May 11, 2012
Written By Patrick McKeough
“Limited Brands, Inc. (LTD – yield 2.10%) owns the Victoria’s Secret lingerie chain and the Bath & Body Works personal-care products stores. … The company continues to expand its well-known brands into related niche markets. For example, in 2004, Limited launched the Victoria’s Secret Pink clothing line for younger women. This brand’s success has prompted the company to open two stand-alone Pink stores in the U.S. and eight in Canada.
“Limited also plans to open more stores outside North America, [which currently accounts for most of its business.] In its 2012 fiscal year, which ended January 28, 2012, Limited’s sales rose 7.8%, to $10.4 billion from $9.6 billion in 2011. Same-store sales rose 10.0%. The company recently sold 51% of a subsidiary that buys apparel from various manufacturers. Without the extra costs of these businesses, earnings jumped 19.4%, to $817.3 million from $684.5 million. Earnings per share rose 26.2%, to $2.60 from $2.06, on fewer shares outstanding. Limited’s strong balance sheet will help support its expansion plans. Long-term debt of $3.5 billion is a moderate 25% of its market cap. It also holds cash of $935 million, or $3.17 a share. The stock trades at 17.2 times the $2.90 a share that Limited should earn in fiscal 2013. [LTD] is a buy.”
Patrick McKeough, Wall Street Stock Forecaster, May 2012