Second-quarter profit at Limited dropped 24% to $113.1 million, or $0.27 per share. Total revenues increased 4% to $2.29 billion, while same-store sales came in flat. If you'd like to dig deep into the company's balance sheet and cash flow statement, you have to go to the company's Web site and seek out the complete financial information packet, since the company doesn't include these important financial sheets in the earnings release it distributes through portals such as Yahoo! Finance.
The rather uninspiring quarter bears resemblance to last quarter's results (and anyone who has been tracking this company for a while knows that it has had a rather protracted period of malaise based on problems with Express and the Limited).
Indeed, there doesn't seem to be much reason to look forward to the rest of the year, either. Limited said that it expects earnings for the full year to drop 2% to 4%, with slightly negative August same-store sales because of continued softness at Express.
Limited's successful units have been its Victoria's Secret and Bath and Body Works chains, but I question much longer these two names can continue to prop up the rest of its flagging operations.
Indeed, last quarter Limited's management used the adjective "embarrassed" to describe the performance of Express; this quarter, the adjective is "disappointed." Disappointed, indeed -- same-store sales for the unit were down a whopping 12% (admittedly, this is not as embarrassing as last quarter's 21% decline in same-store sales).
I mentioned strong retailers before; it seems that although Limited's shares may look cheap at first glance on a simple P/E metric, other retailers's ratios may be higher. But heck, those competitors also tend to deliver much stronger financial performance on a more consistent basis -- think Urban Outfitters
Sure, it's good to know that Victoria's Secret and Bath & Body Works have proven to be consistent successes, but they seem to be offsetting other problems, and in the last two quarters, it seems quite obvious that Express is dragging the company down. Until Limited can show marked improvement at Express, it seems would-be investors have reason to be leery.
Alyce Lomax does not own shares of any of the companies mentioned.