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L Brands, Inc. , formerly known as Limited Brands, posted second-quarter fiscal 2013 earnings of 61 cents a share that came a penny ahead of the Zacks Consensus Estimate and rose 22% from the prior-year quarter earnings of 50 cents. The consumers, who cut back on their discretionary spending during the recession, are now gradually opening their wallets. The company also raised its 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 $2,516 million, up 5% from $2,399.1 million reported in the prior-year quarter, and surpassed the Zacks Consensus Estimate of $2,513 million.

Limited Brands, which operated 2,892 stores as of Aug 3, 2013, posted comparable-store sales growth of 2% during the quarter compared with 8% in the prior-year quarter.

Sales at Victoria’s Secret Stores & Victoria’s Secret Beauty increased 6% to $1,236.8 million, whereas comps were up 1%. Victoria's Secret Direct sales fell 6% to $383.7 million. Total Victoria Secret sales grew 3% to $1,620.5 million. Bath & Body Works & The White Barn Candle Co.’s total sales grew 3% to $630.3 million, with a 3% increase in comps. Comps at La Senza jumped 4%, but sales tumbled 9% to $86.1 million.

Gross profit for the quarter grew 5% to $988.6 million, whereas gross margin contracted 10 basis points to 39.3%. Operating income advanced 16% to $357.8 million, whereas operating margin expanded 130 basis points to 14.2%.

A Glance at the Guidance

Management now forecasts earnings in the range of 23 cents to 28 cents for the third quarter and between $3.06 and $3.21 per share for fiscal 2013. The company had earlier projected fiscal 2013 earnings guidance of $2.95 to $3.15 per share.

The current Zacks Consensus Estimate for the third quarter and fiscal 2013 are 28 cents and $3.19 per share, respectively.

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

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). However, the other stocks worth considering in the retail sector are Fortune Brands Home & Security, Inc. (FBHS - Free Report) , Lumber Liquidators Holdings, Inc. (LL - Free Report) and PetMed Express, Inc. (PETS - Free Report) , all sporting a Zacks Rank #1 (Strong Buy).

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