NEW YORK — Limited Brands Inc. posted slightly weaker earnings for the first quarter as rising sales were nullified by lower margins and higher costs.
For the period ended May 1, the Columbus, Ohio-based specialty conglomerate said earnings retreated 0.9 percent to $96.6 million, or 19 cents a diluted share, compared with earnings of $97.5 million, or 19 cents, in the year-ago period.
The company’s sale of New York & Co. in November of 2002 continued to impact results. During the quarter, the company recognized a onetime pretax gain of $44.9 million, or 6 cents a share, stemming from the early repayment of a $75 million subordinated note by New York & Co.
Excluding the extraordinary gain, earnings came in at $67.8 million, or 13 cents a share.
Sales for the quarter increased 7.4 percent to $1.98 billion from $1.84 billion.
However, apparel sales from its Express and Limited stores slid 2.5 percent to $600.1 million compared with $615.6 million in the year-ago quarter.
“Women’s results were disappointing in the quarter,” said Tom Katzenmeyer, vice president of investor relations, during the company conference call. “Growth in the wear-to-work category, driven by pants, was more than offset by declines in other categories, particularly in knit tops.”
Keeping results afloat for the quarter was Victoria’s Secret, with sales increasing 14.9 percent to $908.8 million from $791.3 million and a comparable-store sales gain of 15 percent. “Our sales performance was primarily driven by the bra category,” said Grace Nichols, president and chief executive officer of Victoria’s Secret.
The company’s Bath & Body Works segment saw sales advance 6.4 percent to $341.9 million from $321.4 million.
In a research report following the call, SG Cowen analyst Lauren Cooks Levitan said, “We expect the potential margin benefit of the company’s shift toward a more full-price strategy in the apparel brands to be more evident in [the second half of the year].”
General, administrative and store operating expenses came in at $556.3 million, an 80 point basis point increase to 28.1 percent of sales compared with 27.3 percent of sales in the year-ago period.
The company also announced its board of directors had approved the additional repurchase of $100 million worth of shares of common stock. In March, the company completed a $1 billion repurchase program of its common stock.
Rising expenses will be a concern going forward, as the company moves to overhaul its information technology capabilities over the next several years. According to Leonard Schlesinger, vice chairman and chief operating officer, the firm expects to spend $50 million to $60 million during 2004 on what it is referring to as Project Insight. “At this point, it’s way too premature to project the total cost of the project beyond that,” said Schlesinger, who went on to say that the company had already hired five senior executives from outside the company to lead the operation.