Despite Increased Q4 Costs, Limited Brands’ Result Beat Forecasts

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2012 swim catalog from Victoria's Secret, owned by Limited Brands

Columbus, OH—Despite a fourth quarter profit decline due to restructuring costs at its La Senza lingerie brand, Limited Brands Inc.’s results still beat analysts’ average estimate.

For the quarter ended Jan. 28, Limited Brands reported Wednesday that its net income dropped to $359.4 million, or $1.17 a share, from $452.3 million, or $1.36 a share a year ago. Results included intangible asset impairment and restructuring charges at La Senza, including closed store, costing $256.1 million, or 74 cents a share. That was partially offset by one-time gains for a total charge of 33 cents a share.

Excluding this items, adjusted net income rose to $459.2 million with adjusted earnings increasing 19% to $1.50 a share. That still beat analysts’ average estimate, which typically excludes special items, for $1.46 a share.

Net sales grew 10% to $3.52 billion from $3.46 billion last year, again besting analysts’ estimate for sales of $3.46 billion. Total comparable store sales increased 12% on top of a 7% increase in its fourth quarter a year ago.

By division, sales at Victoria’s Secret increased 13% with comparable store sales up 12%, Victoria’s Secret Direct had a 3% increase in sales, but La Senza posted a 3% drop in its comparable store sales. Bath & Body Works & The White Barn Candle Co.’s total sales were up 4% at $1,128 million, with a 3% comparable store sales increase.

But 2012 Outlook Disappoints

Also during the quarter, gross margin expanded 210 basis points to 43.9%. The company’s sale of a 51% interest in Mast Global Fashions, a third-party apparel sourcing division, to Sycamore Partners.

But Limited Brands’ first quarter and fiscal 2012 forecasts disappointed analysts. In the first quarter of this year, the company expects to earn 35 to 40 cents a share, below analysts’ average estimate for 44 cents.

For the year, Limited Brands forecast earnings in the $2.60 to $2.80 a share, again below analysts’ average estimate expecting $2.91 a share.

The company also said it expects February comparable store sales increase in the mid- to high-single digit range, up from its previous estimate of up low single digits.


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