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L Brands, Inc. , formerly known as Limited Brands, posted third-quarter fiscal 2013 earnings of 31 cents a share that came ahead of the Zacks Consensus Estimate of 28 cents and rose 19% from the prior-year quarter earnings of 26 cents.

The consumers, who cut back on their discretionary spending during the recession, are now gradually opening their wallets. Retailers are spending more on promotions and coming up with lucrative discounts to drive traffic.

Let’s Dig Deep

This specialty retailer of women’s intimate and other apparel, beauty and personal care products posted net sales of $2,171.1 million, up 6% from $2,050.2 million reported in the prior-year quarter, and surpassed the Zacks Consensus Estimate of $2,165 million.

Limited Brands, which operated 2,927 stores as of Nov 2, 2013, posted comparable-store sales growth of 3% during the quarter compared with 5% in the prior-year quarter.

Sales at Victoria’s Secret Stores & Victoria’s Secret Beauty increased 5% to $1,058.5 million, whereas comps were up 4%. Victoria's Secret Direct sales fell 1% to $268.9 million. Total Victoria’s Secret sales grew 4% to $1,327.4 million. Bath & Body Works & The White Barn Candle Co.’s total sales increased 5% to $566.6 million, with a 3% increase in comps. Comps at La Senza rose 3%, but sales tumbled 9% to $75.1 million.

Gross profit for the quarter grew 3% to $856.7 million, whereas gross margin contracted 130 basis points to 39.5%. Operating income advanced 7% to $211 million, whereas operating margin expanded 10 basis points to 9.7%.

A Glance at the Guidance

Management now forecasts earnings in the range of $1.67 to $1.82 for the fourth quarter and between $3.07 and $3.22 per share for fiscal 2013.

The current Zacks Consensus Estimate for the fourth quarter and fiscal 2013 are $1.83 and $3.18 per share, respectively.

Limited Brands now projects total comparable-store sales to decline in the low single-digits for the month of November as Thanksgiving Day falls one week later in 2013. For the fourth quarter comps are expected to increase in the low single-digits.

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 revamping its La Senza brand alongside.

Limited Brands is keen on augmenting its retail footprint internationally by expanding aggressively in Canada and other international markets. However, stiff competition and erratic consumer behavior still remain major causes of concern.

Currently, Limited Brands holds a Zacks Rank #3 (Hold). Some better ranked stocks in the retail sector are Hanesbrands Inc. (HBI - Analyst Report) and Best Buy Co., Inc. (BBY - Analyst Report) both carrying a Zacks Rank #1 (Strong Buy), and Five Below, Inc. (FIVE - Snapshot Report) sporting a Zacks Rank #2 (Buy).

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