Fitch Ratings affirmed L Brands’ debt grades on the strength of the specialty retailer’s market position as well as its sales and earnings outlook.
L Brands is tagged with a “BB-plus” grade on its long-term issuer default rating, a “BBB-minus/RR1” rating on its secured bank credit facility, a “BB-plus/RR4” rating on its senior guaranteed unsecured notes and a “BB/RR5” grade on its senior unsecured notes. Fitch also has L Brands listed with a rating outlook that is “stable.”
Shares of the company were up 0.3 percent to $85.01 on lighter-than-average trading at midday. The company’s 52-week low is $56.57 and the high is $95.28. In its most-recent quarter, L Brands beat earnings guidance and offered a tepid outlook.
Behind the affirmation is L Brands’ “strong business profile” that “is anchored by its two flagship brands, Victoria’s Secret and Bath & Body Works; a strong direct business; and a growing international footprint,” Fitch said in its report.
The ratings firm L Brands has delivered “strong comparable-store sales trends since the recession” that are “driven by relevant and attractive product offerings and a loyal customer base.”
The Fitch report noted L Brand’s 4 percent same-store sales increase last year, which was on top of a 2 percent gain in 2013 and a 6 percent gain in 2012. “In addition to positive operating leverage from strong comps growth, the company has driven margin growth through efficient inventory and expense management. EBITDA [earnings before interest, taxes, depreciation and amortization] margins in the 20 percent-plus range compare favorably to the broader retail average in the low teens,” Fitch stated.