Limited Brands Posts Higher Sales - Analyst Blog
March 05 2012 - 8:45AM
Zacks
Limited Brands
Inc. (LTD), a specialty retailer of women’s intimate and
other apparel, beauty and personal care products, posted
better-than-expected sales results for the four-week period ended
February 25, 2012. The increase was boosted by healthy sales at its
Victoria's Secret Stores and Bath & Body Works.
February
Sales
The owner of Victoria's Secret
Direct and La Senza chains has sustained its growth momentum.
Limited Brands’ comparable-store sales for February 2012 rose 8%
following an increase of 9% in January 2012 and 12% jump in
February 2011.
Management had earlier predicted
comparable-store sales to rise in the mid to high single-digit
range for the month under review.
Comparable-store sales for February
increased 10% at Victoria’s Secret Stores & Victoria’s Secret
Beauty, 7% at Bath & Body Works & The White Barn Candle Co.
and 1% at La Senza. Sales at Victoria’s Secret Direct climbed
5%.
Limited Brands, which competes with
Hanesbrands Inc. (HBI), said that net sales for
February dropped 2.5% to $653.9 million from $670.9 million posted
in the same month prior year. The prior-year period sales included
$70.5 million from a third-party apparel sourcing business that was
sold in November 2011.
Limited Brands fared far better
than its peer Gap Inc. (GPS), which
postedcomparable-store sales growth of 4% compared with a decline
of 3% in the prior-year period.
Consumer Confidence on
High
Consumers seem to have gained
confidence this year, and are opening their wallets, leading to a
surge in sales at stores in February.Conference Board data suggests
that Consumer Confidence Index rose to 70.8 in February 2012 from
61.5 in January, the highest level attained since February 2011,
when the index touched 70.4.
The U.S. economy is showing some
signs of resurrection, as evident from an improving job market,
fall in the count of Americans claiming unemployment benefits and
boost in consumer spending, which represents over 70% of the
economy.
The unemployment rate dropped to
8.3% in January 2012, the lowest figure attained since February
2009. Moreover, according to Labor Department, the number of people
seeking unemployment benefit fell by 2,000 to 351,000.
Strolling Through
Guidance
For the month of March, management
now expects comparable-store sales to rise in the low single
digits. At its last earnings call, Limited Brands forecasted a
comparable-store sales rise in the low to mid single digits in the
first quarter and between 2% and 4% in fiscal 2012. The company
also projected earnings in the range of 35 cents to 40 cents for
the first quarter and between $2.60 and $2.80 per share for fiscal
2012.
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 to augment
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 #3 Rank that translates into a short-term ‘Hold’
rating, and correlates with our long-term view.
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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