Limited Brands (
) reported a 20% increase in comparable store sales of $683 million
in the month of April over the same period last year. For the
quarter ending in April, the increase in comparable sales was a
healthy 15% as Limited Brands' sales crossed $2.2 billion in sales.
Victoria's Secret led the charge with a jump of 25% in sales for
April year-over-year, and the power of this recognized lingerie,
beauty and personal care lines help separate it from those like
Abercrombie & Fitch
), AnnTaylor (
Victoria's Secret Leads the Way
Victoria's Secret, the firm's most popular brand, is best known
for its ample selection of lingerie and sleepwear. This unit
witnessed an eye catching 25% increase in comparable store sales
for April and registered 19% growth for the quarter with $987
million in sales.
While we currently forecast the revenue per square foot of
Victoria's Secret stores in the U.S. to increase at a low single
digit rate, there could be significant upside to the firm if it
maintains the high comparable store sales growth going forward. We
estimate a 15% increase in revenue per square foot of Victoria's
Secret stores in U.S. in 2011 instead of our current forecast of 3%
rise would result in just about 5% to our price estimate for
Limited Brands' stock.
As our estimates are around 18% below the current market price,
this suggests what we could be conservative on our growth forecasts
for Limited looking ahead.
Below are some supporting factors to this bullish thesis:
1. Increasing market share in intimate apparel sales
Over the past few years, the market share of branded products in
the intimate apparel market has increased primarily due to retail
channels carrying more branded intimate apparel.
This is great news for Victoria's Secret, the largest in the
intimate apparel market with nearly 38% market share by our
estimates. As more consumers turn to the retail channel and become
increasingly brand conscious, the revenue per square foot at
Victoria's Secret stores in U.S. is likely to increase.
2. Expansion into new product categories
Victoria's Secret over the past has expanded its product
offering outside the core lingerie products. Victoria's Secret now
also offers shoes, evening wear, accessories, handbags, luggage as
well as fragrances.
We expect this expansion trend to continue in the future as
Victoria's Secret tries to realize the full potential of its strong
brand image by broadening its product line. Increased product
offerings will likely result in higher revenue per square foot of
Victoria's Secret stores in the US.
See our complete analysis of Limited Brands