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L Brands, Inc. formerly known as Limited Brands, posted first-quarter fiscal 2013 earnings of 48 cents a share that beat the Zacks Consensus Estimate by a couple of cents and rose 17% from the prior-year quarter earnings of 41 cents. The consumers, who cut back on their discretionary spending during the recession, are now gradually opening their wallets. The company also raised it fiscal 2013 earnings guidance.

Let’s Dig Deep

This specialty retailer of women’s intimate and other apparel, beauty and personal care products posted net sales of $2,268 million, up 5% from $2,153.8 million reported in the prior-year quarter, and surpassed the Zacks Consensus Estimate of $2,250 million.

Limited Brands, which operated 2,873 stores as of May 4, 2013, posted comparable-store sales growth of 3% during the quarter compared with 7% in the prior-year quarter.

Sales at Victoria’s Secret Stores & Victoria’s Secret Beauty increased 5% to $1,145.6 million, whereas comps were up 3%. Victoria's Secret Direct sales fell 6% to $359.1 million. Total Victoria Secret sales grew 2% to $1,504.7 million. Bath & Body Works & The White Barn Candle Co.’s total sales grew 5% to $530.1 million, with a 3% increase in comps. Comps at La Senza jumped 5%, but sales tumbled 3% to $72.8 million.

Gross profit for the quarter grew 4% to $941.4 million, whereas gross margin contracted 40 basis points to 41.5%. Operating income advanced 6% to $311.2 million, whereas operating margin increased 10 basis points to 13.7%.

A Glance at the Guidance

Management now forecasts earnings in the range of 50 cents to 55 cents for the second quarter and between $2.95 and $3.15 per share for fiscal 2013. The company had earlier projected fiscal 2013 earnings guidance of $2.92 to $3.12 per share.

The current Zacks Consensus Estimate for the second quarter and fiscal 2013 are 54 cents and $3.12 per share.

Limited Brands now projects comparable-store sales to rise in the low single-digit for the month of May.

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 other stock worth considering in the retail, apparel sector is Stein Mart Inc. , 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 The Buckle, Inc. (BKE - Snapshot Report), both of which carry a Zacks Rank #2 (Buy) and are expected to continue with their upbeat performance.

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