LB LandBridge Company LLC

Limited Brands Inc. (LTD), a specialty retailer of women’s intimate and other apparel, beauty and personal care products, posted comparable-store sales results for the four-week period ended October 27, 2012 that fell short of analysts’ projection.

The owner of Victoria's Secret Direct and La Senza chains did sustain its growth momentum, however, rate of increase decelerated sequentially. Limited Brands’ comparable-store sales for October 2012 rose 3% following an increase of 5% in September and 8% in August. In October 2011 the company had registered a comparable-store sales growth of 6%.

For November, management expects comparable-store sales to rise in the low single-digits, and hinted that Hurricane Sandy did adversely impacted sales at the beginning of this month, as the stores remained closed.

Comparable-store sales for October increased 3% at Victoria’s Secret Stores & Victoria’s Secret Beauty and 5% at Bath & Body Works & The White Barn Candle Co. but dropped 2% at La Senza. Sales at Victoria’s Secret Direct fell 3%.     

Limited Brands, which competes with Hanesbrands Inc. (HBI), said that net sales for October fell 6.3% to $611 million from $652.4 million posted in the comparable prior-year month. The prior-year period sales included $74.4 million from a third-party apparel sourcing business that was sold in November 2011.       

In terms of performance, Limited Brands, the operator of 2,626 specialty stores in the United States, marginally lagged its competitor Gap Inc. (GPS), which posted a comparable-store sales growth of 4% compared with a decline of 6% witnessed in the prior-year period.      

Comparable-store sales climbed 5% for the third quarter compared with an increase of 9% in the year-ago quarter. Net sales dropped 5.7% to $2.050 billion for the third quarter compared with net sales of $2.173 billion last year. The prior-year quarter sales included $258.7 million from a third-party apparel sourcing business that was sold in November 2011. However, net sales came ahead of the Zacks Consensus Estimate of $2.046 billion.

Consequently, management raised its third quarter adjusted earnings guidance to a range of 23 cents to 25 cents, up from a band of 15 cents to 20 cents forecasted earlier. The current Zacks Consensus Estimate for the quarter is 24 cents, up  3 cents in the last 7 days. Limited Brands is slated to release its third quarter results on November 14.

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 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 across the globe by expanding aggressively in Canada and other international markets. Moreover, the company’s strong liquidity positions it for growth and higher returns. However, stiff competition and erratic consumer behavior still remain matters of concern.

Currently, we have a long-term Neutral recommendation on the stock. Moreover, Limited Brands holds a Zacks #2 Rank that translates into a short-term Buy rating, and well support the company’s upbeat guidance.

 
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