Limited Brands, Inc.
(
LTD
), a specialty retailer of women's intimate and other apparel,
beauty and personal care products, recently posted
better-than-expected fourth and fiscal 2011 results on the back of
an improving sales environment witnessed across its Victoria's
Secret and Bath and Body Works chains.
The quarterly earnings of $1.50 per share beat the Zacks
Consensus Estimate of $1.46, and rose 19% from $1.26 earned in the
prior-year quarter. Management had earlier projected quarterly
earnings on the high end of $1.42 to $1.46 per share range.
The company said that fiscal 2011 earnings registered a growth
of 26% to $2.60 per share from $2.06 in the prior year, and came
ahead of Zacks Consensus Estimate of $2.56.
On a reported basis, including one-time items, the quarterly
earnings came in at $1.17 per share compared with $1.36 in the
year-ago quarter. For fiscal 2011, the company posted earnings of
$2.70 per share, up from $2.42 in 2010.
Let's Dig Deep
Limited Brands, which competes with
Gap Inc.
(
GPS
) and
Hanesbrands Inc.
(
HBI
), posted net sales of $3,515.4 million that rose 2% from the
prior-year quarter, and comfortably beat the Zacks Consensus
Estimate of $3,490 million.
Sales climbed 8% to $10,364 million from $9,613.3 million in
fiscal 2011, and outdid the Zacks Consensus Estimate of $10,344
million.
Limited Brands posted a comparable-store sales growth of 7%
during the fourth quarter of 2011 compared with 9% in the previous
quarter and 10% in the prior-year quarter.Comps rose 7% both in
November and December, and 9% in January. Limited Brands'
comparable-store sales for fiscal 2011 climbed 10% compared with 9%
in the prior year. 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 13% to $1,572 million, whereas comps were up 12%.
Victoria's Secret Direct sales jumped 3% to $519 million. However,
comps at La Senza dropped 3%. Total Victoria Secret sales grew 10%
to $2,091 million driven by a 12% rise in comps. Bath & Body
Works & The White Barn Candle Co.'s total sales were up 4% at
$1,128 million, with a 3% increase in comps.
Gross profit for the quarter rose 7% to $1,544.6 million, aided
by a low-single digit growth in the top line and a 2% decline in
cost of goods sold, buying and occupancy, whereas gross margin
expanded 210 basis points to 43.9%. Operating income jumped 10% to
$786.5 million, whereas operating margin increased 180 basis points
to 22.4%.
Other Financial Details
Limited Brands, which operates 2,941 stores, ended the quarter
with cash and cash equivalents of $935.1 million, long-term debt of
3,481 million and shareholders' equity of $138.2 million.
Capital expenditures for the fourth quarter and fiscal 2011 were
$90.9 million and $425.8 million, respectively. Management now
anticipates capital expenditures between $575 million and $625
million in fiscal 2011, and expects to generate free cash flow in
the range of $600 million to $700 million.
Limited Brands is also actively managing its cash flows, and
returning much of its free cash via dividends and share
repurchases. The company recently completed its $250 million share
buyback authorization, and its board of directors went on to
announce a new $500 million share repurchase program.
Strolling Through Guidance
Management now expects earnings for the first quarter in the
range of 35 cents to 40 cents and for fiscal 2012 between $2.60 and
$2.80 per share. The current Zacks Consensus Estimates are 44 cents
for the first quarter and $2.92 for fiscal 2012, both of which lie
ahead of management's guidance range. Consequently, we could
witness a correction in the Zacks Consensus Estimates in the coming
days with analysts revising their estimates to better align with
management's guidance.
Limited Brands now expects comparable-store sales to increase in
the low-to-mid single digits in the first quarter and between 2%
and 4% in fiscal 2012. For the month of February, comps are
expected to rise in the mid-to-high single-digit range, up from low
single digits forecasted earlier.
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
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 #2 Rank that
translates into a short-term 'Buy' rating.
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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