Chain of apparel store operator Limited Brands (NYSE: LTD) provided unenthusiastic outlook for the first quarter and full year dragging the stock down more than 3 percent in the extended hours trading. The company did well in the fourth quarter reporting adjusted earnings that topped analysts' estimations by four cents a share.
The outlook for the quarter and full year not only fell short of street analysts' estimations, but also dented sentiments as the investors were expecting either in line with consensus or slightly above. This is on the back of the company's improved adjusted gross margin as well as operating margin for the fourth quarter as well as full year.
Additionally, the company lifted comparable store sales for February guidance to mid to high single digit from low single digit provided earlier.
The Columbus, Ohio-based Limited Brands expects first quarter earnings in the range of 35 – 40 cents a share. This is much below Street analysts' prediction of 44 cents a share for the first quarter.
Similarly, for the year ending January 2013, the company guided earnings between $2.60 and $2.85 a share, which is again below Street consensus of $2.91 a share. The company, in effect, is projecting a flat to about 10 percent earnings growth. Limited Brands failed to provide additional information for the reasons behind in providing such outlook.
For the fourth quarter, the company reported net income that dropped 20.5 percent to $359.44 million from $452.29 million and earnings slipped 14 percent to $1.17 a share from $1.36 a share in the earlier quarter. But on an adjusted basis, excluding any impact, net income would have increased 9.4 percent to $459.2 million from $419.7 million and earnings surged 19 percent to $1.50 a share from $1.26 a share in the year-ago quarter.
Net sales grew 1.7 percent to $3.515 billion from $3.455 billion in the previous year quarter. Comparable store sales witnessed 7 percent upside for the fourth quarter. Analysts' were expecting the company to report earnings of $1.46 a share on revenues of $3.47 billion.
Significantly, the company's adjusted gross margin improved to 43.46 percent from 41.81 percent, while adjusted operating margin also rose to 22.37 percent from 20.65 percent last year.
Our Take:
Limited Brands seems to have taken a cautious outlook that depressed sentiments. The stock could likely to fall immediately due to outlook besides the stock was trading closer to 52-week high. The shares of the company could come back once the sentiments improve.