Taking a look at a recent 8-K filing, we can gather their quarterly numbers and see how the short term fundamentals stack up. The company reported net sales for the fourth quarter were $4.489 billion, an increased of 2 percent from the year prior. For the fourth quarter, the exit of swim and apparel categories had a negative impact of 2 percentage points and 4 percentage points to total company and Victoria’s Secret comparable sales, respectively. The company also announced a dividend of $0.60 per share, payable on March 3, 2017. These are good numbers and should not scare anyone off at a quick glance.
Switching gears to the chart, we can see that has fallen from the highs and appears to have more room to fall. Volume appears to be alright and that means that buyers may not want to step in as of yet. How I would approach the chart is wait for confirmation that price wants to turn around. This can be done by looking a few indicators on the chart in combination with the fundamental data. Judging from the chart, it seems the best play would be to wait and see when price turns.
How important is L Brands's Liquidity
L Brands
financial leverage refers to using borrowed capital as a funding source to finance L Brands ongoing operations. It is usually used to expand the firm's asset base and generate returns on borrowed capital. L Brands financial leverage is typically calculated by taking the company's all interest-bearing debt and dividing it by total capital. So the higher the debt-to-capital ratio (i.e., financial leverage), the riskier the company. Financial leverage can amplify the potential profits to L Brands' owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if the firm cannot cover its debt costs. The degree of L Brands' financial leverage can be measured in several ways, including by ratios such as the debt-to-equity ratio (total debt / total equity), equity multiplier (total assets / total equity), or the debt ratio (total debt / total assets). Please check the
breakdown between L Brands's total debt and its cash.
Breaking down L Brands Further
Risks
Being in the retail industry, there are many risks to keep in mind. You can find the full list of risks on the latest 10-K report, but here are a couple to keep in mind. First, the company has to stay on top of the latest trends because it is easy for the customer to head over to a competitor to purchase the same thing. Secondly, being in retail poses a risk to the overall market conditions. If people no longer have job security or are no longer making money, they are going to stop shopping, which hurts the company and investors.
Conclusion
The brands that are under this company are strong and people still go to the stores in a healthy number. However, it doesn’t take a whole lot to cause people to stop going or change their store of choice. Be sure to do research to ensure your portfolio can handle the risks and if it fits your diversification rules. If you still have questions, be sure to consult an investing professional and they can help point you in the right direction.
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Nathan Young is a Senior Member of Macroaxis Editorial Board - US Equity Analysis. With years of experience in the financial sector, Nathan brings a diverse base of knowledge. Specifically, he has in-depth understanding of application of technical and fundamental analysis across different equity instruments. Utilizing SEC filings and technical indicators, Nathan provides a reputable analysis of companies trading in the United States.
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