Amid a challenging global retail environment, Limited Brands Inc. (LTD) was able to deliver better-than-expected second quarter 2009 results.
Limited’s second quarter EPS (excluding one-time items) were 19 cents, well above the expected range of 11 cents to 16 cents, surpassing the Zacks Consensus Estimate of 16 cents. However, EPS dipped 29.6% year over year compared to 27 cents in the prior-year quarter.
For the third quarter of 2009, Limited now expects to report a net loss per share in the range of 7 cents to 12 cents. However, the company has raised its outlook for full-year 2009 earnings and now expects EPS in the range of 75-90 cents, up from 67-87 cents forecasted earlier.
On a reported basis, EPS fell 23.3% to 23 cents from 30 cents reported in the prior-year quarter. Revenue for the quarter declined 9.5% to $2,066.6 million compared to $2,284.3 million reported a year earlier. Sales under its brands Victoria’s Secret and Bath & Body Works fell 11.2% to $1,306.2 million and 3.6% to $533.5 million, respectively.
The decline was due to the slump in demand for apparel, accessories, and beauty and personal care products on account of waning consumer discretionary spending and rising unemployment.
Comparable store sales declined 9% in the quarter compared to a 7% decline in the year ago quarter. Comps at Victoria’s Secret and Bath & Body Works brands declined 12% and 5%, respectively, in the quarter under review.
Comps at the company’s stores have been consistently declining due to demand weakness since the third quarter of 2007. In the third quarter of 2007, comps fell 3%, and since then they have been falling in the range of 7% to 10%.
To combat the downturn, management has been taking cost-cutting measures, reducing excess stock, realigning the organizational structure and lowering capital expenditure. Limited has drastically lowered its expenditures. Capital expenditure for the quarter was $45.5 million down from $133.3 million in the prior year quarter. For full-year 2009, management expects capital expenditure to be $225 million compared to $478.7 million.
The company ended the quarter with cash and cash equivalents of $1,550.1 million, and long-term debt of $3,251.1 million, representing a debt-to-capitalization ratio of 63.4%. Limited expects to generate free cash flow at the upper limit of the previous range of $350 million to $450 million.
Limited Brands Inc. closed at $14.58 on August 19, up 4.4% from the previous day.
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