Victoria's Secret (and so much more) operator Limited Brands (NYSE:LTD) traipses down the catwalk on Wednesday, wearing a sultry little number ... Sorry, I got carried away with the metaphor there for a moment. In fact, Limited will be bringing quite a few numbers with it when reporting fourth-quarter and full-year 2006 results. Whether they're sultry or insulting, only time will tell -- but that hasn't stopped analysts from guessing.

What analysts say:

  • Buy, sell, or waffle? Twenty-six analysts track Limited, splitting their votes right down the middle between buy and hold.
  • Revenues. Analysts expect quarterly sales growth of just less than 13%, to $3.99 billion.
  • Earnings. Profits are predicted to rise more slowly, up 10% to $1.08 per share.

What management says:
In January, Limited Brands turned in the third-best sales performance of all publicly traded apparel chains, growing its same-store sales an impressive 11%, trailing only Wilson's (NASDAQ:WLSN) at 20% and American Eagle (NASDAQ:AEOS) at 17%, and just ahead of Ann Taylor (NYSE:ANN) at 10%, in comparison to last year. Total sales were up 30% -- but that number is deceptive, as the firm advised that January had five sales weeks this year, and only four last year.

In reporting the monthly results, Limited also gave us a sneak peek at its Q4 numbers and full-year sales numbers. Specifically, overall sales edged out analyst expectations, rising 14% for the quarter (same caveat regarding the longer quarter), with same-store sales clocking in 8% higher. For the year, it was total sales 10%, and comps 7%.

That's a lot of numbers to digest, so let me break it down for you: Limited's sales accelerated in Q4 when compared to its performance in the rest of the year, and accelerated again in the last month of Q4, in comparison to the other two months. Simpler still: Things have gotten steadily better all year long.

What management does:
I have to admit to some confusion, then, regarding analysts' predictions of slower profits growth than sales. After all, judging from the numbers reflected in the table below, Limited has grown each of its rolling gross, operating, and net margins every quarter for the past year. More and more profit pennies from each dollar of sales sounds like a formula for faster earnings growth to me. Call me optimistic, but unless something went horribly wrong with margins this quarter, I don't see why Limited shouldn't land closer to the top of its last guidance range, $1.14, for something more like 16% profits growth.





























All 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.

One Fool says:
Subscribers to Motley Fool Income Investor will be aware that Limited Brands was one of two stocks chosen by new lead analyst James Early to join our portfolio in December. In making his recommendation, James listed a few members of Limited's expansive brand portfolio -- Victoria's Secret, Express, The Limited, and Bath & Body Works -- and termed the company a "branding behemoth." What impressed him even more than the brands, though, was the same thing that caught my attention: "Limited's more than 35% (and increasing) gross margins," which James feels indicate "real pricing power."

Limited's stock price has lagged the S&P 500 since we picked it, but that's at least as much good news as bad for investors. On the one hand, those who bought it right out of the gate probably aren't thrilled with these returns. On the other, those who remain as confident as we are in the company's long-term potential get the chance to buy even more shares, and at a discount to the already discounted price at which James highlighted the stock.

A discount on a discount? Just how cheap is Limited now, anyways? Read James' full write-up, and find out. It's yours with a free trial of the service.

American Eagle is a Motley Fool Stock Advisor recommendation.

Fool contributor Rich Smith does not own shares of any company named above.