LB Surges on Victoria's Secret Store Closures

The company's first-quarter results missed analysts' estimates

Lillian Currens
May 21, 2020 at 1:51 PM
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L Brands Inc (NYSE:LB) just reported first-quarter losses and revenue that missed analysts' estimates. The apparel retailer's Victoria's Secret branch, which has been steeped in controversy lately, saw its sales for the first-quarter cut in half, while its Bath & Body Works sales dropped by 18%, with both branches hit hard by coronavirus-related lockdowns. The firm also withheld second-quarter and full-year forecasts. Despite this, LB is up 15.5% at $14.11, pacing for its highest close in over a month, likely due to news that the firm plans on closing 250 of its Victoria's Secret stores in North America this year. 

Today's surge has LB set to close atop its 60-day moving average for the first time since March 6. The equity is also testing its footing back above the $14 level, which has acted as pressure on the charts since LB's gap lower later in March. L Brands stock is up 32% this week alone, though it still suffers a 20.9% year-to-date deficit. 

LB May 21

The unexpected surge has brought plenty of options players to the table, with 60,000 calls and 16,000 puts across the tape so far -- four times the intraday average. The most popular is the August 10-call, while positions are being opened at the June 14 call, too. 

This bullish sentiment has been the norm for LB of late. In the last 10 days, 9,358 calls were exchanged, compared to just 3,371 puts. Echoing this, LB sports a Schaeffer's put/call open interest ratio (SOIR) of 0.13, which sits in the lowest percentile of its annual range. This means short-term options traders haven't been more call-biased in the past year. 

The brokerage bunch, however, is singing a different tune. Of the 18 in coverage, 12 call it a "hold" or worse, while six say "strong buy." Plus, the 12-month consensus price target of $15.03 is a slim 5.3% premium to current levels. 

 


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