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Limited Brands Profit Drops 24%

From Reuters

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.

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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.

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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.

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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.


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