Earnings Preview: Limited Brands - Analyst Blog
February 21 2012 - 8:45AM
Zacks
Limited Brands
Inc. (LTD), a specialty retailer of women’s intimate and
other apparel, beauty and personal care products, is slated to
report its fourth-quarter 2011 financial results on February 22,
2012. The current Zacks Consensus Estimate for the quarter stands
at $1.46 per share, representing an estimated year-over-year
increase of about 16%. Revenue, as per the Zacks Consensus
Estimate, is $3,490 million.
Third-Quarter 2011, a
Synopsis
Limited Brands’ third quarter
earnings of 25 cents per share surpassed the Zacks Consensus
Estimate by a penny and rose 39% from 18 cents per share in the
prior-year quarter. On a reported basis, quarterly earnings
came in at 31 cents, up 72% from the year-ago quarter.
Limited Brands, which competes with
Gap Inc. (GPS) and Hanesbrands
Inc. (HBI), posted net sales of $2,173.4 million that
climbed 10% year-over-year and comfortably beat the Zacks Consensus
Estimate of $2,163 million.
Earnings Estimate
Revisions- Overview
Estimates crept up for Limited
Brands following its fourth-quarter 2011 sales data. The company
registered an increase in its comparable-store sales, but lagged
its prior-year quarter’s performance. Let’s get to the
details of the earnings estimate.
Agreement of Estimate
Revisions
The analysts are positive about the
company’s upcoming earnings, as among the 20 analysts covering the
stock, 4 revised the estimates upward in the last 30 days, while
none moved in the opposite direction. For fiscal 2011, 8 analysts
revised their estimates upward while none lowered the
same.
Magnitude of Estimate
Revisions
The Zacks Consensus estimate inched
up a penny in the last 30 days as the analysts are upbeat about the
company’s future outlook. Management now expects fourth-quarter
2011 earnings to be at the high end of the earlier guidance range
of $1.42 to $1.46 per share.
Positive Earnings Surprise
History
With respect to earnings surprises,
Limited Brands has topped the Zacks Consensus Estimate over the
last four quarters in the range of 0.8% to 4.4%. The average
remained at 3.0%. This suggests that Limited Brands has
outperformed the Zacks Consensus Estimate by the same magnitude
over the trailing four quarters.
Our View
The company’s net sales during the
fourth quarter rose 1.7% year over year to $3,515 million, and
surpassed the Zacks Consensus Estimate of $3,490 million. Limited
Brands comparable-store sales increased 7% during the fourth
quarter of 2011, compared with 9% in the previous quarter and 10%
in the prior-year quarter.
Comparable-store sales for quarter
rose 12% at Victoria’s Secret Stores & Victoria’s Secret Beauty
and 3% at Bath & Body Works & The White Barn Candle Co.,
but fell 3% at La Senza. Sales at Victoria’s Secret Direct grew
3%.
Limited Brands’ sustained focus on
cost containment, inventory management and merchandise initiatives
has kept it afloat amid a sluggish retail environment. The
company’s Bath & Body Works segment is gaining traction on
the back of higher store transactions, enhancement in the direct
channel business and growth in new stores. Victoria’s Secret Stores
has been performing well, and the company is 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 erratic consumer behavior remain concerns.
Currently, we have a long-term
‘Neutral’ recommendation on the stock. However, Limited Brands
holds a Zacks #2 Rank, which translates into a short-term ‘Buy’
rating.
GAP INC (GPS): Free Stock Analysis Report
HANESBRANDS INC (HBI): Free Stock Analysis Report
LIMITED BRANDS (LTD): Free Stock Analysis Report
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