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Avoid L Brands Stock

At least 250 store closures in 2020.
Not able to pay its rent to landlords and having to renegotiate its lease terms.
At least 850 jobs lost.
Falling margins.
Stores not opening or seeing far less traffic due to the coronavirus.
A 45% reduction in sales at its Victoria Secret stores already.
And a 50% reduction in sales in the fall expected.
These are the lowlights of L Brands (L) latest press release on July 29th, 2020 announcing its plans for the rest of 2020.
L Brands own’s popular brands like Victoria’s Secret, Pink, and Bath & Body Works and mostly operates in enclosed malls…
The ones that have seen mass closures. And the ones that are now seeing hugely reduced traffic even after opening back up due to fears of the coronavirus.
The companies next quarterly report is expected to be brutal when it releases… Which is why its prereleasing some of this bad news via a press release.
And I can’t even tell you when that is because on the company’s upcoming corporate events tab on its site it doesn’t even show when its next earnings are coming out.

On top of all this though is something far more worrisome…
Its massive debt.
As of this writing L Brands has a market cap of $7.1 billion.
Its got cash on hand of $1 billion.
And total short term and long-term debt and leases of $9 billion.
Its debt position is so bad that total liabilities make up 119.7% of its balance sheet.
In other words, after you subtract total assets from total liabilities there is negative number. Which means the company’s equity based on its book value is worth less than $0 per share today.
This means the equity – shares – you can buy on the market at your brokerage for L Brands is worth less than $0 per share… And yet people are buying its shares in droves on this news.
As of this writing, L Brands shares are up 34.2% today on the news of this cost cutting and store closures.
Its shares are now selling at $25.66 per share as of this writing… Ones that after you subtract the company’s debt are worth less than $0.
Like many of these articles I write where I tell you to avoid a stock – this makes no sense.
Especially with coronavirus cases still exploding in the US and worldwide which will keep people out of their stores.
Even worse is that in time this stock is likely to go to $0 or be bought out at a discounted price to the “Retail Apocalypse”.
The Retail Apocalypse is former great retailers like Sears, JC Penney, Macy’s ([link removed]), Bed Bath & Beyond ([link removed]) and others losing out to people shopping online and collapsing.
It’s impossible to give you exact stats on the following due to the slow decline of individual companies in the retail industry.
But millions of jobs have been lost to this trend already. And thousands if not tens of thousands of stores have closed nationwide.
And it’s only going to continue with the rise of people shopping and then getting things delivered directly to their houses.
This has been going on for years… But retail store closures due to the coronavirus is accelerating this.
Since the start of the coronavirus pandemic in March the following retailers declared bankruptcy.
• JC Penney
• Brooks Brothers
• Lucky Brands
• GNC
• J. Crew
• Neiman Marcus
And according to reports many other retailers are preparing to file for bankruptcy.
But it won’t work.
Normally in these articles I show you profitability metrics, valuations, and more.
But frankly none of those matter in this case.
Stay away from owning L Brands stock.
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Disclosure – Jason Rivera is a 13+ year veteran value investor who now spends much of his time helping other investors earn higher than average investment returns safely. He does not have any holdings in any securities mentioned above and the article expresses his own opinions. He has no business relationship with any company mentioned above.

Our newsletter is for informational purposes only and is not intended to serve as the basis for any investment decision.
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