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Limited's Tough 1st Qtr.: Earnings Fall 76 Percent As Express Unit Falters

First-quarter earnings at Limited Brands dropped 76 percent, as merchandise shortcomings at Express dragged down results.

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NEW YORK — First-quarter earnings at Limited Brands Inc. dropped 76 percent and missed analysts' expectations as merchandise shortcomings at Express dragged down results.

The specialty retailer on Monday also forecast second-quarter and full-year earnings below analysts' projections.

"There's no silver bullet" for Express, Limited chairman and chief executive Leslie H. Wexner said during the annual shareholders' meeting at corporate headquarters in Columbus, Ohio. A "number of fashion judgments have been not as good" as they should have.

Executives said that there were no plans to shed the apparel division, which includes Express and Limited Stores, and that setbacks in sportswear won't impede initiatives in the fast-paced lingerie and personal care divisions. On the agenda: the Pink subbrand of Victoria's Secret will begin opening stores, and Bath & Body Works will soon start selling online and via catalogues.

Limited said net earnings in the quarter ended April 30 fell to $23.1 million, or 6 cents a share, dropping below Wall Street's expectations of 8 cents. Comparatively, Limited earned $96.6 million, or 19 cents, in the first quarter of 2004. Shares closed at $20.45 on Monday, up 0.1 percent in New York Stock Exchange trading.

On an adjusted basis, which excludes a $44.9 million, or 6 cent, pretax gain from the repayment of a New York & Co. subordinated note, Limited Brands posted earnings of $67.8 million, or 13 cents, in the first quarter of 2005; Limited sold New York & Co. to Bear Stearns Merchant Banking in November 2002.

Net revenues in the latest quarter were essentially flat at $1.97 billion, down 0.2 percent from last year's $1.98 billion. Same-store sales in the period declined 5 percent.

Limited said in a statement that it sees second-quarter earnings at 23 cents to 25 cents and full-year earnings at about $1.41. Analysts are calling for 29 cents in the second quarter and $1.50 in the year.

First-quarter operating income totaled $48.3 million, down 59.6 percent from the previous year's $119.4 million. Operating income at Victoria's Secret increased by $6.2 million; Bath & Body Works increased by $7.8 million, apparel operating income declined by $79.2 million.
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