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Limited Brands Inc. $29 – New York symbol LTD

LIMITED BRANDS INC. $29 (New York symbol LTD; Aggressive Growth Portfolio, Consumer sector; WSSF Rating: Average) operates about 3,600 stores under three main retail chains: Limited Brands (20% of revenue) sells men’s and women’s casual clothing; Victoria’s Secret (50%) sells lingerie; and Bath & Body Works (20%) sells personal care products such as soaps and fragrances. The remaining 10% comes from non-core businesses and other investments.

A wide variety of apparel and products helps shield Limited Brands from unpredictable fashion trends and tastes. It large size also gives it clout when dealing with suppliers and mall owners.

Limited’s revenue fell from $9.4 billion in 2001 to $8.4 billion in 2002, but rose to $9.7 billion in 2005. Profits grew from $0.87 a share (total $378.0 million) in 2001 to $1.35 a share ($638.0 million) in 2004, but fell to $1.29 a share ($559.7 million) in 2005.

In its second fiscal quarter ended July 29, 2006, the company earned $0.28 a share (total $113 million), up 40% from $0.20 a share ($82 million) a year earlier. Sales rose 8.7%, to $2.5 billion from $2.3 billion.

The company’s apparel business has struggled in the past few years. But Limited’s plan to focus on clothes aimed at younger shoppers seems to be working.

Overall sales at this division fell 7% in the first six months of fiscal 2007, but same-store sales fell just 5%, which is a big improvement over a 14% drop in the year-earlier period.

Same-store sales at Victoria’s Secret in the first half of fiscal 2007 grew 10%, thanks to the successful launch of new products under the sub-brands PINK and Angels. New products fueled an 8% rise in same-store sales at Bath & Body Works. Both chains are also selling more goods through their web sites.

The stock has gained over 50% in the past year, partly due to the company’s aggressive stock buybacks. Limited Brands spent $130 million on share repurchases in the first half of fiscal 2007, and has earmarked a further $100 million.

It now trades at 17.6 times its forecast profit for fiscal 2007 of $1.65 a share, and at 1.2 times its sales of $24.75 a share. The $0.60 dividend yields 2.1%.

Limited Brands is a buy.

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