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Limited Brands Inc. , 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 August 25, 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 August 2012 rose 8% following an increase of 12% in July 2012 and 11% in August 2011. For September, management expects comparable-store sales to be in the low single-digit range.

Comparable-store sales for August increased 9% at Victoria’s Secret Stores & Victoria’s Secret Beauty and 6% at Bath & Body Works & The White Barn Candle Co. but remained flat at La Senza. Sales at Victoria’s Secret Direct inched up 1%.  

Limited Brands, which competes with Hanesbrands Inc. (HBI - Analyst Report), said that net sales for August fell 5.2% to $665.6 million from $702.4 million posted in the comparable prior-year month. The prior-year period sales included $87.8 million from a third-party apparel sourcing business that was sold in November 2011.       

In terms of performance, Limited Brands marginally lagged its competitor Gap Inc. (GPS - Analyst Report), which posted a comparable-store sales growth of 9% compared with a decline of 6% witnessed in the prior-year period.

For the 30-week period ended August 25, 2012, Limited Brands registered comparable-store sales growth of 8%. However, net sales for the period fell 3% to $5,218 million from $5,378 million in the prior-year period. The prior-year sales included $518.3 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 is keen on augmenting 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 #2 Rank that translates into a short-term Buy rating, and well defines the company’s upbeat guidance for fiscal 2012.

Management now expects earnings in the range of 15 cents to 20 cents for the third quarter and between $2.73 and $2.88 per share for fiscal 2012, up from its previous guidance range of $2.63 to $2.83.

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