Limited 4Q profit rises as Victoria’s Secret parent benefits from lean inventory, cost cuts

Victoria’s Secret parent Limited Brands Inc. reported a sharp rise in fourth-quarter profit, a result of cost-cutting and tight inventory controls.

The profit, which topped expectations, combined with a brighter February sales outlook to send shares rising in after-hours trading.

Limited, based in Columbus, Ohio, said Wednesday it earned $356.1 million, or $1.08 per share, for the quarter ended Jan. 30. That compares with $16.1 million, or 5 cents per share, in the year-ago period.

Revenue reached $3.06 billion, from $3 billion in the year-ago period.

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Limited, which also operates Bath and Body Works and other retail chains, has seen a brisk sales pickup in the past two months. On Wednesday it sharply raised its sales expectations for February.

Shares rose 79 cents, or 3.7 percent, to $22.33 after hours, adding to a 3 percent gain during regular trading.

Like many mall-based stores, Limited saw weak sales as shoppers cut back to necessities during the recession. For its latest fiscal year, it recorded a 4 percent drop in sales at stores open at least a year.

But the company has responded to consumers’ new frugality, and it has started to pay off.

Last holiday season, Victoria’s Secret offered more matching panty-and-bra sets and sleep sets for the holidays, as well as lower-priced gift sets, including a $15 beauty pack.

Sales at stores open at least a year rose 1 percent in the quarter. The figure is considered a key measure of a retailer’s health because it excludes results at stores that have opened or closed during the year.

Adjusted net income was $1.01 per share, beating analyst expectations for 98 cents.

“The economic environment in 2009 was very challenging,” Chairman and CEO Leslie Wexner said in a statement. “We managed inventory, expenses and capital conservatively. We made good progress, but we recognize there is more to do and are very focused on continued improvement.”

Earlier this month, Limited reported a 6 percent rise in sales at stores open at least a year for January following a 2 percent decline in December. It now says the figure will see a percentage increase in the high single digits to low double digits for February. It previously expected the sales measurement to be flat.

For the year, Limited posted net income of $447.9 million, or $1.37 per share, compared with net income of $220.1 million, or 65 cents per share, the year before. Revenue fell 4.5 percent to $8.63 billion.

Limited expects first-quarter 2010 earnings between 5 and 10 cents per share. Analysts surveyed by Thomson Reuters estimate 7 cents. For the year, the company expects earnings per share between $1.40 and $1.60 per share. Analysts expect $1.41.

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