L Brands Inc.’s stock dropped 3.5% in morning trade Tuesday, after the apparel retailer was downgraded at Goldman Sachs, which cited concerns that the recently-announced restructuring at Victoria’s Secret could hurt same-store sales in the near term. Analyst Lindsay Drucker Mann cut her rating to neutral, after being at buy for the last 16 months, and removed the stock from the firm’s conviction list. Although Mann expects the restructuring moves will create value long term, some of the moves, such as reduced promotions, could hurt sales near term until customers are weened off the promotions. Therefore, she now sees potential for same-store sales deceleration, and as a result, earnings multiple compression during early implementation, “and we prefer to stay on the sidelines until the full scope and impact of these actions are better understood.” The stock has shed 20% year to date, while the S&P 500 has gained 0.2%.
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