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Limited Brands, Inc. , a specialty retailer of women’s intimate and other apparel, beauty and personal care products, recently posted fourth-quarter fiscal 2012 earnings of $1.76 per share that beat the Zacks Consensus Estimate of $1.73 and rose 17.3% from the prior-year quarter earnings of $1.50. The consumers, who cut back on their discretionary spending during the recession, are now gradually opening their wallets.

Including one-time items, earnings came in at $1.39, up from $1.17 in the year-ago period.

Let’s Dig Deep

Limited Brands posted net sales of $3,855.6 million, up 9.7% from $3,515.4 million reported in the prior-year quarter, and surpassed the Zacks Consensus Estimate of $3,785 million. The prior-year period sales included $13.1 million from a third-party apparel sourcing business that was sold in Nov 2011.

Limited Brands posted comparable-store sales growth of 5% during the fourth quarter of fiscal 2012 compared with 7% in the prior-year quarter and in line with the previous quarter. Comps rose 5% in Nov 2012, 3% in Dec 2012, and 9% in Jan 2013.

Sales at Victoria’s Secret Stores & Victoria’s Secret Beauty increased 9% to $1,713.4 million, whereas comps were up 3%. Victoria's Secret Direct sales rose 2.9% to $534 million. Total Victoria Secret sales grew 7.5% to $2,247.4 million. Bath & Body Works & The White Barn Candle Co.’s total sales surged 10.8% to $1,249.6 million, with a 7% increase in comps. However, comps at La Senza remained flat, whereas sales tumbled 14.2% to $102.4 million.

Adjusted gross profit for the quarter surged 12.9% to $1,743.2 million, whereas gross margin expanded 130 basis points to 45.2%. Adjusted operating income advanced 15.4% to $907.8 million, whereas operating margin augmented 110 basis points to 23.5%.

Other Financial Details

Limited Brands, which operates 2,876 stores as of Feb 2, 2013, recently raised its quarterly dividend by 20% to 30 cents (or $1.20 annually) from 25 cents a share (or $1.00 annually). The increased dividend, which is the 153rd successive quarterly payout, will be paid on Mar 8, 2013, to stockholders of record as of Feb 22, 2013.

Strolling Through Guidance

Management now forecasts earnings in the range of 40 cents to 45 cents for the first quarter and between $2.92 and $3.12 per share for fiscal 2013. However, the projected earnings remained below the Zacks Consensus Estimate of 51 cents for the first quarter and $3.24 for fiscal 2013.

For the month of February, Limited Brands reiterated its comparable-store sales growth guidance of 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). The stock worth considering in the retail, apparel sector is Express Inc. (EXPR - Snapshot Report), which holds a Zacks Rank #1 (Strong Buy), and is expected to continue with its positive earnings surprise history. Other stocks that should be merited include Gap Inc. (GPS - Analyst Report) and American Eagle Outfitters, Inc. (AEO - Analyst Report), both of which carry a Zacks Rank #2 (Buy) and are expected to continue with their upbeat performance.

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