L Brands: Earnings Preview

L Brands (NYSE: LB  ) will report results for the third quarter of fiscal 2014 after market close Wednesday. Shares have risen more than 45% in the past year as L Brands continues to show strength in a faltering retail environment. Will that trend continue in the third quarter? 

L Brands was formerly known as The Limited before spinning off that namesake chain of stores. Nowadays L Brands owns several popular brands including intimate apparel store Victoria's Secret and the body-care and home-goods-focused Bath & Body Works. The company faces competition from other mall regulars, including Gap (NYSE: GPS  ) , but benefits from having a diverse product mix.

Here's what to watch for in the L Brands third-quarter report.   

Quarterly estimates to beat 
L Brands forecast third-quarter earnings per share in the range of $0.23 to $0.28. Analysts predict revenue of $2.2 billion and earnings per share of $0.28. L Brands has met revenue estimates for four of the five past quarters and beat on the fifth. The company has beat EPS estimates consistently across that period. 

Quarterly results to beat 
Investors will judge L Brands' third-quarter report against the same period last year. What were the performance numbers for that quarter? 

L Brands reported $2.1 billion in revenue and earnings per share of $0.26. Comps rose 5% overall, primarily driven by 6% comps growth for Victoria's Secret and 5% growth for Bath & Body Works. 

Fall into the Gap? 
Gap will report third-quarter earnings on Thursday. Analysts expect revenue of $4.0 billion and EPS of $0.66. Gap has met or beat estimates for the past five quarters. 

L Brands hasn't historically had a lot to fear from Gap in regard to customer cannibalization, since their product mixes were so different. However, Gap's moving further into the athletic-wear arena -- where L Brands' Pink stores also reside -- and opened six new Athleta stores in the second quarter. Gap plans to open 19 more Athleta stores before year's end.

Sales reports offer performance hint
L Brands reported its October sales data earlier this month. For a 13-week period ending Nov. 2, L Brands had net sales of about $2.2 billion -- 6% year-over-year growth-- and 3% growth in comps. The 39-week figures were about $7 billion in net sales -- up 5% from the prior-year period-- and 3% comps growth. 

Analyst revenue estimates for the quarter represent 5% growth compared to last year's quarter. The sales report suggests that L Brands will at least meet estimates.  

Foolish final thoughts 
L Brands has consistently met or beat estimates this year, and estimates for the third quarter appear conservative. The company stands as one of the few mall properties that's not suffering from softer traffic in the quarter. Investors would be wise to pay attention to its results.

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