Limited Brands, Inc. $23 - New York symbol LTD

LIMITED BRANDS, INC. $23 (New York symbol LTD; WSSF Rating: Average) operates three main retail chains: Limited Brands sells men’s and women’s casual clothing; Victoria’s Secret sells lingerie; and Bath & Body Works sells personal care products such as soaps and fragrances. The company’s move to reposition its Express chain of clothing stores to appeal to younger shoppers seems to be working. In December 2005, same-store sales rose 7% compared with an 18% drop a year earlier. Despite weakness at the Victoria’s Secret and Bath & Body Works chains, overall same-store sales improved by 3%, up from 2%. However, that’s still less than an earlier forecast of 3.4%. Limited Brands is also doing a good job of selling its products though catalogs and the Internet. Its biggest Internet operation is Victoria’s Secret Direct, whose sales in December 2005 rose 17%, compared with a 12% gain a year earlier. The stock has stayed in a narrow range for the past year, and trades at 18.0 times the $1.28 a share it will probably earn in the fiscal year ending January 31, 2006. But earnings in fiscal 2007 should grow to $1.48 a share, and the stock trades at more reasonable 15.5 times that forecast. It also trades below its sales of $23.70 a share. The $0.60 dividend yields 2.6%. Limited Brands is a buy.