NEW YORK — Limited Brands Inc. Thursday posted a third-quarter loss as the apparel division continues to drag down results.
For the three months ended Oct. 29, the loss was $12.3 million, or 3 cents a share, against net income of $78.3 million, or 16 cents, in the same year-ago quarter. The year-ago period benefited from a gain of 6 cents per share from its New York & Co. initial public offering and a tax benefit of 3 cents per share. Sales for the quarter were essentially flat at $1.89 billion. Same-store sales for the quarter fell by 3 percent, although comps at the Express chain were down 6 percent.
For the nine months, income fell 61.6 percent to $123.9 million, or 30 cents a share, from $322.9 million, or 66 cents, a year ago. Sales inched up 1.3 percent to $6.16 billion from $6.08 billion.
“Our third-quarter loss of 3 cents per share was slightly below our initial expectations. Traffic across all of our brands was soft in the third quarter and the external environment remains challenging. Although we’re cautious about the customer’s mind-set and competitive activity during the holiday season, we’ve prepared for and are committed to executing the best possible holiday that we can,” said Leonard Schlesinger, vice chairman and chief operating officer, during a conference call to Wall Street analysts.
Many buy-side analysts and portfolio managers at institutional investment firms have been hoping for some hint as to Limited’s plans for its apparel stores, but the retailer did not disclose any. In September, there was speculation that Limited would either sell or spin off its apparel operation. That speculation heated up earlier this month right before the company’s analysts’ meeting. But sources in the banking community who have familiarity with Limited’s operation said there are no plans to sell the apparel businesses.
In the third quarter, apparel was the weak spot. “The apparel division continued to drag on results with a $36 million loss in the quarter, although the level of losses is decelerating from the beginning of the year. Still, the division has accumulated year-to-date losses of nearly $150 million, wiping out 25 percent of the profits of the Victoria’s Secret and Bath & Body Works divisions, and management seems unprepared to comment on when the division might begin making money again,” wrote Emme Kozloff, analyst at Bernstein Research, in a research note. She said Express continues to struggle to define its customer and attract those who defected last year.
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Richard Jaffe, analyst at Legg Mason, said Express last year focused on seasonless, wear-to-work basics that limited markdown risks, but failed to inspire the consumer to shop. He said this year the chain rebalanced its assortment with a stronger fashion presence.
Ken Stevens, chief executive officer of Express, told analysts that the company relaunched denim in the third quarter as a key component in its back-to-school strategy, and that denim underperformed its inventory position.
“In women’s, growth in knit tops and denim was offset by unfavorable performance in several categories, including two major wear-to-work categories, woven pants and woven tops. In men’s, growth in denim, knit tops and jackets was more than offset by declines in pants, sweaters and woven tops,” he said.
For holiday, Stevens said that the chain is offering a greater selection of items at lower opening price points to stimulate gift-giving, and its strategy for winning back the customer is through “creating a casual, young, sexy sensibility.”