George Putnam is an industry-leading expert specializing in turnaround stocks; in the latest issue of his newsletter, The Turnaround Letter, he reviews two potential opportunities in the retail sector.

Founded by legendary retailer Les Wexner, L Brands (LB) has failed to stay relevant to customers of Victoria’s Secret (about 55% of sales), leading to an 8% decline in year-to-date same store sales. 

Slowing mall traffic weighs further on its prospects. Investors threw in the towel on LB shares in August following yet another weak quarter.

However, the November report showed signs that the company is waking up: new leadership at PINK, strength in the Beauty line, and impressive performance in the Bath & Body Works segment. Renowned hedge fund Bridgewater Associates recently added to its sizable stake.

Levi Strauss (LEVI) owns one of the most highly regarded brands in the world. Its ubiquitous blue jeans are sold in over 50,000 retail locations in 110 countries, as well as through Levi’s burgeoning online business.

Its shares debuted at $17 and surged to over $22 on the first trading day, but that enthusiasm has faded as the shares now trade at their IPO price. Levi’s otherwise sturdy revenue and profit strength is being obscured by the strong U.S. dollar and some sluggishness in the wholesale channel.

The company continues to invest in its growth initiatives and expand its direct-to-consumer operations and product array.The shares are valued at a reasonable multiple, and the modest debt is nearly fully offset by cash.  Investors might want to try on Levi’s for size.

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