Limited Brands Earnings Preview: Margins in Focus
Limited Brands (NYSE:LTD) is scheduled to announce its Q1 fiscal 2012 earnings on May 16th. [1] As the company already disclosed its Q1 sales along with its April sales, [2] we expect the earnings release will center around the company’s gross margins. Limited Brands is a specialty apparel retailer focused on lingerie, beauty and personal care products and competes with Abercrombie & Fitch (NYSE:ANF), American Eagle Outfitters (NYSE:AEO), Ann (NYSE:ANN) and Gap (NYSE:GPS).
- 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
- Limited Brands Earnings Preview: Intimates Will Drive The Company Through The Industry Slump
- 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
See our full analysis of Limited Brands
Limited’s margins in focus
Limited Brands announced its Q1 sales along with its April sales, and so we expect the company’s gross margins to be the main focus on Wednesday. We expect the margins to improve on a q-o-q basis, as the company should benefit from declining cotton prices, which recently reached a 21-month low owing to extensive supply and Asia’s lower industrial output. Although cotton prices impact apparel retailers that depend more heavily in intimate apparel like Limited to a lower extent than the rivals such as Abercrombie & Fitch, the declining cotton prices should result in a slight improvement in the company’s margins.
Additionally, Limited should also benefit from the increase in its direct-to-consumer business, which carries higher margins compared to its retail channel. The company should particularly gain from the spike in intimate apparel mobile-commerce sales during the week leading to Valentine’s Day. See: Intimate Apparel Mobile Sales Spike Around Valentine’s Day
Understand How a Company’s Products Impact its Stock Price at Trefis
Notes:- Limited Brands to announce Q1 earnings on May 16th, Source: Limited’s IR [↩]
- Limited discloses Q1 sales results, Source: Limited’s IR [↩]