L Brands Inc. stock got a lift after analysts had a chance to digest the intimate apparel brands many changes it announced this week. The stock popped almost 3 percent to $66.15.
RBC Capital Markets analyst Brian Tunick said that he walked away with increased confidence that the focus at Victoria’s Secret from restructuring actions, Bath & Body Works store projects and developing the China business can better position the company.
L Brands confirmed that it was closing the catalogue business during its earnings conference call. The company also made it clear to analysts that the decision to pull back on the catalogue and printed promotions was the right one. Chief financial officer Stuart Burgdoefer said that it cost the company $125 million to $150 million a year to do the catalogue.
“If one does the simple math on it, we need to get a lot of sales or a meaningful amount of sales to pay for the catalogue,” he said. He pointed out that the company reduced the catalogue activity by 40 percent and online sales rose 15 percent. He also noted that if the L Brands was starting its business today, they would not send a paper-based catalogue through the mail.
Many of the changes are being made now so as not to disrupt the holiday. Tunick also believes the company will take a 1-2 percent comp hit from the later Memorial Day holiday.
Tunick expects the shares to be range bound as the company experiences near term pain for long-term gain. He continues to have a $68 price target on the stock.