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John Morris, BMO Capital Markets managing director,gives his preview of Limited Brands’ earnings report coming after the bell.
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Up 40% over last year the company behind Bath & Body Works -- Victoria's Secret reporting.
Second quarter earnings -- -- the bell today so why should we expect joining me now is John Morris BMO capital markets.
Senior retail analysts -- John.
But this stock has gained one of the 40% over the last year -- line.
-- about what's -- doing all right they're doing everything right.
You know they have to key divisions Bath & Body Works and Victoria's Secret stores and they are hitting it on all cylinders.
You start with the product a lot of -- -- this year that they haven't had.
In recent years he's gonna create jobs fending off the competition particularly Victoria's Secret stores bottom -- starts trying to kind of come in political and their turf.
That's over there are now out there launching -- -- for products.
And it's really working with their customers on top of that.
They're paying they're giving returning cash to shareholders you saw them again -- another special dividend exactly so there really covering all the bases.
What about.
They're fairly affordable Victoria's Secret compared to some of the -- and -- -- Businesses.
Is that putting pressure on the margins little.
Well -- you know one of the things you're gonna have to watch your special in this earnings report tonight.
Is their margins the gross margin the merchandising march and are there going to be able to continue.
To rack up the -- gains that they've had we think that they probably will but it's a question of how much further room is there to go.
You know tracking this company for something like fifteen almost twenty years yeah we're really close to historically high merchandise margins now.
What's interesting is this company has been he able to actually take price increases.
When others have not been able to say they've had pricing power.
It speaks to the power of the brand how much further that can go we'll have to see I think right some of the calms you could say falling net income weak operating cash flow.
Oh mom what is the key thing you can look for this report after the bell well you certainly want to see how they're gonna guide on forward estimates you -- want to be able to see.
There were probably won't got a little bit cautiously don't necessarily buy into that.
As -- -- -- don't bring the range down now one of the compound that's how did they get to the beat they have to have done it with a combination.
Good expense control on -- -- -- airline that'll be up a little bit because there's a lot of us sourcing division.
But also the gross margin.
Is is the kind of car guidance implied points show that there's more room for margin upside from here I just want to wait and -- expecting a beat on top and bottom.
Well they've already pre -- on the second quarter up so we expect 48 cents they could come in -- -- -- that's just kind of politics.
The go forward guidance and the for your guidance I would expect that they're probably gonna get fairly conservatively.
I'm looking in the third quarter right now for 27 cents the streets of 24 cents so -- -- we think they're probably gonna actually differently altogether they need -- -- holiday.
What's the upside for -- we want to -- we wanna ask them where's the opportunity.
They really did a great job at this point last year to its stuffed again up 40% over the last year John thank you so much for joining -- -- appreciate it.
Schools Tracy's buying respects.
