There are two ways to look at Limited Brands' (NYSE:LTD) recent decision to focus on its flagship Victoria's Secret and Bath & Body Works franchises. The first supports the way management would like investors to look at it -- positioning the company to focus on its strongest, growing brands. However, based on current developments, the other view suggests that Limited could be a company with a deteriorating competitive position.

Limited released second-quarter results yesterday that included a number of moving parts, to say the least. For starters, it finalized the divestiture of 75% stakes in each of its flagging Express and Limited Stores concepts to private equity groups. These moves resulted in a gain and loss, respectively, but they thankfully remove most of the company's exposure to mature, slow-growing stores.

This leaves it primarily exposed to two concepts that supposedly have much more future growth prospects. Unfortunately, recent trends suggest store, sales, and earnings expansion are becoming more, well, limited. For the quarter, Victoria's Secret posted a respectable 4% increase in same-store sales, and total sales advanced an impressive 16%. But management summed up Q2 as "challenging" -- gross profit was "down significantly" and operating income fell in the double digits.

Results came in worse at Bath & Body Works, as comps fell 4%, total sales dropped by $18 million, and gross profit and operating income fell significantly as well. It appears the stores are having problems moving products, as excess inventory led to a number of charges for the quarter, with sales trends also below management expectations.

In addition to the store divestitures and sales challenges, management is spending heavily to remodel stores, make real estate investments, and improve inventory and supply chain management. In particular, the majority of Victoria's Secret stores are being renovated and the franchise will soon open a new distribution center to handle a big jump in store square footage over the next five years.

Add it all up and right now it's hard to tell whether Limited is prudently managing future growth or desperate to keep Victoria's Secret and Bath & Body Works relevant to consumers. From following the news flow at other retailers, it's becoming apparent that firms such as J.C. Penney (NYSE:JCP), Target (NYSE:TGT), and Gap (NYSE:GPS) have realized that intimate apparel and lingerie carry high profit margins and can drive store traffic. In other words, the secret is out that Victoria's Secret has created an appealing category in apparel, one that archrivals fully intend to exploit.

I've never personally been able to grasp the allure of Bath & Body Works, but it too faces stiff competition from the likes of The Body Shop and Williams-Sonoma (NYSE:WSM), and recent trends suggest the going is only getting tougher. As they say, when the going gets tough, the tough go shopping -- but recent developments are making it hard to discern whether Limited will stay at the forefront of favorable shopping trends.

In Limited's defense, it pays a decent dividend, throws off plenty of cash flow, and has a well-respected history of creating compelling retail concepts. Past successes include Tween Brands (NYSE:TWB) and Abercrombie & Fitch (NYSE:ANF), which were spun off to shareholders. Overall, it has plenty of capital to continue to buy back stock, pay dividends, and invest in its brands. It's just that the long-term outlook is a bit hazy at this point.

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Fool contributor Ryan Fuhrmann has no financial interest in any company mentioned. Feel free to email him with feedback or to discuss any companies mentioned further. The Fool has an ironclad disclosure policy.