Foolish Forecast: Can Limited Brands Keep the Beat?

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An increasingly Limited Brands (NYSE: LTD) reports its latest batch of earnings news Tuesday afternoon. But will the Q3 numbers be as stylin' as last quarter's "earnings beat"?

What analysts say:

• Buy, sell, or waffle? 23 analysts track Limited, giving it nine buy ratings, 13 holds, and a sell. Our CAPS community gives the stock two out of five stars.
• Revenues. On average, analysts expect to see sales fall 8% to $1.95 billion.
• Earnings. Profits are predicted to shed a nickel to come in at just a penny a share.

What management says:
Limited Brands gave investors (well, analysts at least) the chance to hear how things are going, straight from company executives this quarter. Senior VP for investor, media, and community relations, Tom Katzenmeyer, and CEO for Victoria's Secret Beauty, Christine Beauchamp, appeared in September at the Goldman Sachs 14th Annual Global Retailing Conference to talk a bit about how the recently downsized retailer plans to resume its growth. Read all about it here.

Honestly, there wasn't much of interest in Limited's presentation. Probably the most useful information was management's list of who's who among Limited's competitors: Target (NYSE: TGT), Wal-Mart (NYSE: WMT), and J.C. Penney (NYSE: JCP) were named, and "emerging specialty competitors" American Eagle (NYSE: AEO) and Abercrombie & Fitch (NYSE: ANF) got honorable mention. Notably absent from Limited's competitive radar was Maidenform (NYSE: MFB).

What management does:
A Fool can forgive that oversight, however. Clearly, Limited has other things to attend to, chief among them the need to move gross and operating margins in the right direction again.

Margins	4/06	7/06	10/06	2/07	5/07	8/07
Gross	36.6%	37.1%	37.7%	37.6%	36.9%	36.1%
Operating	10.7%	10.9%	11.1%	11.0%	10.1%	9.4%
Net	7.1%	7.3%	7.4%	6.3%	5.8%	7.0%

Data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ending in the named months.

Two Fools say:
I may not have been impressed with Limited's September presentation, but Foolish minds can certainly differ. Over at Motley Fool Inside Value, where we've recommended the stock, Michael Olsen expressed "cautious optimism" after a comment from Katzenmeyer, who said that Limited is planning to expand Bath & Body Works and Victoria's Secret overseas. Michael especially likes Limited's plan to use a franchising model when crossing U.S. borders, calling this "an excellent source of high-margin revenues that requires little capital investment."

What we thought last quarter:

• Foolish Forecast: Leaner Limited Brands
• Limited Outlook or Unlimited Potential?