CHICAGO – Limited Brands Inc. (LTD) said on Thursday its quarterly profit fell nearly 24 percent, dragged down by poor clothing sales at its struggling Express chain, and gave a weak forecast for the rest of the year, sending its stock down more than 3 percent.
The company, which owns its namesake clothing stores as well as Victoria's Secret (search) and Express, said it was taking steps to correct mistakes it made a year ago when it tried unsuccessfully to attract older, wealthier shoppers by switching to wear-to-work styles instead of jeans.
"We clearly still have a ways to go in winning back the customers we spent the last year alienating," Paul Raffin, president of the Express division, said on a conference call with analysts.
Raffin said the retailer "literally shocked" customers with price increases last year, and was now re-stocking stores with a better mix of denim and dressy clothing. However, the company said the Express chain would be "in transition" for some time, which will hurt second-half profits.
Earnings for the second quarter ended July 30 fell to $113.1 million, or 27 cents per share, from $148.0 million, or 31 cents per share, in the year-ago period.
Wall Street analysts, on average, had forecast earnings of 24 cents per share, according to Reuters Estimates.
Shares of Limited fell 3.6 percent to $22.45 on the Inet electronic brokerage.
Limited said last quarter it was "embarrassed" by the slumping sales at Express, but after another quarter of poor sales and a forecast that predicted continued weakness this fall, analysts questioned when the company hoped to fix problems at Express.
"How do you get traffic in there? What's the plan?" Prudential Equity Group analyst Stacy Pak asked on the conference call.
The company said it would get more aggressive in canceling orders of merchandise that didn't sell well and stocking more in-demand items. The retailer also increased the amount of direct-mail advertising, and said it was changing its window displays in hopes of attracting more walk-by traffic.
Limited hired a new apparel manager earlier this year but sales have yet to recover, and the retailer on Thursday blamed weakness at Express for a steep cut in its August sales forecast.
Limited now expects a slight decline in August sales at stores open more than a year -- also known as same-store sales (search). It had previously estimated that sales would show a percentage increase in the mid-single digits.
For the third quarter, Limited gave a forecast ranging from a loss of 1 cent per share to a profit of 1 cent per share. Analysts, on average, expected a profit of 6 cents per share.
For the full year, Limited expects earnings ranging from $1.36 to $1.38 per share, below Wall Street expectations for $1.41 per share.
Second-quarter sales rose 4 percent to $2.3 billion, while sales at stores open more than a year -- a key retail measure known as same-store sales -- were flat.
Limited said it was pleased with its performance at Victoria's Secret, where its recently launched "Pink" line of sleepwear, bedding and underwear saw strong demand. Bras also sold well, helped by its IPEX line.
At Bath & Body Works (search), new brands such as Tutti Dolci boosted sales, and the retailer said its e-commerce site will be up and running in time for the vital holiday season.