Limited Brands' Q2 earnings exceed expectations

21 Aug '08

3 min read

Limited Brands Inc reported 2008 second quarter results.

Leslie Wexner, chairman and chief executive officer, stated, "We are very pleased with our performance in this challenging economic environment. Our disciplined management of inventory and expenses resulted in earnings per share that exceeded our initial expectations and increased 35% over last year's comparable result in spite of negative same store sales in the quarter.

Although we expect that the environment will continue to remain challenging, we will continue to conservatively manage the financial aspects of the business while at the same time provide compelling assortments and exciting store experiences to build our brands."

Second Quarter Results:
Earnings per share for the second quarter ended Aug. 2, 2008, were $0.30 compared to $0.67 last year. Second quarter operating income was $185.2 million compared to $318.9 million last year, and net income was $102.0 million compared to $264.4 million last year.

The 2008 results include a pre-tax gain of $13.3 million (included in other income), or $0.02 per share, related to a $71 million cash distribution from Express. The 2007 results contain certain significant items totaling $0.47 per share. These items include:

• A pre-tax gain of $302 million, or $0.46 per share, related to the divestiture of a 75% interest in Express to affiliates of Golden Gate Capital;

• A pre-tax loss of $73 million, or $0.20 per share, related to the divestiture of a 75% interest in Limited Stores to affiliates of Sun Capital Partners;

• A tax benefit of $39 million, or $0.10 per share, related to an adjustment to state net operating loss valuation allowances in connection with the divestiture of the apparel brands;

• A pre-tax gain of $100 million, or $0.15 per share, related to the refinancing of Easton Town Center, in which the company has an investment interest, included in other income;

• A pre-tax restructuring charge of $47 million, or $0.07 per share, for costs of disposing of non-core assets and severance related to the termination of approximately 10% of the company's home office associates; and

• A pre-tax gain of $17 million, or $0.02 per share, related to an interest rate hedge entered into in the first quarter in anticipation of the intended financing of the La Senza acquisition, included in other income.

Excluding these items, second quarter earnings per share were $0.27 compared to $0.20 last year, an increase of 35%. Second quarter operating income was $185.2 million compared to $142.3 million last year; and net income was $93.9 million compared to $80.6 million last year.

Comparable store sales for the second quarter decreased 7 percent, and net sales were $2.284 billion compared to $2.624 billion last year.

2007 net sales include Express sales through July 6, 2007, the closing date of the sale of a majority interest to affiliates of Golden Gate Capital, and Limited Stores sales through Aug. 3, 2007, the closing date of the transfer of a majority interest to affiliates of Sun Capital Partners.

2008 Outlook:
The company stated that it expects 2008 third quarter earnings per share to be $0.00 to $0.04 compared to a loss of $0.01 per share last year, which excludes a $0.04 per share gain from asset sales in 2007.

For 2008, the company expects earnings per share of $1.45 to $1.60, excluding first half significant items of $0.20 per share.

Limited Brands Inc

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