Limited Brands Beats, Ups Outlook - Analyst Blog
August 16 2012 - 5:45AM
Zacks
Limited Brands, Inc.
(LTD), 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
Gap Inc. (GAP)
and Hanesbrands Inc. (HBI),
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 comps.
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 August 23.
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.
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 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 Report
LIMITED BRANDS (LTD): Free Stock Analysis Report
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