This article is part of our Rising Star Portfolios series. Sean is co-manager of the Dada Portfolio.
The Dada Portfolio bought shares of Limited Brands (NYSE: LTD) back toward the end of November on the thesis that we were going to see a major rebound in domestic retail spending, particularly in higher-end brands. As if by proclamation, Abercrombie & Fitch (NYSE: ANF) reported 15% same-store-sales growth in December, Saks (NYSE: SKS) saw 12% comps growth, and even portfolio holding Wet Seal's (Nasdaq: WTSLA) Arden B brand pulled in a respectable 9% increase in sales from stores that have been open at least a year.
With the information we've seen from Limited Brands' Q4 and full-year earnings report from last week, I think our thesis has found another point of validation:
- 13% net sales growth for Q4; 11% for the full year.
- 22% operating income growth for Q4; 50% for the full year.
- 15% comparable-store sales growth in Victoria's Secret stores for Q4; 14% for the full year.
- 5% comparable-store sales growth in Bath & Body Works stores for the full year.
Especially since our original investment write-up for Limited focused heavily on the growth potential from the company's international Victoria's Secret stores -- which, at the time, numbered just one -- it was very encouraging to hear that the pent-up demand for Victoria's Secret locations across the world was coming through in a big way:
- Sales in Canada from Bath & Body Works and Victoria's Secret stores grew by some 150%.
- Sales from international wholesale and franchises grew by 50%.
The big head-scratcher was that Limited's stock made absolutely no move on the news, even with the company issuing guidance far above what analysts were expecting for 2011. We're curious why you think that may be. Leave us a comment on our discussion board and tell us what could possibly explain this market's apathy. You can also follow the Dada Portfolio on Twitter @TMFDada.
