Limited Brands’ Continued Momentum Presents Stock Upside
Limited Brands (NYSE:LTD), a specialty apparel retailer focused on lingerie, beauty and personal care products, competes with retailers like Abercrombie & Fitch (NYSE:ANF), American Eagle (NYSE:AEO), AnnTaylor (NYSE:ANN), Gap (NYSE:GPS), and J.Crew Group (NYSE:JCG). Some of its popular brands include Victoria’s Secret in the lingerie business and Bath & Body Works in the personal care segment.
We estimate that the Victoria’s Secret brand is the largest value driver for Limited Brands, contributing about 53% to our $30.63 price estimate for the company’s stock. Bath & Body Works generates an incremental 34%.
- L Brands Stock Can Gain 2x The S&P 500, But There Is A Catch
- Limited Brands Reports Steady Growth In Q3; Outlook Looks Good
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- Good Inventory Planning And Global Expansion Will Drive Limited Brands’ Growth
- Intimates Are Driving Victoria’s Secret Growth Despite A Lull In Apparel Sales
- Limited Brands Posts Steady Growth And Raises Its Outlook
Strong Holiday Season Sales
Retailers, notably those who offer affordable luxury, performed well in November and December as pent-up consumer demand was released during the holiday season. Limited Brands in particular had an outstanding holiday season and reported a 5% increase in year-over-year (YOY) same-store sales during December (See Limited Looking Good in 2011 on Growth in Lingerie Business).
While many expected these stores to maintain some strength into January, analysts did expect a dip in spending coming off the holiday season. Also, many anticipated that record snowfall in the U.S. had kept shoppers away from stores and pressured same-store sales. Markets seemed to be expecting modest retail activity in January. [1]
See our full analysis and $30.63 price estimate for Limited Brands
Limited Outperforms Expectations
While analysts were expecting almost 7% YOY growth in January spending at Limited Brands’ stores (Victoria’s Secret and Bath & Body Works), results surprised on the upside. Limited Brands’ comparable store sales increased 24% in January over the same period last year. [2]
We currently forecast a mere 3% increase in revenue per square foot for Victoria’s Secret stores in the U.S. during 2011. However if the Limited Brands continues its current momentum through 2011, achieving double-digit growth in revenue per square foot for its Victoria’s Secret U.S. stores (excluding Bath & Body Works), there could be an upside of 4% to our $30.63 price estimate for Limited Brands. A similar increase in revenue per square foot at Bath & Body Works stores could present further upside.
Notes:- Retailers to report chilly end to holidays, Reuters [↩]
- Limited Costco post big same store sales gains, Barrons.com [↩]