Limited Brands, Inc. (
, a specialty retailer of women's intimate and other apparel,
beauty and personal care products, recently posted second-quarter
2012 earnings of 50 cents a share that beat the Zacks Consensus
Estimate by a couple of cents, and rose from 48 cents earned in the
prior-year quarter. Management had earlier projected quarterly
earnings between 46 cents and 48 cents a share.
Let's Dig Deep
Limited Brands, which competes with
Hanesbrands Inc. (
, posted net sales of $2,399.1 million, falling 2% from $2,458.1
million reported in the prior-year quarter, but marginally
surpassing the Zacks Consensus Estimate of $2,398 million. The
prior-year period sales included $216.6 million from a third-party
apparel sourcing business that was sold in November 2011.
Limited Brands posted comparable-store sales growth of 8% during
the second quarter of 2012 compared with 7% in the previous quarter
and 9% in the prior-year quarter. Comps rose 6% in May, 7% in June,
and 12% in July. This indicates that consumers, who cut back on
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 $1,170.1 million, whereas comps were up 10%.
Victoria's Secret Direct sales jumped 3% to $406.6 million. Total
Victoria Secret sales grew 8% to $1,576.7 million. However, comps
at La Senza edged down 3%, whereas sales tumbled 17% to $94.9
million. Bath & Body Works & The White Barn Candle Co.'s
total sales rose 8% to $609.1 million, with a 7% increase in
Adjusted gross profit for the quarter rose 5% to $945.3 million,
aided by a 7% decline in cost of goods sold, buying and occupancy,
whereas gross margin expanded 270 basis points to 39.4%. Adjusted
operating income inched up 1% to $308.9 million, whereas operating
margin augmented 40 basis points to 12.9%.
Other Financial Details
Limited Brands, which operates 2,906 stores, announced the
payment of a special dividend of $1 per share, apart from regular
quarterly dividend of 25 cents a share. Both the dividends are
scheduled to be paid on September 7 to stockholders of record as on
Strolling Through Guidance
Management now expects earnings in the range of 15 cents to 20
cents for the third quarter and between $2.73 and $2.88per share
for fiscal 2012, up from its previous guidance range of $2.63 to
$2.83. The current Zacks Consensus Estimates for the third and
fiscal 2012 are 20 cents and $2.83, respectively. For the month of
August, management 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 on augmenting its retail footprint
internationally by expanding aggressively in Canada and other
international markets. However, stiff competition and erratic
consumer behavior still remain major causes of concern.
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): ETF Research Reports
HANESBRANDS INC (HBI): Free Stock Analysis
LIMITED BRANDS (LTD): Free Stock Analysis
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