Byline: Jennifer L. Brady

NEW YORK — Led by improved merchandise margins at the Express division and strong sales of lingerie and personal care products, The Limited Inc. posted a 30.8 percent fourth-quarter profit surge, while sales gained 4.9 percent.
The results drew praise from Wall Street analysts, as well as Leslie H. Wexner, Limited’s chairman and chief executive officer, who last year was highly critical of much of his women’s businesses.
“Our progress in the women’s category is best demonstrated by the associates at the Express who delivered a significant increase in merchandise margin rate during the fourth quarter,” Wexner said in a statement.
During 1994, the Columbus, Ohio-based specialty giant reached its goal of “restoring merchandise margin integrity” at its women’s apparel businesses, which increased operating income contribution as a percentage of sales.
Women’s gains were achieved through improved merchandise quality, faster-turning trends and more disciplined pricing.
In the quarter ended Jan. 28, the company earned $256.7 million, or 72 cents a share, against $196.3 million, or 54 cents, a year ago. Sales rose to $2.5 billion from $2.4 billion.
For the year, earnings climbed 14.7 percent to $448.3 million, or $1.25 a share, from $391 million, or $1.08. Sales edged up 1 percent to $7.3 billion from $7.2 billion.
The firm spotlighted strong improvements at the Express Stores division and continued strength at Victoria’s Secret Stores and Bath & Body Works.
However, Lerner New York and Limited Stores still are experiencing some difficulties. Last month, Wexner shuffled the management at three women’s divisions to alleviate difficulties at Lerner’s, naming Pamela McConathy the division’s president. Susan Falk, president of Bendel’s, succeeded McConathy as president of Express, and Ted Marlow succeed Falk.
In the year, sales of lingerie, personal care products, and men’s and children’s apparel gained 28 percent and accounted for 41 percent of the volume and about 55 percent of operating income.
“From the stock market perspective, the results are a significant event,” said Barry Bryant, analyst at Ladenburg, Thalmann & Co. Inc. Limited stock rose 1 to 18 1/4 Tuesday on the New York Stock Exchange.
Bryant noted that the growth businesses now comprise more than half of the company’s total earnings. “Wall Street has looked at The Limited with cynicism and skepticism but now may start to look [differently] at the company in light of its growth businesses,” Bryant said. The analyst added that previously, “Limited’s core apparel business was the cake, and the other businesses were the icing. Now it seems that the growth businesses are the cake.”
Bryant added that the flagship Limited Stores division “is still very troubled.”
Peter Schaeffer, analyst at Dillon Read & Co., said he would like to see a merger between Limited and the Express. The businesses have been cannibalizing each other’s sales, and a consolidation could eliminate the competition.
In a conference call with analysts, the company disclosed that in the latest quarter, sales were up at the Express division, but same-store sales fell in the low single digits. The company noted that gross margin rate was up significantly and operating income more than tripled from the year-ago period. For the year, Express sales totaled $1.4 billion with same-store sales up in the high single digits.
Ladenburg’s Bryant noted that the Express “has begun to reestablish some pricing integrity.”
At the Limited Stores, total sales were down in the quarter and same-store sales plunged in the mid 20s. For the year, Limited sales came to $869 million and same-store sales fell in the low 20s.
Sales at Lerner were off “significantly” in the quarter and same-store sales fell in the mid-teens. Gross margin rate and operating rate were down significantly. For the year, sales totaled $1.02 billion and same-store sales slid in the low single digits.
Lane Bryant sales inched ahead in the quarter with same-store sales up in the low single digits. The division’s total sales came to $959 million for the year and same-store sales increased in the low single digits.
Henri Bendel sales were up slightly in the fourth quarter and same-store sales grew in the low single digits. Gross margins were up in the quarter and the year. Bendel’s total sales came to $84 million in the year and same-store sales increased in the mid-single digits.
The company cited an “extraordinary fourth quarter ” for Victoria’s Secret Stores which set fourth-quarter and year-long records in operating income and chalked up a $200 million increase in sales for the year to $1.2 billion. In the quarter, sales were “up significantly” and same-store sales advanced in the low double digits. For the year, same-store sales rose in the low double digits.
Victoria’s Secret catalog sales advanced 30 percent in the quarter and the year, and sales totaled $569 million for the year. Gross margins and operating income rate were down, hurt by one time expenses from the opening of a telemarketing center and costs for paper and ink.
Sales were up significantly at Bath & Body Works in the quarter, and same-store sales jumped in the high 30s. For the year, the division racked up $216 million in sales and same-store sales were up in the high 30s.
Wexner said that the potential for continued growth of Bath & Body is demonstrated by the “successful” opening of five stores in the U.K. in partnership with Next PLC.
In the men’s businesses, sales were up for Structure Stores and Abercrombie & Fitch in the quarter. However, same-store sales dipped in the low single digits at Structure, while Abercrombie’s same-store sales rose in the mid-teens.
Looking ahead, the company said it expects first quarter earnings to be about flat with the year-ago. In the year-ago first quarter, the company earned 13 cents a share.
Sales are expected to be about $1.65 billion and same-store sales in the range of 2 percent up or down.
The Limited operates 4,867 specialty stores and plans to open about 430 stores in 1995.
— Fairchild News Service