Limited Brands Raises Outlook - Analyst Blog

Limited Brands Inc. (LTD), a specialty retailer of women's intimate and other apparel, beauty and personal care products recently raised its third-quarter 2010 earnings outlook, following better-than-expected sales results for the four-week period ended October 30, 2010.

The company now expects third quarter earnings between 15 cents and 17 cents a share, up from the previously provided guidance range of 3 cents to 8 cents. The analysts covered by Zacks now expect Limited Brands to post earnings of 16 cents a share that dovetails with the company's outlook.

The owner of Victoria's Secret and Bath & Body Works chains sustained its growth momentum. Limited Brands' comparable-store sales for October rose 9%, following a 12% increase registered in September 2010, and reflecting a sharp improvement from a decline of 4% experienced in October 2009. Limited Brands now expects November comparable-store sales to rise in the low-single digits.

Comparable-store sales for October increased 14% at Victoria's Secret Stores & Victoria's Secret Beauty, 5% at Bath & Body Works & The White Barn Candle Co., and 2% at Victoria's Secret Direct but dropped 2% at La Senza.

In the third quarter, comparable-store sales of Columbus, Ohio-based Limited Brands, grew by 10% as against a fall of 2% in the prior-year quarter.

Limited Brands hinted that comparable-store sales in the third quarter increased 14% at Victoria's Secret Stores & Victoria's Secret Beauty, 6% at Bath & Body Works & The White Barn Candle Co., 3% at Victoria's Secret Direct and 1% at La Senza.

Net sales for October rose 10% to $617.3 million from $561.1 million posted in the same month last year. In third the quarter, sales climbed 11.6% to $1,983 million from $1,777 million in the prior-year quarter.

Limited Brands' sustained focus on cost containment, inventory management and merchandise initiatives has kept it afloat in a sluggish consumer environment. Management also expects gross margin to improve in the year driven by an improvement in the merchandise margin rate.

The company's Bath & Body Works segment is gaining traction, driven by the rise in store transactions, enhancement in the direct channel business and growth from new stores. Victoria's Secret Stores have been performing well. The company is also constantly revamping its La Senza brand. Limited Brands is keen to enhance its retail footprint across the globe by expanding aggressively in Canada and other international markets.

However, stiff competition and unfavorable macroeconomic factors influencing the consumer spending pattern still remains a concern.

Currently, we have a Neutral rating on Limited Brands. The Zacks #3 Rank, which translates into a short-term ‘Hold' recommendation, also correlates with our long-term view.