Limited Brands Inc. (LTD) Thursday posted its first quarterly loss in four years on weak clothing demand, but said it would meet profit forecasts for the current period, including the vital holiday season.

The retailer, whose store chains include Victoria's Secret, Express and Bath & Body Works, posted a loss of $12.3 million, or 3 cents per share, for the third quarter, compared with a year-earlier profit of $78.3 million, or 16 cents per share, including one-time gains from the initial public offering of New York & Co. and a tax settlement.

Analysts, on average, expected a loss of 3 cents per share, according to Reuters Estimates.

Shares were up 3.4 percent at $21.87 in morning trade.

Sales were flat at $1.89 billion. Sales at stores open at least a year fell about 3 percent.

"The external environment remains challenging," Chief Operating Officer Len Schlesinger said on the earnings conference call.

"Although we're cautious about the customer's mindset and competitive activity during the holiday season, we have prepared for and are committed to executing the best possible holiday that we can," he said

The retailer has been grappling with weak results at its apparel stores, particularly the Express women's clothing chain. Limited has acknowledged that it alienated customers by switching to pricier wear-to-work styles instead of jeans in the hope of attracting older, wealthier shoppers.

The company has been restocking Express stores with a mix of denim and dressy clothing, but has cautioned investors that it will take time before business gets back to normal. On the conference call, it said denim had underperformed.

Apparel did improve in the third quarter compared to the first and second quarters when it "bottomed," the company said.

Limited hosted an analyst meeting last week where it admitted to some missteps in the past year and outlined a refreshed strategy.

Deutsche Bank analyst Gabrielle Kivitz said while there weren't many surprises in the earnings report, she was pleased to hear of continuing improvement sales of holiday displays at Express stores.

"It's still early to declare victory on the Express brand," Kivitz, who has a hold rating on Limited, said. "Investors have been looking for a turnaround there.

The company is experimenting with new brands and opening freestanding stores. It opened six C.O. Bigelow stores this fall, which sell beauty and personal care products. Limited is planning to open 160 high-end Intimissi brand lingerie boutiques in 2006.

Looking ahead, Limited said it was comfortable with analysts' fourth-quarter forecast for earnings of $1 per share. The fourth quarter is the biggest sales and profit driver for Limited.

It expects fourth quarter total sales to rise in the mid-single digits, and same-store sales are forecast to be up in the low single digits. November same-store sales are in-line with earlier "slight positive" guidance.

The retailer said it plans to be very aggressive in its "Black Friday" sales. The day after Thanksgiving traditionally kicks off the holiday shopping season.

Limited shares are trading at about 13 times next year's estimated earnings, according to Reuters Estimates, compared with a multiple of 17 for the broader S&P retail index.

The stock is down about 8 percent in the year-to-date.