Following an aggressive strategy, Limited Brands Inc. (LTD), a specialty retailer of women’s intimate and other apparel, beauty and personal care products, recently revealed that it is enhancing its pre-announced senior notes offering to $1.0 billion from $750.0 million.
The owner of Victoria’s Secret and La Senza chains priced the senior debts at 6.625% with a due date of 2021. Moreover, the notes will carry the guarantee of some of its subsidiaries.
The announcement reflected the company’s strategic approach to utilize the amount from the offering, after meeting the expenses, for boosting the shareholders’ return through a new share repurchase program of $500.0. Moreover, the proceeds will also be used for common business purposes.
It is to be noted that the newly announced share repurchase program includes the remaining $31.0 million shares under its previously announced $200.0 million program.
Earlier, the company posted healthy sales results for the four-week period ended February 26, 2011with comparable-store sales growth of 12.0%.
The company’s continuous focus on inventory management, cost control and merchandise inventiveness kept it hovering in an apathetic retail environment. Further, it has been actively managing its cash flows and returning much of its free cash to shareholders through share repurchases and dividends. The company has also been making far-sighted investments related to store openings and expansions coupled with the improvement of distribution centers to drive revenue growth.
Limited Brands’ Bath & Body Works segment is gaining traction resulting from a rise in store transactions, enhancement in the direct channel business and growth in new stores. Victoria’s Secret Stores have been performing well, and the company is also revamping its La Senza brand both in Canadaand internationally by improving product assortments, store operations and layout.
However, the company’s customers remain sensitive to macroeconomic factors including interest rate hikes, increase in fuel and energy costs, credit availability, unemployment levels and high household debt levels, which may negatively affect their discretionary spending, and in turn, the company’s growth and profitability.
Followed by a broad evaluation, we prefer to maintain a long-term ‘Neutral’ recommendation on the stock. Moreover, Limited Brands, which competes with Gap Inc. (GPS) and Hanesbrands Inc. (HBI), holds a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating.
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