Limited Brands, Inc.
), a specialty retailer of women's intimate and other apparel,
beauty and personal care products, recently posted first-quarter
2012 earnings of 41 cents a share that whiskered past the Zacks
Consensus Estimate by a penny, and rose 5% from 40 cents earned in
the prior-year quarter. Management had earlier projected quarterly
earnings between 38 cents and 40 cents a share.
Let's Dig Deep
Limited Brands, which competes with
), posted net sales of $2,153.8 million that fell 3% from the
prior-year quarter, and also fell short of the Zacks Consensus
Estimate of $2,155 million.
Limited Brands posted comparable-store sales growth of 7% during
the first quarter of 2012 compared with 7% in the previous quarter
and 15% in the prior-year quarter.Comps rose 8% both in February
and March, and 6% in April. This indicates that consumers, who cut
back their discretionary spending during the recession, are now
gradually opening their wallets.
Sales at Victoria's Secret Stores & Victoria's Secret Beauty
increased 10% to $1,088 million, whereas comps were up 9%.
Victoria's Secret Direct sales jumped 4% to $382 million. However,
comps at La Senza edged down 1%. Total Victoria Secret sales grew
8% to $1,470 million driven by a 9% rise in comps. Bath & Body
Works & The White Barn Candle Co.'s total sales were up 5% to
$505 million, with a 6% increase in comps.
Gross profit for the quarter rose 7% to $902 million, aided by a
9% decline in cost of goods sold, buying and occupancy, whereas
gross margin expanded 390 basis points to 41.9%. Operating income
jumped 10% to $293.2 million, whereas operating margin increased
160 basis points to 13.6%.
Other Financial Details
Limited Brands, which operates 2,899 stores, ended the quarter
with cash and cash equivalents of $1,285.6 million and total
long-term debt of 4,537.5 million
Capital expenditures for the quarter were $136.3 million.
Management now anticipates capital expenditures between $575
million and $625 million for fiscal 2012, and expects to generate
free cash flow in the range of $600 million to $700 million.
Strolling Through Guidance
Management now expects earnings in the range of 40 cents to 45
cents for the second quarter and between $2.63 and $2.83 per share
for fiscal 2012. The current Zacks Consensus Estimates for the
second and fiscal 2012 are 43 cents and $2.79, respectively.
Limited Brands now expects comparable-store sales to increase in
the low-to-mid single digits in the second quarter and between 3%
and 5% in fiscal 2012. For the month of May, management now expects
comparable-store sales to rise in the low single-digit range.
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
Limited Brands is keen to augment its retail footprint
internationally by expanding aggressively in Canada and other
international markets. 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 #3 Rank that
translates into a short-term 'Hold' rating.
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