Limited Brands' Comps Rise

Limited Brands Inc. (LTD - Analyst Report), a specialty retailer of women’s intimate and other apparel, beauty and personal care products, posted better-than-expected comparable-store sales results for the four-week period ended May 26, 2012. The increase was boosted by healthy sales at its Victoria's Secret Stores and Bath & Body Works.

The owner of Victoria's Secret Direct and La Senza chains has sustained its growth momentum. Limited Brands’ comparable-store sales for May 2012 rose 6% following a similar percentage increase in April 2012 and May 2011.

Management had earlier predicted comparable-store sales to rise in the low single-digit range for the month under review. For June, management now expects comparable-store sales to be in the flat to low single-digit range.

Comparable-store sales for May increased 9% at Victoria’s Secret Stores & Victoria’s Secret Beauty and 7% at Bath & Body Works & The White Barn Candle Co. but fell 8% at La Senza. Sales at Victoria’s Secret Direct dropped 5%.

Limited Brands, which competes with Hanesbrands Inc. (HBI - Analyst Report), said that net sales for May fell 6.3% to $671.9 million from $717.4 million posted in the comparable prior-year month. The prior-year period sales included $68.9 million from a third-party apparel sourcing business that was sold in November 2011.

In terms of performance, Limited Brands fared far better than competitor Gap Inc. (GPS - Analyst Report), which posted acomparable-store sales increase of 2% compared with a decline of 4% witnessed in the prior-year period.

For the 17-week period ended May 26, 2012, Limited Brands registered comparable-store sales growth of 7%. However, net sales for the period fell 3.7% to $2,826 million from $2,934 million in the prior year. The prior-year sales included $282.8 million from a third-party apparel sourcing business that was sold in November 2011.

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 new stores. Victoria’s Secret Stores have been performing well, and the company is also revamping its La Senza brand.

Limited Brands wants 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. However, Limited Brands holds a Zacks #3 Rank that translates into a short-term Hold rating.