Is L Brands Inc (NYSE:LB) Ready For A Major Rebound?

L Brands Inc (NYSE:LB) reported slightly weak quarterly results in August, which triggered a significant slide in its stock price. However, the company’s stock has recently recovered most of its losses and seems to be on an upward trend.

The company currently has a dividend yield of 6.1%, which is likely to be sustained if its fundamentals such as comparable sales remain stable. However, some analysts believe that the dividend yield is not sustainable and that L Brands will suffer the same fate as other apparel retailers who have witnessed declining sales.

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The company’s previous performance has been excellent as it reported growth in sales revenue for 29 consecutive quarters from 2009 up to 2016. However, the company has reported two quarters of weak sales in 2017 so far and some see this as an indicator that the company might have entered a phase of weakening sales.

The retail environment is getting tougher even as L Brands and other specialty apparel retailers such as Michael Kors Holdings Ltd (NYSE:KORS), Ralph Lauren Corp (NYSE:RL) and Gap Inc (NYSE:GPS) struggle with declining foot traffic in most retail malls.

Another significant disadvantage facing L Brands is the fact that many women who find it awkward to buy lingerie and innerwear at brick and mortar stores are turning to online retailers such as Amazon.com, Inc. (NASDAQ:AMZN) where they can shop from the comfort of their homes.

Amazon is gaining ground in the retail apparel industry at the expense of most brick and mortar retailers given that it reported 25% growth in its apparel sales in 2016. Investors who are bullish on L Brands believe that the August comparable sales data showed that the company was improving and the guidance for September comps was positive.

L Brands also stands to benefit from the growing strength of its Victoria Secrets brand, which had experienced weakness in the past. The iconic brand is now repositioning itself in favor of natural beauty as opposed to bombshell beauty.

Clearly, the opinion is divided on whether L Brands is on track for a major rebound, or the company is on a downward slide as is the case with many other retailers.

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