Limited Brands Comps Rise - Analyst Blog

Limited Brands Inc. (LTD), a specialty retailer of women’s intimate and other apparel, beauty and personal care products, posted better-than-expected comparable-store sales for the five-week period ended March 31, 2012. The increase was boosted by healthy sales at its Victoria's Secret Stores and Bath & Body Works.

The owner of Victoria's Secret and La Senza chains has sustained its growth momentum. Limited Brands’ comparable-store sales for March 2012 rose 8% following a similar percentage increase in February 2012 and 14% jump in March 2011.

Management had earlier predicted comparable-store sales to rise in the low single digits for the month under review.

Comparable-store sales for March increased 10% at Victoria’s Secret Stores & Victoria’s Secret Beauty, 6% at Bath & Body Works & The White Barn Candle Co. and 1% at La Senza. Sales at Victoria’s Secret Direct climbed 3%.

Limited Brands, which competes with Hanesbrands Inc. (HBI), said that net sales for March dropped 2.6% to $840.9 million from $863 million posted in the same month prior year. The prior-year period sales included $84.3 million from a third-party apparel sourcing business that was sold in November 2011.

Limited Brands performed at par with its peer Gap Inc. (GPS), which also posted comparable-store sales growth of 8% compared with a decline of 10% in the prior-year period.

For the nine-week period ended March 31, 2012, Limited Brands registered comparable-store sales growth of 8%. However, net sales for the period fell 2.5% to $1,495 million from $1,534 million in the prior year. The prior-year sales included $154.8 million from a third-party apparel sourcing business that was sold in November 2011.

Sifting Through Guidance

For the month of April, management now expects comparable-store sales to rise in the low single-digit range. At its last earnings call, Limited Brands forecasted comparable-store sales to increase in the low-to-mid single digits in the first quarter and between 2% and 4% in fiscal 2012. The company also projected earnings in the range of 35 cents to 40 cents for the first quarter and between $2.60 and $2.80 per share for fiscal 2012.

Let’s Conclude         

The company’s Bath & Body Works segment is gaining traction, driven by a rise in store transactions, enhancement in the direct channel business and increased number of new stores. Victoria’s Secret Stores have been performing well, and the company is also revamping its La Senza brand.

Limited Brands is keen to augment its retail footprint across the globe by expanding aggressively in Canada and other international markets. Moreover, the company’s strong liquidity positions it for growth and higher returns. However, stiff competition and erratic consumer behavior still remain matters of concern.

Currently, we have a long-term Neutral recommendation on the stock. Moreover, Limited Brands holds a Zacks #3 Rank that translates into a short-term Hold rating, and correlates with our long-term view.

GAP INC (GPS): Free Stock Analysis Report

HANESBRANDS INC (HBI): Free Stock Analysis Report

LIMITED BRANDS (LTD): Free Stock Analysis Report

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