LIMITED 3RD-QUARTER NET UP 10.1%

Byline: Catherine M. Curan

NEW YORK--Aided by improved gross margins, expense controls and a better inventory position in its women's apparel businesses, The Limited Inc. reported third-quarter earnings rose 10.1 percent.
In the quarter ended Oct. 29, the company earned $90.5 million, or 25 cents a share, against $82.2 million, or 23 cents. The results were in line with Wall Street's expectations. Sales in the quarter were up 6.1 percent to $1.7 billion from $1.6 billion.
Gross margin improved to 28.9 percent of sales from 27.7 percent.
In the nine months, earnings declined 1.6 percent to $191.6 million, or 53 cents a share, from $194.7 million, or 53 cents a year earlier. Sales were nearly flat at $4.8 billion.
In a statement, Leslie Wex-ner, chairman and chief executive officer of The Limited Inc., said the firm has tightly controlled inventories and expenses, noting that as the quarter ended, margin rates recovered and same-store sales comparisons at its women's fashion businesses began to improve.
Among the women's apparel units, Express posted negative mid-single digit same-store sales. However, the company said same-store sales improved at the end of the quarter, with margins up significantly from last year.
At The Limited Stores, same-store sales for the quarter were off in the high teens, with sales about on plan and margins up significantly. Lerner New York posted negative low double-digit same-store sales.
Wexner noted that Victoria's Secret racked up its highest third-quarter operating profit. Victoria's Secret catalog had a significant sales increase, as well.
Terrence J. McEvoy, a retail analyst at Janney Montgomery Scott, said if the positive trends at Limited continue--and he thinks they will--fourth-quarter earnings could be up as much as 40 percent. However, he said comparisons are easy because of depressed year-ago results.
Steven Kernkraut, a managing director of Bear Stearns, noted that in the last four to five weeks, Limited's strategy of reducing inventory and promotional activity and introducing better quality merchandise has been paying off.
Kernkraut said this strategy has been particularly effective at Express, adding, "We're seeing early signs at Limited Stores."
He expects the positive momentum to continue.
Linda Morris, an analyst at PNC Bank, Philadelphia, noted that inventory and expense controls are in place.
"Now all we need is some top line sales growth," in women's apparel to provide earnings leverage in the fourth quarter, she said.
For the fourth quarter, Janney Montgomery Scott's McEvoy estimated 77 cents a share against 54 cents, and for the year, $1.30 a share against $1.08.
--Fairchild News Service

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