Victoria’s Secret parent company growth may not match ambition


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Victoria’s Secret parent company growth may not match ambition

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Limited Brands, parent company of Victoria’s Secret and Bath and Body Works, has reported solid results combined with a reduction in gross margin and slowing growth in sales in its Q2 financial report.

The company reported solid sales growth of 5 percent for the second quarter of 2013 and an increase in gross profits by 4.89 percent on 2012.

However, this growth was down from 6 percent in 2012 and 10 percent in 2011, whilst gross profit increase was down from the sterling 11.7 percent growth from 2011-2012.

Gross margin rates also declined by 10 base points, which the company attributed to a slight increase in the merchandise margin rate being offset by buying and occupancy deleverage.

These results are not necessarily in line with company’s ambitious medium-term plan to “double business” ​in the next five years by greatly increasing volume and profitability at a store-wide level, particularly by increasing volume in US outlets.

Beating the average

The report also saw Limited Brands beating the median results of peer companies, with a 242 percent in total shareholder returns over three years compared to an industry average of 71 percent.

Second-quarter earning per share increased by 22 percent, from $0.50 to USD$0.61, while operating income for the company increased to USD$357.8m, up from an adjusted USD$308.9m last year.

Net income also grew overall by USD$178.9m, compared to an adjusted figure of USD$147.2m in 2012.

The company also reported a pre-tax charge of USD$3.6m in 2012, related to the closure of La Senza stores.  

Growing the footprint

Limited Brand's quarterly direct sales in shops grew, increasing by 2 percent for the year as a whole, with total sales for Victoria’s Secret growing from $4552.9m to $4783.9m.

The firm plans to expand its bricks-and-mortar footprint by 4 percent in the US and 3 percent overall in 2013, as part of an ambitious plan to be recognized as the best-performing retailer in the world. 

In his letter to the partners in 2012, CEO Leslie H. Wexner said: “We have a clear opportunity to double the business in the next five years. Why? We simply have the world’s best brands.”

“I believe we can double our volume through store productivity in North America alone. We have excellent real estate and generate great store productivity, and yet there is opportunity.”

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