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Why L Brands, Netflix, and Cato Slumped Today

Steve Symington, The Motley Fool

Major benchmarks rebounded on Thursday, as tech stocks rallied and investors put global trade tensions on the back burner.

But not every company's shares enjoyed a positive session. Read on to learn why L Brands (NYSE: LB), Netflix (NASDAQ: NFLX), and Cato (NYSE: CATO) each slumped today.

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L Brands goes on sale

Shares of L Brands fell 12.1% after the parent company of chains including Victoria's Secret and Bath & Body Works announced disappointing monthly sales growth.

L Brands revealed that net sales had climbed 5.7% year over year, to $1.282 billion, for the five weeks ended July 7, 2018, slowing from 10% growth last month. Within that total, comparable-store sales climbed roughly 3%, again marking a deceleration from last month's 5% increase.

During a subsequent conference call, L Brands management blamed a "soft start with negative traffic levels" during Victoria's Secret's highly anticipated semiannual sale. As a result, the company opted to further reduce prices and extend the sale by two weeks to clear inventory -- a move investors will almost certainly see reflected in the company's next quarterly report in August.

Has Netflix climbed too high?

Netflix stock lost nearly 3% early in the session, then partially recovered to close down 1.2% in the wake of UBS analyst Eric Sheridan downgrading his firm's rating on the streaming-media leader from buy to neutral. He also curiously increased his price target on Netflix stock to $425 from $375, representing a modest premium from yesterday's closing price at around $419 per share.

To justify his call, Sheridan admitted while Netflix's content and technology leadership will likely "drive a virtuous circle of greater [subscribers] and increased viewing time," he worries that these strengths are "all priced in," making the stock a "less compelling" option for investors looking to put money to work today.

Still, with shares still up around 160% over the past year as of this writing, I think you'll be hard-pressed to find investors willing to complain about Wall Street's tempered enthusiasm.

Cato goes out of style

Finally, shares of Cato fell 13.5% following the women's fashion and accessories retailer's announcement of dissatisfying monthly sales results. For the five weeks ended July 7, 2018, Cato's sales fell 2.4% year over year to $72.9 million, as roughly flat same-store sales couldn't offset a small number of store closures over the past year. 

Company chairman and CEO John Cato simply stated the results arrived "slightly below" expectations. Similar to L Brands' aforementioned slowdown, Cato's flat comps also marked a notable deceleration from 9% same-store sales growth in May -- a much better-than-expected result the company attributed at the time to "pent up demand" as weather began to improve throughout the month.

With shares up around 45% over the past year going into yesterday's close, it should come as no surprise to see Cato stock pulling back today.

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Steve Symington has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Netflix. The Motley Fool has a disclosure policy.