down 0.32 percent to $74.57.

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