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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Same-store sales in the second quarter are anticipated to be flat. May comps are expected to be down in the low-single digits.

The company completed its previous $100 million share repurchase program and has authorized an additional $100 million share repurchase.

Wexner kept the spotlight on Victoria's Secret and its subbrand, Pink, and bright earnings news for Limited Stores. The introduction of the IPEX bra "will probably be a major volume and income generator for Victoria's Secret" and the in-store brand Pink is being expanded after a successful fall launch throughout Victoria's Secret stores and will emerge as its own store in 2006, Wexner said.

Victoria's Secret and Bath & Body Works account for 70 percent of the sales for Limited Brands, which now considers itself more of a packaged-goods company, as opposed to strictly a specialty retailer. Limited Brands operates 3,699 stores and posted $9.4 billion in sales last year.

With Express a major drag there has been speculation of an apparel spin-off.

Leonard Schlesinger, vice chairman and chief operating officer, said during the conference call: "While we have always in the past demonstrated our willingness to adjust the portfolio in the name of shareholder value and will always continue to do that, that doesn't drive us right now having a specific time frame for the disposition of any of our businesses ... At the moment, we've indicated quite clearly that we have no plans to sell either of those businesses.

That got reaffirmed in the annual report letter from Wexner, who wrote: "Some have suggested to me that we should think about selling both of them. Let me be crystal clear: Express and Limited are not for sale. They both have significant growth opportunities."

Apparently, there's a bigger opportunity at Pink, the more youthful, casual lingerie line launched at VS stores over a year ago. Schlesinger said this fall Pink will test accessories, sportswear, denim, and "pickups" at the cash register in 40 "solution" VS stores as a prelude to opening Pink stores. In-store marketing ideas will be tested, too.

Other growth strategies:

  • Bath & Body Works is working on "full-direct capability to sustain its momentum, and plans to launch e-commerce in October, and a catalogue in 2006. The division is close to completing an agreement with a third party to outsource technology and fulfillment. The outsourcing decision is "driven especially by the fact we want to get into the market quickly," Schlesinger said. "It's not intended to state a strategic direction."
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