Why we like Limited Brands Inc. toilets and all

If you know nothing about Limited Brands, Inc. (LTD) then know this - they make some wonderful catalogs. Limited operates in the specialty retail business in the United States and sells women’s intimate apparel, personal care, beauty products, and women’s and men’s apparel. They have three major segments: Victoria’s Secret, Bath & Body Works, and Apparel. Limited Brands was founded in 1963, with one women's apparel store in Columbus, Ohio, and has since grown into more than 3,500 stores and seven retail brands. Last month Limited reported their 2006 revenue at a staggering $10.6B with a lovely profit of $677M (net income). How's that for bringing sexy back?

I'll bet that every male that reads this article has taken a gander at a Victoria’s Secret catalog. Some guys have even bought a few things in those stores for their lady friends. Victoria's Secret sells sex, it's that simple. They make a killing from their women’s intimate apparel, beauty products, and accessories through retail stores, catalogues, and e-commerce.

Victoria's ads really push their product and sometimes, it's hard to figure out the artistic value. Take this picture from a recent ad campaign, can anyone tell me why this chick is on the crapper? Same store sales for Victoria's Secret went up 11% in 2006 when compared to 2005. Victoria made the company $3.7B in sales in 2006 proving that sex does sell.

Toilets aside, their Bath & Body Works segment brought in $2.3B in sales for 2006. Bath & Body works operates in 1,555 stores. Their sales per average selling square foot comes to $637. High end soaps are big business and if you've ever visited one of their stores, you'll probably get stuck smelling lotions for hours on end. Their products are marketed as "Beauty for Body and Soul" and they aren't cheap. Who would have thought just 20 years ago that people would be shelling out hundreds of dollars on bath related goods, let's be honest, is it really necessary?

Limited's apparel segment includes Express stores, which sell both men and womens clothing, sportswear, and accessories raked in $1.8B in sales for 2006. Their Limited stores are a mall-based specialty store retailer of sportswear for women and brought in $545M in 2006.



I don’t care what anyone says, Victoria’s secret is not going out of style anytime soon. With the apparent Bear market coming in full force, why don’t you invest in a company that you feel good about?

Retail sales have been sluggish for Limited Brands Inc in Q1 and their 3% increase in same-store sales fell below the 4% estimate. In retrospect the company had warned that bad weather affected Valentine's Day sales at its Victoria's Secret and Bath & Body Works chains. The Masters believes this presents a lucrative buying opportunity for LTD, because they only missed by 1%. Savvy Investors know that when a solid company goes down for apparently no reason, it’s time to buy.

LTD also pays a 2.3% dividend yield. This is a must have when the markets are volatile like they’ve been since the end of February. We believe support levels reside in the $24 range and resistance at the $30 range. Just take a look at what shares have done over the past year (see chart below). This stock has plenty to gain and not much more to lose. You could argue and say that if times get hard, people will stop buying the type of goods that Limited sells. This is partially true, but limited is not dependent on just one business segment and people always want to buy something that makes them feel happy regardless of what the economy is doing. Just review some of the tasteful pictures we've included in this article, if those pictures don't make you happy, then there is no hope for you. Limited Brands is a solid company and the stock is trading at a weakness.

We’ve told you the reason why we like LTD, now the one thing the StockMasters don’t like about Limited Brands Inc. This guy.

Article written by: Eric Cheshier
Article posted on: March 20th, 2007

Disclaimer: The Author does not own any shares or hold any short/long positions in the securities mentioned in this publication. Nor does he own, pose, or play dress-up in any Victoria’s Secrets bras.