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Limited Brands, Inc. (LTD), The Gap Inc. (GPS), Hanesbrands Inc. (HBI): Catering to Women and Consistency Go Together With This Retailer

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One of the main things that I look for in assessing an investment opportunity is consistency. Limited Brands, Inc. (NYSE:LTD) meets the definition of consistency in retailing. The company’s two flagship store brands are Victoria’s Secret and Bath & Body Works. It also owns Henri Bendel and La Senza. Its stores sell lingerie, personal care and beauty products, apparel and accessories. The company operates more than 2,600 stores in the U.S. Its brands are also sold in more than 770 company-owned and franchised locations outside the U.S. L Brands has also built a large e-commerce business for its brands as well.

Latest results

Limited Brands calls look for near-term rallyIn the first quarter, earnings increased 17% to $0.48 per share compared to the first quarter of last year. Net sales increased 5% to $2.3 billion and comparable- store sales increased 3%. Going forward, the company expects second-quarter earnings to be between $0.50 and $0.55 per share. For the full year, the company expects earnings per share of $2.95 to $3.15.

In May, Limited Brands, Inc. (NYSE:LTD) reported net sales increased to $737 million compared to $671.9 million last May. Comparable-store sales increased 3% in May. For June, net sales came in at $1.1 billion compared to slightly less than $1.1 billion in June of last year. Comparable-store sales were flat in June.

Outlook

This year, capital spending will be about $650 million. Limited Brands, Inc. (NYSE:LTD) is increasing its investment in real estate at Victoria’s Secret and boosting square footage for its PINK and lingerie products. Square footage at Victoria’s Secret is expected to expand by about 4% this year. This will include expansions of existing Victoria’s Secret locations and the opening of about 50 new PINK Stores.

Free cash flow this year is expected to be between $650 million and $750 million. In the first quarter, Limited Brands, Inc. (NYSE:LTD) repurchased 1.2 million shares for $54.7 million. There is still $184.2 million remaining to be purchased on the existing $250 million repurchase program. L Brands continues to be a very shareholder-friendly company with share repurchases and an attractive $1.20 per share dividend for a yield of 2.2%.

Where I see tremendous growth still for Limited Brands, Inc. (NYSE:LTD) is in international markets. Its store brands are well-known and appeal to the world’s growing middle class. In Canada, Victoria’s Secret International has 26 stores and another eight new stores will open this year. Victoria’s Secret Beauty & Accessories already has 126 stores open and there will be a total of 200 stores by the end of the year. Bath & Body Works International plans to open an additional 22 stores this year.

Competition

L Brands competes with The Gap Inc. (NYSE:GPS) and Hanesbrands Inc. (NYSE:HBI). The Gap store brands include Gap, Old Navy, Banana Republic, Piperlime, Athleta and Intermix. Its products for women include lounge-wear, sleepwear, intimates and active apparel. HanesBrands sells its products under the names Champion, Hanes, C9 by Champion, Bali, Playtex, Just My Size, L’eggs, barely there, Gear for Sports, Zorba, Sol y Oro and Rinbros.

In June, The Gap Inc. (NYSE:GPS) reported that net sales rose 8% to $1.5 billion compared to last year. Comparable-store sales increased 7% compared with a flat June last year. The strongest division was Old Navy, where comparable-store sales rose 13% on a global basis.

Where Gap has done a great job is online and its e-commerce initiatives. I see this segment driving growth forward for the company. In the first quarter, online revenue rose 27%. The company can now process orders online and ship-from-store at Old Navy, Gap and Banana Republic. Gap can now use its pools of inventory and take something from a store and ship it to an online customer.

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