* Q4 adjusted EPS 68 cents vs Wall Street view 64 cts
* Sees Q1 shr loss 7 cents to 12 cents
* Amends credit agreements
* Shares down 10.5 pct
(Adds analyst comment, updates share price)
By Nicole Maestri
NEW YORK, Feb 26 Limited Brands Inc LTD.N said
its quarterly net income fell sharply as it slashed prices to lure
hesitant shoppers and wrote down the value of its La Senza
lingerie chain, sending shares down 10 percent.
With the environment forecast to remain tough, the operator of
the Victoria's Secret lingerie chain and Bath & Body Works shops
forecast on Thursday a first-quarter loss while analysts, on
average, were expecting a profit.
Martyn Redgrave, chief administrative officer cited
"extraordinary uncertainty and lack of visibility" in all the
company's businesses and said the company was responding with
"aggressive" actions, including job cuts and salary freezes.
In an analyst note, Jefferies' Randal Konik said playing
defense was the right move for the Columbus, Ohio-based retailer.
"We applaud management for getting even more serious about
cutting costs, preserving capital, and focusing on cash flow in
this environment," Konik wrote, noting that the company's outlook,
however, was "not spectacular."
Limited said profit was $16.1 million, or 5 cents per share,
for the fourth quarter ended Jan. 31, down from $388.6 million, or
$1.10 per share, a year earlier.
Excluding items, such as a 63 cent-per-share impairment charge
for La Senza, the retailer said earnings were 68 cents per share,
down from 94 cents per share a year earlier.
Analysts on average had expected earnings per share of 64
cents, excluding items, according to Reuters Estimates.
As previously reported, revenue fell to $2.99 billion from
$3.23 billion a year earlier, excluding a $47.8 million gain
related to gift cards. Same-store sales, a key gauge of retail
performance, fell 10 percent in the quarter.
Limited expects to report a loss of 7 to 12 cents per share
for the first quarter, and it forecast full-year earnings of 60 to
85 cents per share.
Analysts had been expecting it to earn 1 cent per share in the
first quarter and 89 cents per share for the full year.
RECESSION REDUCES DEMAND FOR LINGERIE, BATH PRODUCTS
Limited has struggled as the recession crimps demand for
nice-to-have items like lingerie and bath products.
To offset declining sales, it has reduced capital spending,
cut staff and tried to better control its inventory.
It also discounted merchandise earlier than usual this holiday
season to lure hesitant shoppers, but the heavy promotions hurt
fourth-quarter results in its Victoria's Secret and Bath & Body
To respond to slumping demand, Limited said it has reduced the
number of products and styles it carries in Victoria's Secret
stores to focus on its most popular items.
At Bath & Body Works, it has relaunched its Signature
fragrance collection and will try to attract shoppers with a
series of new product introductions this spring.
But it said February same-store sales are tracking down in
mid- to high-single digits, and it forecast first-quarter
same-store sales would be down in the high single-digit range.
It expects full-year same-store sales to drop between 5 and 10
Limited said it will manage inventory and expenses
conservatively and forecast capital expenditures of roughly $200
million this fiscal year. In October, it said such spending would
range from $300 million to $400 million.
The retailer said it cut 400 jobs, or about 10 percent of the
staff, at its home office; suspended pay increases for salaried
employees; and will focus on its liquidity and cash position
instead of buying back its own shares.
Limited Brands acquired La Senza, a Canadian lingerie brand,
in January of 2007. It operates more than 300 stores in Canada and
hundreds of franchise stores internationally.
But the economic downturn has forced many retailers to write
down the value of acquisitions made in rosier times, and Limited
said it took an impairment charge of $215 million to write down
goodwill and other assets related to La Senza.
The retailer said the charge will not affect its relationships
with its own lenders.
It also said the credit agreements for its $1 billion
revolving credit facility and its $750 million term loan have been
In early afternoon trading, Limited shares were down 94 cents
or 10.5 percent to $7.98 per share.
(Additional reporting by Alexandria Sage in San Francisco,
editing by Dave Zimmerman, Gerald E. McCormick, Phil Berlowitz)