Limited Brands Sales Rise - Analyst Blog

December being the busiest gift-giving time of the year is also the most crucial month for retailers, and Limited Brands Inc. (LTD), a specialty retailer of women’s intimate and other apparel, beauty and personal care products, has made the most of it this time.

The company posted better-than-expected sales results for the five-week period ended December 31, 2011 on the heels of healthy sales at its Victoria's Secret Stores and Bath & Body Works, and consequently, raised its fourth-quarter 2011 earnings outlook.

The owner of Victoria's Secret Direct and La Senza chains has sustained its growth momentum. Limited Brands’ comparable-store sales for December 2011 rose 7% following a similar increase in November 2011 and compared with a 5% jump in December 2010.

Comparable-store sales for December increased 11% at Victoria’s Secret Stores & Victoria’s Secret Beauty and 4% at Bath & Body Works & The White Barn Candle Co. but remained flat at La Senza. Sales at Victoria’s Secret Direct climbed 6%.

Limited Brands, which competes with Hanesbrands Inc. (HBI), said that net sales for December jumped 4.4% to $1,868 million from $1,790 million posted in the same month of the prior year.

For the 48-week period ended December 31, 2011, comparable-store sales surged 10%, whereas net sales jumped 8.5% to $9,590 million from $8,841 million reported in the prior-year period.

Buoyed by better-than-expected sales results, management now projects fourth-quarter 2011 earnings in the range of $1.42 to $1.46 per share, up from $1.28 to $1.43 forecast earlier. The current Zacks Consensus Estimate for the quarter is $1.44.

In terms of performance, Gap Inc. (GPS) lagged behind Limited Brands, posting comparable-store sales decline of 4% compared with a 2% fall in the prior-year period.

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 growth in 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 concerns.

The economy is still grappling with the ongoing financial crisis. Although, the recent drop in the unemployment rate to 8.5% in December compared with 8.7% in November and 9.4% in the prior year, is encouraging, but we still expect consumers to remain cautious on their spending, and retailers to make relentless efforts to convert store traffic into business.

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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