Limited Brands Inc. (LTD) recently offloaded its remaining 25% stake in the namesake chain, Limited Stores, to private investment firm Sun Capital Partners Inc. for $32 million. The transition will help the company concentrate more on other profitable ventures, which include women’s intimate apparel, personal care and beauty products.
Boca Raton, Florida-based Sun Capital Partners already owns a 75% stake in Limited Stores, the women’s apparel unit of Limited Brands, which the private equity firm acquired in 2007.
The firm at that time made an equity contribution of $50 million to the business and secured access to $75 million in credit facility to aid the expansion of Limited Stores. Consequently, Limited Brands did not receive anything from the transaction, but recorded a loss of $42 million on the deal.
There are currently 220 Limited Stores, and the chain plans to open 10 stores this year and another 20 in 2011. We believe that the sale of the entire stake in Limited Stores will help Limited Brands focus on its other popular brands – Victoria’s Secret, Pink, Bath & Body Works, C.O. Bigelow, La Senza, White Barn Candle Co. and Henri Bendel. However, it will continue to provide logistics and sourcing services to Limited Stores.
Limited Brands’ sustained focus on cost containment, inventory management, and merchandise initiatives has kept it afloat in a sluggish consumer environment. Gross margin is also expected to improve in the year, driven by an improvement in the merchandise margin rate. The company currently operates 2,969 specialty stores.
Read the full analyst report on “LTD”
Zacks Investment Research
