Limited's Depressed Express?

Limited Brands (NYSE: LTD  ) may have started the spring season off with gusto, but today it reported first-quarter numbers that instilled doubt. While Limited certainly met expectations -- indeed, came in at the high end of the guidance it provided in March -- its second-quarter forecast stuck to the low end as the company said it plans some spending on infrastructure.

On an adjusted basis, Limited's first-quarter net income came in 36% higher at $67.8 million, or $0.13 per share. These numbers exclude a $0.06 per-share pretax, nonoperating gain.

Meanwhile, overall same-store sales increased 8%, and net sales were 7% higher than last year at $1.98 billion. Good chemistry emanated from the Victoria's Secret unit, which posted a 15% gain in same-store sales, while Bath & Body Works enjoyed a 7% increase in the same. However, both Express and the Limited stores reported flat same-store sales.

(For any Foolish investors who were hoping for a statement of cash flows to make the financial picture complete, Limited didn't include one.)

We got a hint of looming challenges when April same-store sales dragged. While Bath & Body Works and Victoria's Secret did well, the Limited and Express concepts represented the weak link in the company's set of mall-based chains. According to today's conference call (transcript courtesy of CCBN StreetEvents), Limited has been decreasing what it called, "the heavy level of indiscriminate discounting and promotion in Limited Stores." That's sort of a disturbing way to describe its markdown environment until now, and the change has been tough so far.

Just last Thursday, Ann Taylor (NYSE: ANN  ) reported a hot quarter, and said that market research had shown that its customers were defecting from Express, as well as from Gap's (NYSE: GPS  ) stable of stores.

Other companies that could be swiping Limited and Express customers? Some bets include Aeropostale (NYSE: ARO  ) , American Eagle Outfitters (Nasdaq: AEOS  ) , and Abercrombie & Fitch (NYSE: ANF  ) , all of which have either been fired up, or showing signs of recovery after a difficult period last year.

Limited may have met its recently first-quarter estimates, but investors took a chunk of its stock price for breakfast. It's hard not to be disappointed when some specialty retailers are seeing flush times these days, but Limited also said it anticipates its second-quarter earnings to be at the low end of its previous guidance.

Despite today's negativity, we all know setbacks happen at times, and Limited has a good rep. However, with rivals indicating that they're swiping some customers, it's a good time to keep an eye on some of Limited's businesses.

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Alyce Lomax does not own shares of any of the companies mentioned.