Victoria's Secret

COLUMBUS-While reiterating Limited Brands Inc.’s commitment to increases in both Victoria’s Secret and Bath & Body Works stores, during a conference call, Martyn Redgrave, EVP and CEO, also made clear that expansion plans have been cut back even more than was previously announced. He blamed the “strong headwinds” caused by “the price of gas, the mortgage and credit crises and recent negative trends in consumer sentiment” for a “very challenging retail environment.”

The company’s net income actually spiked to $97.8 million in the first quarter, up from $52.9 million in first quarter 2007. This came primarily from a pre-tax gain related to the sale of a non-core joint venture and a write-down on the value of another JV.

The one-time boost, however, did not reflect sales performance. Comp-store sales companywide fell 8% in this year’s opening quarter, compared with a 3% comp increase, excluding apparel, in first quarter 2007. Net sales fell to $1.9 billion versus $2.3 billion in the same quarter a year ago.

Operating income was $100.4 million compared with $108.5 million in first quarter 2007. Net earnings fell to $36.4 million in this year’s first quarter, versus $52.9 million in the corresponding quarter of 2007, reflecting, in part, the company’s divestiture of the Express and Limited brand stores.

Based on these quarterly slides, Redgrave said, “we have substantially slowed the pace and timing of (planned) real estate expansion.” Stuart Burgdoefer, CFO, said capital expenditures will be between $515 million and $540 million this year, which is about $60 million below the previous estimate.

Nonetheless, Victoria’s Secret will gain 7% more retail square footage, which includes 43 new stores and 66 remodels. Plans also call for four additional Victoria’s Secret clearance stores, which will take the total to six.

This year, Bath & Body Works will add 4% square footage, driven by the opening of 84 new stores. Another 75 BBW units will be remodeled, Burgdoefer said during the call.

International expansion is also a key part of the company’s growth strategy, Redgrave said. “We are on track to open six BBW stores in Canada this fall and another four opening in early spring 2009.

“We are also continuing to expand our international business through growth in our Victoria’s Secret beauty business in the Middle East, duty-free shops around the world, and our direct channel business,” he added. Asia is another target, and a team is in place “laying the groundwork for stores to be opened in 2009.”

Shares of LTD on the NYSE closed on May 22 at $18.85, up nearly 3% for the day. This compares with a 52-week low of $14.41 a share on this March 7, and a 52-week high of $29.95 on July 6, 2007.Locally based Limited Brands operates 2,974 stores under the Victoria’s Secret, Pink, Bath & Body Works, C.O. Bigelow, LaSenza, White Barn Candle Co. and Henri Bendel banners.