Limited Brands Backs Lowered Q4 Estimates

Limited Brands Inc. (LTD), a retailer of apparel and toiletries and parent of the Victoria's Secret chain, Thursday posted a quarterly profit, reversing a year-ago loss, but disappointed investors by backing Wall Street's lowered fourth-quarter earnings estimates.

Like many specialty retailers, Limited expects mall traffic to be down in the all-important holiday shopping season as consumers feel the pressure of the weak economy and uncertain global politics.

"There wasn't any upside in the (third) quarter and they reminded people of other things they should be nervous about in the fourth quarter," said analyst Lauren Cooks Levitan of SG Cowen Securities.

Limited shares dropped as much as 7 percent before recouping a bit to $15.65, down 2.5 percent, at midday on the New York Stock Exchange. The shares rose 72 cents on Wednesday ahead of the second annual televised "Victoria's Secret Fashion Show."

Limited, which also operates the Express, Limited and Bath & Body Works chains, said it was comfortable with analysts' average earnings estimate of 73 cents a share for the fourth quarter, as compiled by research firm Thomson First Call.

In August, Limited backed an average estimate of 76 cents a share.

After a West Coast port shutdown jeopardized retailers' holiday plans, analysts' mean forecast dropped to 73 cents.

"The fact that they're comfortable now with this new revised consensus is a little bit of a disappointment perhaps. It's kind of like guiding down without really guiding," said Adrienne Tennant, retail analyst for Wedbush Morgan Securities.

Limited, based in Columbus, Ohio, said it would have difficulty meeting the average earnings estimate if fourth-quarter sales at stores open at least a year, or same-store sales, come in at the low end of its forecast for growth in the low- to mid-single digits, or 1 percent to 5 percent.

The company's previous guidance was for growth in the mid-single digits for both the third and fourth quarters.

Earnings in the third quarter, ended Nov. 2, were $11.7 million, or 2 cents per diluted share, compared with a loss of $13.8 million, or 3 cents per share, in the same period a year earlier. The results were adjusted to reconcile items related to the August 2001 sale of Lane Bryant and the March 2002 re-acquisition of Intimate Brands Inc.

Analysts' average earnings estimate was 2 cents per share, according to First Call.

"(Limited) had said they were on track to do the 2 cents in mid-October. I think people got the sense that was probably in the bag and they might have been looking for a penny upside to that," Tennant said.

Excluding adjustments, earnings in the third quarter were $15.8 million, or 3 cents per share, from $90.2 million or 21 cents per share, a year earlier.

Limited said sales rose to $1.98 billion from an adjusted $1.88 billion a year earlier. Net sales in the year-earlier quarter including Lane Bryant were $1.91 billion.

Same-store sales rose 3 percent in the third quarter.

Limited said same-store sales for November are on track for low-single-digit growth, taking into account a calendar shift that eliminates several days from the post-Thanksgiving shopping rush this year.

Sales between Thanksgiving and Christmas represent 15 percent to 20 percent of annual U.S. apparel sales. Limited expects to make two-thirds of its annual profit in the fourth quarter.

The company said the West Coast port shutdown had little impact on sales, and holiday goods are arriving on schedule. But the cost of rerouting deliveries will reduce fourth-quarter earnings by 1 cent per share, it said.

Limited shares have climbed 19 percent since touching a 52-week low of $12.53 on Oct. 10.