Retailer L Brands (LB) is off to a solid start so far in 2020 (+36%), but don't dare look at a five year price chart. It's been all downhill, and 2020 is just a small blip on what has been a disappointing run. Shares eclipsed the $100 mark in late 2015, and less than five years later, traded for less than $25. LB, of course, is not alone, as specialty retail in general has been a disaster. There's been money to be made in this space nonetheless, that is if you have an iron stomach and are adept at identifying situations, primarily short-term, where the market has overly punished certain names, or presumed their demise prematurely.
In LB's case, the recent mini-upswing has been due mainly to expectations that the company will finally be announcing the sale of its Victoria's Secret business, perhaps this week. It's a business that generated $7 billion in revenue last year, and the sale, which might eclipse $3 billion, could put a big dent into LB's $5.6 billion in debt. It would also allow the company to focus on its much more profitable Bath & Body Works business.
Meanwhile, long shot Ascena Retail Group (ASNA) , whose brands include Ann Taylor, Loft, Lane Bryant, Catherine's, and Justice, continues to quietly make moves, as the markets continue to presume bankruptcy may be on the horizon. Shares are down 38% year-to-date and 50% since the company underwent a 1 for 20 reverse stock split on December 19th.
On January 30th, the company put its 20 acre Mahwah, NJ headquarters (195,000 square feet) up for sale. This came on the heels of the shuttering of its Dress Barn stores, and the sale of 51% of its stake in the Maurice's chain for $300 million in 2019. Those moves don't sound to me like the kind you'd make if bankruptcy was imminent. However, the company has been very quiet, which has not brought much comfort to shareholders.
We'll know more once second quarter earnings are released in mid-March. It doesn't look like we'll get any guidance beforehand, which may be adding fuel to the bankruptcy fear fires. Last quarter's results were surprisingly positive, although not in an "earnings surprise" sense, because no analysts currently cover the name.
There could be more brand sales on the horizon as well for ASNA, as it seeks to pay down debt, and survive.