Limited Brands Inc., the owner of the Limited and Victoria’s Secret apparel chains, is considering opening freestanding stores for its Pink line of casual clothing.
“We’ve been very pleased with the expanded assortment that we provided to the 43 additional stores in fall of 2005, and we’ll expand that assortment to a total of about 90 to 95 stores in spring of 2006,” Mark Weikel, Victoria’s Secret Stores chief operating officer, said in a conference call. “Based on that learning, we hope to consider a freestanding option in fall of 2006, (we’re) beginning the exploration.”
The Pink line of apparel includes tank tops, sweat pants and sleepwear.
Weikel made the comments on a call with analysts and investors on Thursday following Wednesday’s release of fourth-quarter results, in which it reported higher earnings on benefits from a tax gain and profits from gift cards that may never be used.
Sales for Limited Brands, whose store chains also include Express and Bath & Bodyworks, were $3.54 billion, a 6 percent gain over the $3.33 billion recorded in the year-ago period. Non-redemption of gift cards added about $30 million to sales.
Shares of Limited Brands climbed as investors bet that its money-losing apparel lines were on the road to recovery.
“The apparel business improved dramatically,” said Richard Jaffe, an analyst with Stifel Nicolaus, who raised his rating on the stock to “buy” after the Limited Brands reported its results. “An improvement in the apparel business to just break even would lift earnings per share by 15 cents.”
Investors were also heartened by the company’s comments that its Pink casual clothing and Patricia Wexler M.D. skin care lines were selling well at its Victoria’s Secret unit.
“They’re positioned fairly well for the future, particularly at Bath & Body Works and Victoria’s Secret,” said Brady Lemos, an analyst with market research firm Morningstar.
On Wednesday after the market closed, Limited Brands said net income rose to $519.2 million, or $1.28 per share, from $382.5 million, or 87 cents per share, in the year-ago quarter, helped by a tax gain and gift cards that may never be redeemed.
Excluding some items, the company posted earnings of $1.05, topping expectations of $1.01.
The company’s apparel division, including its Limited chain, posted an operating loss of $107 million over the full year, versus a profit of $16 million in 2004, noted Jaffe, but “they are taking a more disciplined approach to inventory and (adding more) moderately priced apparel which has more appeal. All these things are encouraging and sustainable.”
Jaffe added that a return to a more “normalized” operating margin could add an additional 30 cents to 40 cents to earnings per share.