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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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Lazard Capital Markets analyst Todd Slater said in a report that it would take 24 to 36 months for Express to get back to typical operating margin levels of about 10 percent seen from 1999 to 2000.

"We're embarrassed by the performance at Express and would like to emphasize that we are very committed to returning the brand to better performance," Schlesinger said. "The Express team, with significant input from Jay Margolis and the rest of the executive committee, are working feverishly to move the business ahead."

Margolis, former president of Reebok, was hired as group president of apparel in February, as part of a management restructuring.

Paul Raffin, president of Express, added that a strategy of emphasizing wear-to-work and trading up has not worked. "We got fashion wrong, we drifted older, we drifted more expensive, and in fact alienated a large percentage of our total customers."

He added, "Wear-to-work can in fact be young and sexy. Wear-to-work and casual balance is the key to effective repositioning. We were getting too old, with a lack of excitement and sexiness, and just turned people off." He added, "We're pragmatic about reducing color and pattern and focusing on black and neutrals.

In other divisions, VS Stores was roughly flat against a strong year-ago performance, and fell below corporate expectations. VS Direct sales rose 10 percent, with strength in bras, swimwear, woven and knit tops. Internet continues to grow as a percent of sales. VS Beauty, which operates at three U.K. airports, is "actively" considering expansion into Germany and Brazil.

BBW rose 5 percent, driven by product introduction.

— With contributions from Brent Wilder, Columbus, Ohio
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