Limited Brands (LTD)
is doubling down on its core brand, Victoria’s Secret, as it seeks ways to grab foreign growth through the iconic lingerie line. Analysts are impressed with the growth despite the economic doldrums and cautiously expect good things from an international expansion plan ahead.
Limited Brands is a specialty retailer focused on women’s intimate and other apparel, personal care and beauty categories, which it sells mostly through mall stores in the United States and Canada, websites, catalogue and international franchise, license and wholesale partners.
The flagship brand is the women’s lingerie lines Victoria’s Secret and Victoria’s Secret Pink, which also sells fragrances and cosmetics. There are currently more than 1,000 Victoria’s Secret stores in the United States and Canada.
Victoria’s Secret brand products are also available in Victoria's Secret Beauty and Accessories stores operated by partners under a franchise or wholesale model worldwide.
The company also owns Bath & Body Works, a specialty retailer of home fragrance and personal care products including shower gels, lotions and antibacterial soaps. There are more than 1,600 Bath & Body Works stores in the United States and Canada and online. Additionally, Bath & Body Works brand products are available through franchise locations in the Middle East.
Limited sells intimate apparel through the La Senza brand, too. It has more than 200 La Senza stores in Canada and online and approximately 300 stores in 30 countries operating under franchise and licensing arrangements. In addition, the company also owns upscale accessory products brand Henri Bendel, which sells at a New York flagship store and 18 other stores, as well as online.
In July 2007, Limited completed a divestiture of 75 percent ownership interest in Express. In August of that year, the company sold its 75 percent share in Limited Stores, later raising the sale to 100 percent.
“The global retail sector and our business continue to face an uncertain environment and, as a result, we continue to take a conservative stance in terms of the financial management of our business,” management told investors in a recent filing.
“We will continue to manage our business carefully and we will focus on the execution of the retail fundamentals.”
Limited Brands is a $14.13 billion market cap stock in the specialty retail sector, where the average company is $6.13 billion. Its trailing 12-month P/E is 17.77, just under the sector average. It has a five-year projected price-to-earnings-growth (PEG) ratio of 17.84, also just below the average.
Limited Brands’ projected earnings per share growth for the coming year is 12.32 percent, compared to 16.62 percent in its sector.
Wall Street is generally bullish on Limited Brands, with buy or outperform ratings from UBS, Ford Equity Research, RBC Capital Markets, Standard & Poor’s, and Piper Jaffray. Merrill Lynch has it rated underperform.
“Our buy recommendation is based on valuation. Same-store sales rose an impressive 10 percent in fiscal year 2012, on top of 9 percent growth in fiscal year 2011. By brand, same-store sales increased 14 percent at Victoria's Secret and 6 percent at Bath & BodyWorks,” S&P analysts wrote in a recent report.
In addition, “we think LTD has an opportunity to expand more rapidly to take advantage of global demand, notably for Victoria's Secret. A dedicated team is executing the international agenda (thus zero distraction for domestic business),” they explained.
Limited Brands next reports on May 17.
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