Sometimes Sex...Y Doesn’t Sell

Victoria’s Secret is a brand most women and men know. But did you know they are owned by L Brands. Well Victoria’s Secret isn’t a secret anymore. When the company extends their semi-annual sale and same-store sales for June still declines 1%, I have to ask, where is the Love?

The stock dropped nearly 10% yesterday and was on track for its worst day since March 1, when it fell 14%.

Usually the semi-annual sale drives up sales. However, L Brands' Chief Investor Relations Officer Amie Preston said in a conference call that a soft-start in lingerie and PINK sales weighed on the promotion during the past five weeks. So they extended the sale two more weeks and reduced pricing to drive traffic and clear inventory, which adversely affected their margins.

Personally, I’m real familiar with L Brands. No, I never bought anything for myself at Vicky’s, but mid-last year I bought 2019 $30 strike leap put options in my IRA betting that price was going to decline. However, the Retail space was oversold and came roaring back between Summer and Christmas. My conviction kept me in the trade until I came to my senses and sold my put options for a 70% loss (ouch..my first real lesson in market sentiment). Due to option time decay, those same put options would be worth %18 lower on my initial investment.

Based on the monthly chart, I think there is more downside risk. The trend has been down since 2016. Price has been making lower highs and lower lows. Thus, wants gets pass $30, I see another $7 of downside risk, but my longer term target is $12.50.

This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.

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Published on

by rollandthomas

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