By  on May 24, 2007

Limited Brands Inc. reported first-quarter results Wednesday that included a steep earnings decline, and said the second quarter will be challenging — especially for the company's Victoria's Secret business.

Earnings for the quarter ended May 5 dropped 47 percent to $52.9 million, or 13 cents a diluted share, from $99.4 million, or 25 cents, in the previous year on sales that rose 11.2 percent to $2.3 billion from $2.1 billion.

The gross margin rate for the quarter shed 320 basis points to 34.77 percent from 37.97 percent. Same-store sales for the period showed a gain of 4 percent.

The company reported results after the stock market closed, without elaborating on specific challenges, and said it will hold a conference call today. The retailer also said its board authorized a new $500 million share buyback program, which follows the completion of its $200 million program.

The $11 billion Limited Brands has decided to sell off 67 percent of Express to Golden Gate Capital, a private equity firm, for $548 million, while retaining 33 percent. The restructuring culminates almost a decade of steamrolling ahead with the company's Victoria's Secret and Bath & Body Works divisions, while largely stagnating on the apparel side, which analysts believe has been a drag on Limited Brands' stock.

In addition, the company will explore options for the Limited Stores division, including possibly selling it off.

"Over the last five years, we have returned more than $5 billion in value to shareholders," Leslie H. Wexner, chairman and chief executive officer, said in a statement. "Subsequent to our announcement last week of the sale of a majority interest in Express and our intent to explore strategic options for Limited Stores, this latest share repurchase program reflects our confidence in the strength and future growth of our intimate apparel and personal care and beauty brands."

The retailer said in its quarterly report that May same-store sales are expected to be in the "negative low single-digit range versus previous guidance for positive low single-digit comps."

Second-quarter earnings per share estimates were lowered to a range of 20 cents to 24 cents, which compares with 28 cents per share in the previous year. "This estimate does not include any impact from the previously announced Express transaction and potential strategic options for Limited Stores, or the new share repurchase program announced [Wednesday]," the company added.

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