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Bath & Body Works could see soap sales surge as coronavirus spreads


Roberto Machado Noa | LightRocket | Getty Images

Bath & Body Works owner L Brands could be poised to benefit from an increase in sales of its soaps and hand sanitizers as consumers try to protect themselves from the spread of the deadly coronavirus, an analyst said Monday.

The retailer “could experience (and meet) a meaningful demand surge as consumers race to take preventive measures to protect themselves and their loved ones,” Evercore ISI analyst Omar Saad said in a note to clients.

Evercore on Monday added L Brands to its “Tactical Outperform” list, with a price target of $18 per share, given the view that the retailer’s “scaled anti-bacterial soap and hand sanitizer business is poised to benefit significantly from the growing coronavirus alarm.”

It called out that following the spread of the H1N1 swine flu, which first appeared in the U.S. in April 2000, L Brands said during its fiscal 2009 first-quarter earnings call: “The anti-bacterial business posted gains over last year aided by sales of our PocketBac hand sanitizer. Hand sanitizer sales improved with the outbreak of the H1N1 flu, and our product is differentiated by our broad assortment of fragrances.”

Soaps and sanitizers represent about 20% of L Brands’ overall sales, Evercore has estimated. A “surge in demand” for these items could added two to four percentage points to L Brands’ overall same-store sales growth, Saad said.

Shares of L Brands were down more than 2.5% Monday afternoon, hovering around $20.14. The company has a market cap of about $5.6 billion. L Brands’ stock has fallen a little more than 26% over the past 12 months.

A representative from L Brands wasn’t immediately available to respond to CNBC’s request for comment.

Other consumer stocks, meanwhile, are getting hammered due to their exposure to China’s consumer market, as more people are falling ill to the coronavirus, and millions are restricted from traveling.

Estee Lauder and Nike both generate 17% of their revenues from mainland China each year, Credit Suisse has estimated based on the two companies’ filings. The bank said that if the coronavirus continues, both companies could see a drop of 3% to 5% in earnings per share next quarter.

Other apparel retailers with high China exposure include Tapestry, PVH Corp and VF Corp.

The coronavirus’ impact on these retailers could be worse than the 2002 to 2003 outbreak of SARS, or severe acute respiratory syndrome, Credit Suisse analyst Michael Binetti said.



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