Analysts surveyed by Thomson Financial expected a lossof 3 cents per share on sales of $1.9 billion. InAugust, the company said it expected third-quarterresults ranging from a loss of one cent to a profit ofone cent per share.
During the third quarter, the company lost three centsper share for the third quarter compared to earningsof 16 cents per share last year. Last year's resultswere boosted by a gain of 6 cents per share relatedto the New York & Co. initial public offering and a3 cent per share tax benefit. On an adjustedbasis, the company lost 3 cents per share for thethird quarter compared to earnings of 10 cents pershare last year.
According to Limited Brands executive vice presidentand CFO V. Ann Hailey, the company's gross margindeclined 150 basis points during the third quarter,primarily because of decline in merchandise margins.General and administrative expenses rose 3.5%.
"Traffic across all of our brands was soft and theexternal environment was challenging," said LenSchlesinger, vice chairman and COO of Limited Brands,during the company's third quarter earnings conferencecall.
Specifically, Victoria's Secret's comps were down 4%,Bath & Body Works' comps were up 1%, comps at the 313-store Limited chainwere up 2%, and Express' comps were down 6%. During the quarter, Limited launched six new C.O.Bigelow apothecary stores, brining its total to eight, and established a new organizationdubbed Beauty Avenues. The new business combines allbeauty product development, Schlesinger said.
Within the 1,001-store Victoria's Secret, sales were flat, althoughresults from its Pink line were solid, according toGrace Nichols, president and CEO of Victoria's SecretStores. Victoria's Secret launched the lower-priced collection in 2004, catering to a younger 18-to-22-year-old clientele. Currently, the company is testing an expandedPink assortment in 23 stores. The performance of theexpanding merchandise mix will determine whether ornot the company decides to develop freestanding Pinkstores.
Also during the quarter, the company expanded thenumber of Intimissimi boutiques in Victoria's Secretstores. Intimissimi is a premier Italian lingerie brand,and the company plans to have 26 boutiques by the endof 2005 and 160 by end of 2006.
During the fourth quarter, the company plans toincrease its Victoria's Secret marketing budget toinclude more television advertising during theholidays.
On the 1,570-store Bath & Body Works front, the 1% comp increaserepresents the 10th consecutive quarter of positivecomps, said CEO Neil Fiske during Limited's earningsconference call. During the third quarter, the companylaunched its new e-commerce site, which is performinginline with expectations, he noted.
On the apparel side, Express' third quarter resultswere "below our expectations," said CEO Ken Stevens of the 791-unit-chain.The company is shifting its merchandise mix to focuson a younger customer with more casual and sexyofferings, he said. Looking forward, Limited reiterated its fourth quarterearnings estimate of $1 per share.
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