NEW YORK — Limited Brands Inc. reported fourth-quarter profits Monday that fell below its previous estimate because of a change in the way it accounts for leases.
Still, the Columbus, Ohio-based retailer of nameplates such as Victoria’s Secret and Express said quarterly sales gained 2.8 percent for the period ended Jan. 31 and earnings and sales for the year rose 9.2 and 5.4 percent, respectively. Wall Street was not impressed as shares fell 0.9 percent to $23.35 on average trading volume.
In February, the retailer had preliminary earnings per share pegged at 95 cents. That was before retailers and restaurant companies switched how they account for leases.
As a result, fourth-quarter net income dropped 1.3 percent to $382.5 million, or 87 cents a share, from $387.6 million, or 74 cents, in the previous year on sales that jumped to $3.32 billion from $3.23 billion. Same-store sales for the quarter showed a 2 percent gain.
For the year-end period, Limited Brands said net income climbed to $637.3 million, or $1.33 per share, from $583.8 million, or $1.11 a share, on sales that increased to $9.41 billion from $8.93 billion. Same-store sales for the year rose 4 percent.
Earnings for the year-end period are adjusted amounts that exclude various gains such as pretax money made on the initial public offering of New York & Co. and a gain “resulting from the sales of the company’s remaining interest in Galyan’s Trading Company.”
Last Friday, Limited Brands released its annual report, which reviewed some of the retailer’s basic strategies initiated last year. For 2005, the company said it is focusing on ways to propel sales in several key areas by building brands, attracting the right talent and making improvements to its operations.
“The company is accelerating growth in its intimate apparel, personal care and beauty brands, while at the same time repositioning its apparel brands as full-priced businesses with disciplined promotional strategies,” Limited Brands said in its annual report. “The company is increasing its product innovation activity to support accelerated growth in future periods and intends to use its control of its channels of distribution to quickly transform new ideas into profitable growth. After a disappointing apparel performance in 2004, the company has focused on improving the apparel brands’ product assortments to ensure better fashion and more attractive price points.”
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Management said that to accomplish this goal it would continue to accelerate “the transformation of ideas into new products, such as the Tutti Dolci product line at Bath & Body Works.” At the same time, the company keeps rolling out product extensions as a way to drive repeat purchases. An example is the expansion of the Henri Bendel Home Fragrance products.
On the talent front, Limited Brands said it is working to “attract, develop and retain talent on a continuing basis.” Part of this initiative included adding three industry veterans to the retailer’s executive ranks in February. Jay Margolis, former president of Reebok, was hired as group president of apparel, and Martyn Redgrave, chief financial officer of Carlson Cos. Inc., joined the management team to focus on acquisitions and other business initiatives, serving as executive vice president and chief administrative officer. Also joining the management team was Deborah Fine, formerly of Avon, who is chief executive officer of Victoria Secret’s Pink division.