Limited Brands Profit Drops 24%
Limited Brands Inc. on Thursday said quarterly profit fell nearly 24%, dragged down by poor sales at its struggling Express clothing chain, and it gave a weak profit forecast for the rest of the year.
The company said it was taking steps to fix mistakes it made a year ago when it switched to wear-to-work styles instead of jeans in hopes of attracting older, wealthier shoppers.
“We clearly still have a ways to go in winning back the customers we spent the last year alienating,” said Paul Raffin, president of the Express division.
Limited shares fell $1.17 to $22.11. They are down 4% year to date.
Raffin said the retailer shocked customers with price increases last year, and was now restocking stores with a better mix of denim and dressy clothing. However, the company said it would take some time before business was back to normal at Express, which would hurt second-half profit.
Columbus, Ohio-based Limited, which also owns its namesake stores as well as Victoria’s Secret and Bath & Body Works, said earnings for the second quarter ended July 30 fell to $113.1 million, or 27 cents a share, from $148.0 million, or 31 cents, a year earlier. Sales rose 4% to $2.3 billion, while sales at stores open more than a year -- a key retail measure known as same-store sales -- were flat.
Wall Street analysts, on average, had expected profit of 24 cents a share, according to Reuters Estimates.
“Express continues to struggle to define its customer and to attract those who defected last year,” said Emme Kozloff, retail analyst with Sanford Bernstein.
Kozloff said investors had looked beyond weakness in Limited’s apparel division in the past because it represented a small part of the company’s profit. But with two consecutive quarters of poor results, apparel has wiped out almost 25% of earnings from Victoria’s Secret and Bath & Body Works this year.
For the third quarter, Limited gave a forecast ranging from a loss of 1 cent a share to a profit of 1 cent a share. Analysts, on average, expected a profit of 6 cents.
For the full year, Limited expects earnings of $1.36 to $1.38 a share, below Wall Street’s average estimate of $1.41.
The gloomy forecast comes two days after Wal-Mart Stores Inc. sent retailers’ stocks tumbling with its warning that high gasoline prices were hurting consumer spending.
Limited said it would get more aggressive in canceling orders of merchandise that didn’t sell well. The retailer also has increased its direct-mail advertising, and said it was changing its window displays to attract more walk-by traffic.