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L Brands, Inc. (KG – Free Report) recently announced its intention to close the 23 Henri Bendel stores as well as the e-commerce site Henri Bendel. Management has suggested that this measure is intended to improve the company's performance and create shareholder value.
The company's store closure plan includes Fifth Avenue and smaller stores in 11 states. The company also indicated that the Henri Bendel brand is expected to generate revenues of approximately $ 85 million and is expected to record an operating loss of approximately $ 45 million in fiscal 2018.
These stores and websites will remain operational until January 2019. Management also indicated that partners remaining in January until January will be offered bonuses, reallocations, compensation and research. separate employment.
Will help efforts resume?
L Brands' decision to close Henri Bendel's business indicates that the company's strategy is to focus on other production opportunities, especially the big brands. This is likely to boost the efficiency and profitability of the help. Apart from this, the company has been engaged in cost control, inventory management and quick marketing initiatives.
However, this company of Zacks Rank # 4 (Sell) has been sailing in rough waters for a while, thanks to the weakness of Victoria's Secret. The lingerie brand Victoria's Secret has lost its place on the market due to strong competition, strong discounts and changing consumer preferences. In addition, the softness of lingerie and loungewear has hurt the Pink brand.
To add to the problems, L Brands' gross margin has declined recently. Gross margin is expected to decrease year-over-year in the third quarter of fiscal 2018 as a result of lower merchandise margin and deleveraging of purchase and occupancy expenses. In addition, selling, general and administrative expenses are expected to increase significantly as a percentage of sales in the third quarter and are expected to increase from one year to the next during the 2018 fiscal year.
Well, all this has forced management to reduce the view of the year. These deterrents were more than enough to hurt investors' feelings. We note that this action by Zacks Rank # 4 (Sell) plunged 23%, compared with a 2.3% increase in the industry over the past three months.
Ultimately, while we expect L Brands' strategy to close Henri Bendel's operations to be cautious in the long term, its short-term impacts are not encouraging. In fact, the Company's expectations of an operating loss from this closure for fiscal year 2018 are likely to compromise the overall profitability of the Company.
That said, we suggest keeping a safe distance from the stock until these efforts begin to bear fruit. Meanwhile, investors may consider the following stocks in the same sector.
Looking for more promising retail stocks? Check these
Urban Outfitters (URBN – Free Report), with a Zacks Rank # 2 (Buy), has a long-term earnings per share (EPS) growth rate of 12%. You can see the complete list of Zacks # 1 Rank (Strong Buy) shares today..
Burlington Stores, Inc. (BURL – Free Report), also ranked No. 2 Zacks, has a long-term earnings per share growth rate of 20.2%.
Target Corp. (TGT – Free Report), with a long-term EPS growth rate of 6.7%, ranks Zacks # 2.
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