Limited Brands Sales Up - Analyst Blog

Limited Brands Inc. (LTD), a specialty retailer of women’s intimate and other apparel, beauty and personal care products recently posted strong sales results for the four-week period ended April 30, 2011 on the heels of healthy sales at its Victoria's Secret Stores and Bath and Body Works.

The owner of Victoria's Secret and La Senza chains sustained its growth momentum. Limited Brands’ comparable-store sales for April 2011 rose 20%, following a 14% increase in March 2011, and compared with 4% growth posted in March 2010.

Comparable-store sales for April increased 25% at Victoria’s Secret Stores & Victoria’s Secret Beauty, 5% at Victoria’s Secret Direct and 16% at Bath & Body Works & The White Barn Candle Co. but decreased marginally by 1% at La Senza.

Limited Brands, which competes with Gap Inc. (GPS) and Hanesbrands Inc. (HBI), said that net sales for April rose 16.9% to $683.2 million from $584.6 million posted in the same month last year.

For the thirteen-week period ended April 30, 2011, comparable-store sales surged 15%, whereas net sales jumped 14.8% to $2,217 million from $1,932 million reported in the prior-year period.

On the back of better-than-expected sales results for the month of April, Limited Brands raised its earnings outlook. Management now expects first-quarter 2011 earnings between 37 cents to 39 cents a share, reflecting a year-over-year growth of 48% to 56%. Earlier, management had earnings in the range of 26 cents to 31 cents a share.

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 enhance its retail footprint across the globe by expanding aggressively in Canada and other international markets. Moreover, the company’s strong liquidity positions it to drive growth and enhance return.

After exhausting the $500 million share buyback program announced on March 22, 2011, Limited Brands’ board of directors announced another $500 million share repurchase program. However, stiff competition and erratic consumer behavior still remain concerns.

Currently, we have a long-term Neutral recommendation on the stock. However, Limited Brands holds a Zacks #2 Rank, which translates into a short-term Buy rating.

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