On July 28, LB said that it expects to deliver about $400M in annualized cost savings, which includes headcount reduction and closure of 250 VS stores in 2020 (previously announced). (While some may applaud the plan as a means to drive operating leverage, we see it as a sign of financial distress.) LB also disclosed that Jul-Q sales are expected to be -20%, above consensus of -26%, reflective, we believe, of pent-up demand and interest for hand sanitizers. That said, LB's 35% share surge yesterday is decoupled from fundamentals. We think investors are underestimating: 1) the pace of consolidation of malls, which threatens the viability of BBW (N.A. segment 55% mall) stand-alone potential; and 2) the burden of debt (LB is among the most leveraged), which gives LB little wiggle room to evolve its business model to a new normal. We reiterate a 12-month target price of $8, 0.2x our FY 21 (Jan.) sales estimate, below the 5-year historical mean. We trim FY 21's EPS to a $0.34 loss from $1.20 EPS on Covid-19.
|Wells Fargo's Q3, 2020, 2021 Full Year Earnings Esti...|
|Viad's 2021 Earnings Projection Cut|
|Analysts' Scale Back 2020, 2021 Consensus Estimates ...|
|Consensus Forecast for Towers Watson & Co's Q3 E...|
|2020 and 2021 Earnings Estimates for Valero Energy D...|