By  on November 19, 2004

NEW YORK — Third-quarter bottom-line results at Limited Brands dropped 39.6 percent as a big gain in the prior year inflated comparable-quarter results. Excluding items, however, the company posted a 12.1 percent rise in earnings, matching Wall Street expectations.

But the Columbus, Ohio-based operator of Express, Bath & Body Works, Victoria’s Secret and Henri Bendel stores forecast fourth-quarter earnings below the current Wall Street consensus.

Net income in the three months ended Oct. 30 fell to $78.3 million, or 16 cents a share, compared with $129.7 million, or 25 cents, in the year-earlier period. Results in the latest quarter included a benefit from a tax settlement as well as a pretax gain of $45.7 million in proceeds from the October initial public offering of New York & Co. In the year-ago quarter, results included a $128.4 million pretax gain from the sale of Limited’s remaining 7.5 million shares of Alliance Data Systems Corp.

Excluding the respective gains, adjusted earnings at Limited rose to $49.7 million, or 10 cents, versus $44.3 million, or 8 cents, last year. Analysts were also expecting a profit of 10 cents.

Operating income on both a reported and adjusted basis was $53.1 million, up 26.4 percent from $42.2 million a year ago. On a subsequent conference call, the firm cited a $22.4 million operating income improvement in its Victoria’s Secret segment, offset by an $8.9 million decline in its apparel business, hurt in part by soft results at Express.

Total sales in the quarter rose 2.4 percent to $1.89 billion from $1.85 billion last year, and same-store sales gained 1 percent.

Regarding its new Bigelow concept, which opened in October at Easton Town Center, near Columbus, Glenn Schlesinger, chief operating officer, said on the call that “we’re quite encouraged by what we have seen…but it is very premature to call game.”

In the nine-month period, Limited earned $322.9 million, or 66 cents, including certain gains, which compared with $329.2 million, or 63 cents, a year ago. Limited sold its Lerner/New York & Co. business to Bear Stearns Merchant Banking in November 2002 for $78.5 million cash and had retained a $75 million subordinated note as well as 15 percent in warrants of the new firm’s common equity. Limited received a $44.9 million pretax gain from the early sale of the note and $20 million on the sale of the warrants in the first quarter. In the second quarter, the company received a $17.6 million pretax gain from sale of its remaining interest in Galyan’s Trading Co.On an adjusted basis, the company earned $254.8 million, or 52 cents, in the first nine months of the fiscal year, compared with $196.1 million, or 37 cents, last year. Total revenues rose 6.6 percent to $6.1 billion with comps up 6 percent.

In the fourth quarter, the company forecast earnings of 85 to 92 cents, versus the consensus estimate for 95 cents. Limited said it is comfortable with its previous full-year earnings estimate of $1.35 to $1.42, in line with analyst estimates for $1.40.

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